New NCIS Video: Crop Insurance By The Numbers

As we continue pressing forward in the 2013 Farm Bill debate, the success of the crop insurance program and the benefit that it has had to the American taxpayer is the subject of a recently released NCIS video.

“Over the last decade, overall taxpayer spending on farm policy as a whole has steadily declined,” notes Tom Zacharias, president of National Crop Insurance Services. “That’s no accident,” he adds, explaining that commodity prices have strengthened and the country began shifting to an insurance system that reduced the need for traditional subsides and limited taxpayer exposure.

From 1998 to 2012, insured acreage has increased by 100 million acres. “It has become such a success, that most farmers agreed in 2012 to get rid of direct payments during the Farm Bill debate,” Zacharias notes.

But in addition to eliminating the need for direct payments, the public-private partnership of crop insurance has also eliminated the need for costly ad hoc disaster bills. “Since 1989, 42 pieces of legislation, totaling $70 billion in unbudgeted dollars were passed to help farmers following a disaster, he explains. “Those days are over.”

With crop insurance in place, farmers and private insurance companies now share the risk, ensuring that the entire burden doesn’t fall solely on the laps of taxpayers. Each farmer must pay the premium for their individual policy, and when disaster occurs, the billions paid in premiums by farmers help offset the cost of the insurance. “Farmers have paid $30 billion of their own money on crop insurance protection to buy this coverage,” Zacharias notes. In addition to the premiums paid by farmers, the government has collected more than $4 billion in underwriting gains from 2001-2010, which helped offset losses in the bad years as well.

Zacharias points out that crop insurers have stood alone in offering up budget reductions in recent years, totaling $12 billion. Unfortunately, some in Congress are angling for more, says Zacharias. “The additional cuts they are proposing would result in lower crop insurance participation, ironically shifting risk away from farmers and crop insurance companies right back to taxpayers,” he said.

“As we go forward in the next farm Bill, we would say ‘Do No Harm” to crop insurance.”

For Farmers, Risk Comes in Many Forms

When thinking about the risks faced by farmers as a part of their daily lives, what is first to come to mind are the risks related to Mother Nature, like drought, flooding, freezes and hail. But there are many other obstacles that farmers face in addition to the elements that they must manage in order to produce the feed, food, fuel and fiber that we need.

The May issue of Crop Insurance TODAY provides a broad overview of the tools farmers have at their disposal to manage the risks they face, examining where specific strategies are useful, the risks they can and cannot mitigate, as well as assessing their limits and overall value to farmers.

While crop insurance is the most ubiquitous risk management tool used by farmers – 89 percent of total planted acres in 2013 are insured – there are other tools that many farmers use as well. These tools are, by category:

Agricultural Practices

• Crop rotation. Crop rotation is the practice of growing different types of crops on the same field in different years or growing seasons. One of the most common crop rotations in the U.S. is interchanging corn with soybeans.

• Crop diversification: Crop diversification is a strategy whereby farmers diversify geographically, or by crops, or both.

• Seed varieties. Hybrid seed varieties have been developed that produce plants that are tolerant to different kinds of stresses.

• Irrigation. Irrigation is the practice of bringing water to plants using various methods, including flooding the fields, overhead, pivot-irrigation and drip irrigation.

• No-till planting. No-till planting is a way of planting crops without breaking the soil through tillage. This practice increases the amount of organic matter and water maintained in the soil while decreasing overall erosion.

• Timing of planting and harvesting. Farmers must hit the window for the best time to plant to maximize the potential of their crop. The same is true for the harvest. For example, harvesting during a dry spell reduces the costs of drying the grain before storage.

• Pest management. Farmers and ranchers can use various herbicides to reduce competition from weeds and use insecticides and fungicides to combat unwanted insects and disease in farming operations. They may also employ scouting to detect pests to best time their applications.

• Use of advisors. Agriculture extension agents or professional crop advisors are present in most states to advise farmers and ranchers on a wide variety of topics, such as marketing, nutrient use or pest management. Usually, this advice is “free” or requires a “small” charge.

Marketing Instruments

• Product differentiation. Product differentiation is the process whereby farmers or ranchers manipulate the quality, characteristics or inputs involved in the production of their product in hopes of attaining a premium from the consumer. Examples of this in ranching would be “humane raised” or “free range.” Examples in farming would be “organic”, “certified natural” or use of specific varieties that improve processing performance (high oil, high fermentable starch, etc.).

• On-Farm Storage. For storable crops, farmers can invest in on-farm facilities to store their production allowing sales to be prolonged until prices improve.

Financial Instruments

• Crop insurance. Crop insurance is a private insurance policy, purchased by a farmer or a rancher – partially underwritten by the federal government – that insures crops or livestock against price volatility and/or weather losses.

• Marketing Contracts. Marketing contracts include the various types of contracts between producers of commodities and buyers that lock in prices in advance, including forward contracts. The product is owned and controlled by the producer during the production process. Similar marketing contracts may also be used by producers to acquire production inputs and reduce input price risk.

• Options and futures contracts. Both options and futures contracts are specific types of marketing contracts – that protect against price risk only – between the producer and a specific buyer at a price on a given date. The basic difference between the two is that options give the holder of the contract the right to buy or sell the asset during a given time period, while the holder of a futures contract is obligated to take delivery or deliver the asset by the end of a given time period under the terms of the contract.

• Production contracts. A production contract is a legally binding agreement made between two parties, generally a producer and a contractor, where the producer transfers ownership or control of the product to the contractor. For example, the producer may agree to sell the output prior to production or agree to produce the ouput that is owned by the contractor in exchange for a payment. The agreement is for a fixed period of time – either one crop year or several production cycles – and begins prior to production.

Financial Strategies

• Share rent and variable cash leasing arrangements. Rather than own farmland, a producer may rent farmland under various rental arrangements. For example, land may be rented just for cash or rented under a flexible-cash arrangement where the landlord may pay some expenses or bear some risk. Or farmland may be rented under a share rent arrangement where the landlord receives a share of production as rent.

• Maintaining cash reserves and liquidity. Holding cash or near-cash allows farmers to weather adverse events. Essentially this tool is self-insurance.

It should be noted that most farmers use many of the above strategies to protect against the many risks they face during any typical year. The question for the farmer is one of profitability: How many risk mitigation strategies can be employed while maintaining the profitable margins needed to keep the farm running?

Also, most of the strategies above only mitigate fairly specific threats, and not the whole gamut of risks faced by farmers. Crop insurance is the only tool available that helps farmers mitigate both natural disasters and market fluctuations, which is why it’s a complimentary risk management tool to all of the above strategies.

In 2013, nearly 294 million acres (more than 89 percent of total acres planted to crops) are protected by crop insurance, which, along with some of these other strategies listed above, will help farmers and ranchers manage their risks. That statement alone underscores the fact that crop insurance has become the preferred risk management tool for America’s farmers, and underpins the stability of the nation’s food supply.

New NCIS Video: Crop Insurance By The Numbers

OVERLAND PARK, KAN. — As we continue pressing forward in the 2013 Farm Bill debate, the success of the crop insurance program and the benefit that it has had to the American taxpayer is the subject of a new NCIS video.

“Over the last decade, overall taxpayer spending on farm policy as a whole has steadily declined,” notes Tom Zacharias, president of National Crop Insurance Services.  “That’s no accident,” he adds, explaining that commodity prices have strengthened and the country began shifting to an insurance system that reduced the need for traditional subsides and limited taxpayer exposure.

From 1998 to 2012, insured acreage has increased by 100 million acres.  “It has become such a success, that most farmers agreed in 2012 to get rid of direct payments during the Farm Bill debate,” Zacharias notes.

But in addition to eliminating the need for direct payments, the public-private partnership of crop insurance has also eliminated the need for costly ad hoc disaster bills.   “Since 1989, 42 pieces of legislation, totaling $70 billion in unbudgeted dollars were passed to help farmers following a disaster, he explains.  “Those days are over.”

With crop insurance in place, farmers and private insurance companies now share the risk, ensuring that the entire burden doesn’t fall solely on the laps of taxpayers.  Each farmer must pay the premium for their individual policy, and when disaster occurs, the billions paid in premiums by farmers help offset the cost of the insurance.  “Farmers have paid $30 billion of their own money on crop insurance protection to buy this coverage,” Zacharias notes.  In addition to the premiums paid by farmers, the government has collected more than $4 billion in underwriting gains from 2001-2010, which helped offset losses in the bad years as well.

Zacharias points out that crop insurers have stood alone in offering up budget reductions in recent years, totaling $12 billion. Unfortunately, some in Congress are angling for more, says Zacharias. “The additional cuts they are proposing would result in lower crop insurance participation, ironically shifting risk away from farmers and crop insurance companies right back to taxpayers,” he said.

“As we go forward in the next farm Bill, we would say ‘Do No Harm” to crop insurance.”

New Video Highlights Success of Crop Insurance in Managing Disaster

America’s Farmers Bounce Back from Record Drought of 2012

On the heels of the worst drought in decades, Americas farmers — and the rural economies they support — bounced back and are expecting a record corn crop this year, due in part to the fact that 86 percent of planted cropland was protected by crop insurance last year.

“America’s breadbasket rebounded after a punishing drought and farmers have shown that with the right risk management tools in place, they are among the most resilient and productive workers in the nation,” said Tom Zacharias, president of National Crop Insurance Services (NCIS).

A new NCIS video offers an oversight of risk management in agriculture and the various risks farmers face, including those from Mother Nature, market forces and rising input costs. “America used to handle agricultural risk through unbudgeted, after the fact ad hoc disaster bills,” noted Zacharias, adding that this was all taxpayer funded, very costly, and slow to deliver.

Finally, America turned to a before the fact, affordable and more accountable way to handle agriculture disasters: Crop insurance. In 2001, crop insurance began its rise in prominence as farmers’ most useful, and popular risk management tool, all while overall federal agriculture spending was trending down. “The idea here was to reduce taxpayer burden and put the system on a planned, sustained basis, noted Zacharias.

The drought of 2012 put that model to the test. “Crop insurance was credited with helping to keep the rural economy afloat,” he added, noting a recent study that credited crop insurance with saving 22,000 jobs and $2.2 billion in four Midwest states alone after the 2012 drought. “This was an enormous benefit,” he added, noting that as we saw the drought sweep through the nation last summer, “indemnity payments were paid back to the farmers within ten to thirty days, and money went back into the rural communities.”

“An important part from the aspect of farm policy is that there was no call for an ad hoc disaster bill,” he added. “And taxpayers were not on the hook for the whole thing.”

NCIS Responds to Unfair Bloomberg Series on Agri-Talk

Mike Adams, radio host of Agri-Talk, recently interviewed National Crop Insurance Services President Tom Zacharias regarding a recent Bloomberg News series that contained numerous factual errors and obvious bias, claiming for instance, that the government “pays farmers to buy [crop insurance] coverage.”

“Farmers are not paid to buy crop insurance,” noted Zacharias. “Farmers pay for crop insurance.” Zacharias explained that crop insurance was a new kind of risk management tool which required farmers to purchase policies with their own money in order to enjoy the relative protection that crop insurance provides.

Zacharias noted that farmers “spent about $4 billion of their own money in 2012 for premium, and last year when we had the catastrophic drought through the Midwest, before those deductibles kicked in, farmers absorbed just under $13 billion in uninsured losses.”

He explained that contrary to farm safety net programs of the past, there is no subsidy in the traditional sense of the word to farmers who purchase crop insurance. “Farmer premiums are discounted which makes crop insurance affordable,” he said, adding that farmers only receive an indemnity payment if they receive a verifiable loss.

Zacharias also pointed out that Bloomberg News led its readers to believe that the costs from last year’s historic drought had become the norm, “not putting it into perspective of what we were going through – the drought of 2012,” he said.

Zacharias told Adams that contrary to the claims in the Bloomberg News series, crop insurance companies are never guaranteed a profit; in fact they have suffered losses in a number of years. “Companies lost money last year, so I don’t think that they view this as a guaranteed profit.”

Zacharias explained that the lengthy series also failed to mention that crop insurance has taken $12 billion in funding reductions since the 2008 Farm Bill. “So there’s a laundry list of issues here” that Bloomberg failed to report correctly or completely omitted, he said.

“Unfounded, sensationalist headlines are uncalled for, it does not serve the public interest, nor the Bloomberg readership.”

Crop insurance helped make this years bounty possible

By Tim Totheroh

photoI’ve been a farmer all my life. I’m also a crop insurance adjuster, which means last summer was a busy time for me.

By the end of harvest claims last year, I visited more than 200 farms, meeting with the farmers, inspecting their losses and adjusting their crop insurance claims. It was sad at times because farmers take crop losses personally.

I’ve never seen anything like what I witnessed last summer in Illinois. In one field, I walked a half-mile through the field and walked the half-mile back in another part of the field, and I never saw a single ear of corn. Not one ear.

Some varieties of corn did better than others, and Mother Nature was kinder to some farmers than to others. When all was said and done, we ended up with about half of a normal corn crop at harvest. Even with half of a harvest, farmers still had a full tab of bills to pay.

I’ll never forget the faces of young farmers shaken by the sight of their year’s income slowly withering in the…

NCIS Responds to Bloomberg News Series on Crop Insurance

Contact Laurie Langstraat, 913-685-2767

The following statement should be attributed to Tom Zacharias, president, National Crop Insurance Services, in response to the Bloomberg News series on crop insurance:

“Over the last decade, elected officials, financial institutions, farm leaders and farmers have reached a general consensus that crop insurance is the best risk management tool available. That conclusion was reached because crop insurance reduces the risk exposure to taxpayers while requiring farmers to purchase policies with their own money before enjoying the relative protection of insurance. In short, it forces farmers to manage risk before, not after it happens, which saves taxpayers money.

“The factual errors, blatant omissions and obvious bias in this series were stunning and it is unfortunate that the editors of Bloomberg News agreed to release these stories publicly. It was a great disservice to their readers and a personal insult to the hardworking farmers and ranchers of this nation.”

 ###

NCIS Responds to Bloomberg News Series on Crop Insurance

Contact Laurie Langstraat, 913-685-2767

The following statement should be attributed to Tom Zacharias, president, National Crop Insurance Services, in response to the Bloomberg News series on crop insurance:

“Over the last decade, elected officials, financial institutions, farm leaders and farmers have reached a general consensus that crop insurance is the best risk management tool available. That conclusion was reached because crop insurance reduces the risk exposure to taxpayers while requiring farmers to purchase policies with their own money before enjoying the relative protection of insurance. In short, it forces farmers to manage risk before, not after it happens, which saves taxpayers money.

“The factual errors, blatant omissions and obvious bias in this series were stunning and it is unfortunate that the editors of Bloomberg News agreed to release these stories publicly. It was a great disservice to their readers and a personal insult to the hardworking farmers and ranchers of this nation.”

 ###

NCIS Responds to Bloomberg News Story

Contact: Laurie Langstraat, 913-685-2767

The following statement should be attributed to Tom Zacharias, president, National Crop Insurance Services and is in response to the Bloomberg News story “Taxpayers turn U.S. farmers into fat cats with subsidies”:

“The primary reason behind the growth and success of crop insurance over the last decade is that farmers, farm groups, banks and other lenders, elected officials and those who live and work in rural America understand that it is the best, most cost-effective risk management tool farmers have.   That is why the lack of balance and clear agenda behind the first in this series of articles is so troubling.

“For example, the article claims that the government “pays farmers to buy coverage,” which is absolutely false.  Farmers purchase crop insurance policies with money out of their own pockets.  If a loss does not occur, which is the case for most farmers in most years, then purchasing crop insurance is a net loss, not a gain, for farmers.

“In truth, crop insurance is a win-win scenario for all stakeholders in agriculture and the public in general.  For farmers and the rural economies they support, it is a critical risk management tool that helps farmers who purchase policies recover from natural disasters.   For financial institutions, a crop insurance policy serves as collateral for a farmer’s production loan that might otherwise not be feasible.  For taxpayers, crop insurance has all but eliminated large-scale emergency disaster bills, which fell fully on their laps every time and cost more than $70 billion since 1989.

“It should be noted that overall farm safety net spending has fallen dramatically since the rise of crop insurance. Unfortunately, this series is providing a platform to the critics of crop insurance, who for various reasons want to implode any farm safety net and return America to the past days of costly, cumbersome agriculture disaster bills and financial disruption for America’s farmers.

“Crop insurance is a modern-day farm policy for today’s unique weather and market challenges and it, and the farmers who raise our feed, food and fuel, deserve praise, not condemnation.”

 ###

Congressional Leaders, Academics, Government Leaders, Farm Leaders and Farmers Underscore Value of Crop Insurance

Over the last several years as the future face of U.S. farm policy has been debated, crop insurance has emerged as the best and most cost-effective risk management tool for farmers, ranchers and taxpayers. The debate over crop insurance, however, has not been confined to the halls of Congress. It has happened on the airwaves, in the newspapers, in academia and on tractors in the fields.

As a public-private partnership, crop insurance is a new hybrid risk management tool whereby farmers purchase policies that are partially discounted by the federal government. As Senate Agriculture Chairwoman Debbie Stabenow pointed out during the recent Farm Bill debate, when a farmer signs up for crop insurance, “the farmer gets a bill, not a check.” And many, many others have voiced their opinions too:

  • “Crop insurance payments made a huge difference for many farmers that suffered drought losses. U.S. crop insurance is easy and a comprehensive marketing tool that protects against yield losses and price declines. The program works.” — William Edwards, an agricultural economist at Iowa State University, Bloomberg News, January 15, 2013
  • “Over the last 15 years, crop insurance is where we have been trying to help move farmers in terms of taking advantage of risk management tools for their crops. It is still the central focus of where we think farmers ought to be able to have easy access to insure their crops and insure some type of revenue out of it. It makes the most sense to me and always has.” — Congressman John Boehner, Agri-Pulse interview, March 4, 2013
  • “After two years without rain, Kansas producers are dealing with a severe drought. It is critical that risk management tools like crop insurance are in place to make certain the United States remains the most food-secure country in the world. Crop insurance is an example of a public-private partnership that uses taxpayers’ dollars wisely and benefits farmers and consumers alike.” — Kansas Senator Jerry Moran, Topeka Capital-Journal, March 26, 2013
  • “But farmers aren’t the only group that has come to love crop insurance. Bankers love it too. That’s because when farmers approach bankers for production loans, bankers regard a crop insurance policy as a form of collateral. Additionally, bankers know that a farmer who has paid his own money for a crop insurance policy is a farmer who has risk management in mind.” — Bill Bridgeforth, a farmer from Tanner, Alabama, in the Athens News Courier, April 27, 2013.
  • “The federal government provides crop insurance subsidies to farmers in part to achieve high crop insurance participation and coverage levels, which are intended, according to USDA economists, to reduce the need for ad hoc disaster assistance payments to help farmers recover from natural disasters which can be costly.” — GAO Report on Crop Insurance, March, 2013
  • “To this day, I have yet to have a single producer call me with a complaint about crop insurance. That is a testament to just how well your agents, your adjusters, the companies, and Risk Management Agency (RMA) worked together in one of the worst droughts in the history of this nation.” — USDA Under Secretary Michael Scuse, February, 2013
  • “But there are those who are making uninformed and uneducated criticisms about crop insurance – and America’s farmers – in the midst of this national tragedy. According to the Washington-based Environmental Working Group, farmers have been “praying for drought, not rain.” Really? I’ve seen a lot of looks on the faces of my fellow farmers this past summer, as their crops and have withered despite their best efforts and their hopes for a great harvest have been dashed. — Mark Drewes, a farmer from Custar Ohio, in the Bowling Green Sentinel Tribune on September 18, 2012.

CROP INSURANCE IN ACTION: Tom & Mike Audet, Orwell, Vermont

Ledge Haven Farm might be one of those Vermont farms that would be most likely to end up on a postcard. The place is just about everything you would think of when you put the words Vermont and agriculture together. The 550-acre farm, owned by brothers Tom and Mike Audet, is a family-run dairy and maple sugaring operation located near the idyllic shores of Lake Champlain, just down the road from historic Mount Independence in Orwell, Vermont.

The Audet brothers have been in business together since 1972, having been raised on a farm just down the road that is still operated by yet another Audet brother. “We have been making pure Vermont Maple Syrup for over 40 years right here on our farm,” says Tom Audet. “It is an Audet family tradition with three generations of our family pitching in to make the final product,” he says.

The brothers manage their risk using one of the gold medal standard rules of modern agriculture: Diversify. The brothers milk 270 dairy cows, attend to another 280 young stock and breeding stock, manage 450 acres of corn, hay and alfalfa, as well as tapping hundreds of maple trees on the 50 wooded acres of the property. “Diversifying is our first line of defense in managing risk, and crop insurance is the second,” said Audet.

Read Tom and Mike Audet’s story here.

Crop Insurance Keeps Rural America Healthy and the Country Fed

Hearings are already starting in Washington on the next Farm Bill, and major decisions will soon be made about which tools best manage the many risks faced by farmers. I count myself as one of the many farmers who will stand together and urge Congress to “do no harm” to crop insurance.

Crop insurance has become the frontline risk management tool for farmers in virtually every corner of this great nation. Crop insurance is a public private partnership whereby individual farmers, like myself, put some “skin in the game,” by purchasing crop insurance policies to manage the many risks we face in this line of work. It does not guarantee profits, nor does it ensure farmers cannot fail. It protects farmers against circumstances beyond their control but does not prevent poorly managed farms from going under. In essence, it allows market forces to work.

Farmers gladly purchase crop insurance, and last year spent $4.1 billion out of their own pockets to do so. And how well is crop insurance working? Last year, most of the Midwest sizzled under a heat wave and drought that cut harvests in half for some farmers and virtually destroyed entire crops for others. When all was said and done, it was the worst drought this nation had seen in decades.

In the past, such widespread destruction in the Food Belt would have ignited a massive call for disaster assistance from Washington. Forty-two such emergency disaster bills in agriculture cost taxpayers $70 billion since 1989, according to the Congressional Research Service. Curiously, after last year’s drought, there wasn’t a single widespread call for disaster assistance for cropland.

And the simple reason why is that 86 percent of planted cropland was protected last year by crop insurance. But crop insurance isn’t just a risk management tool for farmers and a disaster management tool for the federal government; it’s also a rural investment engine for small-town America.

In fact, according to a new study by economists in Lincoln, Nebraska, indemnity payments from farmers who purchased crop insurance generated off-farm economic impact of nearly $2.2 billion across Iowa, Nebraska, South Dakota and Wyoming. That figure includes $721 million of labor income that preserved 20,900 off-farm jobs in the region.

The economists noted “the income from crop insurance payments can play a key role in stabilizing local economies both in the year of the drought and in subsequent years. In agricultural states such as Iowa, Nebraska, South Dakota and Wyoming, crop insurance can also play a key role in stabilizing the statewide economies.”

Here in Illinois where the losses were steep in 2012, nearly $3 billion in indemnity payments flowed back into the state to cover the losses from the drought. And because farmers need to buy seed, equipment, energy, fertilizer and services, they are constantly reinvesting back into their communities. On good years, that money comes from their harvests. On bad years, that money comes from crop insurance.

You see, crop insurance is not only a risk management tool, but also a working capital insurance tool. In short, unlike farmers in other countries, American farmers aren’t forced to bank all of their money on the good years to weather the bad. Instead they can reinvest in their farm and by extension in their communities year after year, generating wealth for other families and much-needed rural development.

For many farmers who are highly leveraged, purchasing a crop insurance policy is nearly a requisite to obtaining a production loan from a bank. And for farmers who are well established and not in need of production loans, the ability to purchase a crop insurance policy allows farmers to pay off other loans faster, generating much-needed economic activity in other sectors. I would not be paying down my debt as quickly if I were required to hold cash reserves in the absence of crop insurance to account for Mother Nature’s whims or volatile futures markets.

There are few things you can count on in farming, and that’s why we are all hoping for a new, five-year Farm Bill. And at its centerpiece, let’s hope there is a strong, vibrant crop insurance policy, a policy that helps keep the ag sector moving when Mother Nature throws us a curve ball; a policy that provides food security to the nation, and the world.

Andrew Bowman is a fifth-generation farmer from Oneida, Illinois.

This op-ed appeared in the Peoria Star Journal on May 18, 2013.

CROP INSURANCE IN ACTION: Jimmy Miller, Interlachen, Florida

For centuries, blueberries were gathered from the dense forests and bogs by northeastern U.S. Native Americans, and they are one of the only fruits we consume that are native to North America. So when most of us hear about blueberry farms, we conjure up images of cool, damp climates and cold winters.

Jimmy Miller’s blueberry farm, which is well south of the Mason-Dixon line in Interlachen, Florida, in an exception. Miller has operated the farm, which is the oldest existing blueberry farm in the state, since 1979. Miller, along with his two daughters and son-in-law, operates the 124-acre operation using a variety of blueberries developed by the University of Florida that tolerate the summer heat and mild winters.

Miller explains that one of the main issues for blueberry growers in Florida is that the plants require at least 200 hours every winter where the temperature dips below 45. If that doesn’t happen, fruit production can tumble quickly.

But the primary risk is a freeze or hail. “We never had a real loss until this year,” said Miller. “It was an early spring, and then all of the sudden, we had a front blow through that dropped our temperature to 24 degrees,” he explained.

The next day, the Miller clan was hopeful that the crop would be okay, “but we also knew that it could be catastrophic,” he said. Thankfully for Miller, he always purchases crop insurance, so if the blueberries didn’t look better in a few weeks, he knew he’d be filing his first-ever claim.

Read Jimmy Miller’s story.

Senate Passes Five-Year Farm Bill, Begins New Era for U.S. Farm Policy

The Senate overwhelmingly passed the 2013 Farm Bill with a very strong of vote of 66 to 27, with 93 senators voting. The passage of the bill represents an historic pivot in U.S. farm policy, away from the era of direct payments to large numbers of commodity farmers to crop insurance, which must be individually purchased by each farmer and offers financial support – in the form of a crop insurance indemnity payment – only when they incur a verifiable loss, including weather damages or commodity price fluctuations.

The issue is now in the House of Representatives where the debate continues. Both bills pare overall Farm Bill spending, with the Senate version projecting $24 billion in savings over ten years and the House version projecting $40 billion in savings over the same period of time. Eighty percent of Farm Bill expenditures will go to food assistance programs and roughly 20 percent goes to farm programs, including conservation, renewable energy, commodity programs and crop insurance.

The dramatic shift in farm policy was best encapsulated by a quote made by Senate Agriculture Committee Chairman Debbie Stabenow (D-MI) during the debate. “Crop insurance is insurance. The farmer gets a bill, not a check,” she said. The Senate bill would cut $24 billion from farm spending over 10 years, and includes a provision tying the ability of a farmer to purchase crop insurance to conservation compliance requirements.

Prior to the bill’s passage, USDA Acting Deputy Secretary Michael Scuse pointed out that the performance of crop insurance during last year’s drought was clear proof of the program’s value. “We provided insurance for about $116 billion worth of crops last year,” he said. Scuse added, “We’ve paid about $17 billion in indemnities. I think that shows this program worked and it worked as it was intended. We got the money out to the producers and it’s going to help an awful lot of people stay in business that, had we not had a really good crop insurance, may not have been farming this year.”

Despite strong opposition from Chairman Stabenow, the bill contains an amendment sponsored by Senators Dick Durbin, (D-Il) and Tom Coburn (R-OK) which would reduce the premium discount for farmers in higher income brackets or those from larger or more successful farms. Chairman Stabenow said the amendment would raise premium costs by 40 percent for the affected farmers and would reduce the amount of acreage that must comply with federal conservation standards.

Neither the conservation compliance measure nor the premium subsidy limit is in the bill passed by the House Agriculture Committee.

Keep crop insurance affordable in new Farm Bill

Bing Von Bergen.jpgThere is a lot of buzz in Washington again this year about the prospects of a farm bill. For those of us in agriculture, a five-year farm bill is one of the few things Congress can do to take some of the guesswork out of farming.

That’s because farming is an inherently risky venture, and Mother Nature never seems to run out of tricks to play on America’s farmers. Floods one year, droughts the next, followed by a year or two of great weather peppered with a tornado, a late-spring freeze, and then a crash in commodity prices just as your crop comes into harvest.

How in the world can one businessman plan for all of those possibilities? The simple answer is crop insurance.

Crop insurance is a nationwide program that enables farmers to purchase insurance to partially protect themselves from both weather-related and market-related disasters. I’ve been a wheat farmer for 34 years, and when I started farming, crop insurance was just a shell of what it is now. Back then, it was not widely available, was not purchased by many farmers, and was completely administered by the federal government.

Today’s crop insurance policy is a completely different animal. It’s partially underwritten by the federal government but sold and delivered by private sector insurance companies, ensuring efficient handling of claims and speedy delivery of indemnities when claims are filed. Today, it protects about 86 percent of planted cropland in the United States.

Most Reliable Safety Net

Farmers today find crop insurance to be critical, and in 2012, they spent $4.1 billion out of their own pockets to purchase its protection. One thing that farmers today can agree on, despite which commodity they grow, is that in the next farm bill, crop insurance is a top priority. It’s our principal, and most reliable safety net.

As unbelievable as it sounds, during last summer’s great drought, which was the worst this country had seen since the Dust Bowl years, there were groups claiming that “farmers are praying for drought, not praying for rain.” People who make an appalling statement like that have no business talking about agriculture.

But those same groups are calling for big changes in crop insurance.

One of those changes is an idea called means testing. In a nutshell, means testing would force many large farmers to pay more for their federal crop insurance coverage, which could keep many of them from buying any crop insurance coverage at all.

Means testing would be a big mistake and could spell higher premiums for all farmers who purchase crop insurance. Why? Because by parsing out the biggest farmers, the pool of insured shrinks and thus the risk for those remaining gets bigger. For example, if a car insurance company excluded the best drivers from their pool of insured, the only drivers left would be those who are the riskiest, and thus the costliest to insure. This fact would drive up the premiums for all remaining drivers.

Risky Montana business

The fact is that farming in Montana is riskier than in other parts of the country because our rainfall is generally much less than in the Corn Belt. The fear for me as a wheat producer is that means testing would alter the mix of those who purchase crop insurance and skew it against those of us who are in the high-risk areas. Premiums in Montana, and through out the rest of wheat country, will go up.

Think about it this way: this country has faced back-to-back years of major natural disasters. The year 2011 saw record floods, freezes, droughts and even a hurricane. Then 2012 was the worst drought we’ve seen in decades. Yet despite this level of farm loss, there wasn’t a single call to Washington for a farm disaster bill for cropland. That’s because most farmers were already protected by crop insurance policies they had purchased for themselves.

When Congress begins its discussion of the next farm bill, crop insurance is sure to be a key topic of conversation. Congress should remember a simple saying that has been my north star through my life: “If it’s not broken, don’t fix it.” Congress should do no harm to crop insurance.

Bing Von Bergen, the president and acting CEO of the National Association of Wheat Growers, is a farmer from Mocassin, Montanta. This op-ed appeared in the Billings Gazette on April 27, 2013.

Convo 29

We have skin in the game. We aren’t just accepting a handout or subsidy from the government.

Convo 27

Crop insurance has prevented lots of farm stress that would have occurred without it.

Crop Insurance Is Critical to Michigan’s Specialty Crop Industry

By Steve Umlor

The affordability and bounty of the American food system did not occur by happenstance. It took wise policies supported by dedicated officials, hardworking farmers willing to risk their fortunes and a first-rate transportation and distribution system.

Many of the policies that underpin food production chiefly support the major food and feed commodities like corn, wheat and soybeans. But for those of us raising specialty crops – those fruits, vegetables and nuts that are an important part of our diet – there’s only one major risk management tool available: crop insurance.

Crop insurance is a public-private partnership whereby farmers purchase their own policies to cover the risks they choose to pay for. Michigan’s farmers face a huge amount of risk on a daily basis, including early frosts, drought, floods and market…

Crop Insurance Is Critical to Michigan’s Specialty Crop Industry

By Steve Umlor

The affordability and bounty of the American food system did not occur by happenstance. It took wise policies supported by dedicated officials, hardworking farmers willing to risk their fortunes and a first-rate transportation and distribution system.

Many of the policies that underpin food production chiefly support the major food and feed commodities like corn, wheat and soybeans. But for those of us raising specialty crops – those fruits, vegetables and nuts that are an important part of our diet – there’s only one major risk management tool available: crop insurance.

Crop insurance is a public-private partnership whereby farmers purchase their own policies to cover the risks they choose to pay for. Michigan’s farmers face a huge amount of risk on a daily basis, including early frosts, drought, floods and market…

NCIS, RMA Team Up To Help African American, Limited Resource Farmers Develop Risk Management Plans

Thanks to a joint effort between USDA’s Risk Management Agency and National Crop Insurance Services (NCIS), limited resource farmers and African American producers of specialty crops and under-served commodities in Mississippi and Arkansas were instructed on how to develop personal risk management plans in five risk areas..

The courses consisted of three, day-long structured workshops, held roughly one month apart and lasting six hours each day. Participants, who attended workshops in either Pine Bluff, Arkansas or Jackson, Mississippi, were instructed on how to manage risk in the areas of production, marketing, financial, human resource and legal. The instructors included Dr. Albert Essel, Delaware State University and Dr. Laurence M. Crane, NCIS.

The classes were organized by NCIS and funded through a Cooperative Agreement from RMA, which selected several areas in the country where rural poverty was endemic, to focus its resources. Over the course of the workshops, participants were educated in the various risks they could expect when running farm and ranching operations. The goal was that by the end of the third class, each farmer would leave with his or her own personalized risk management plan in hand.

NCIS_carousel_image_62The seminars sought to educate producers through a combination of instruction, discussion, interactive group activity and roughly 60 hours of homework assignments (20 hours after each workshop). “These classes are a great opportunity to help a group of eager, hard-working farmers learn more about managing the risks they personally face on their farms and how to better prepare themselves for the adversity that is all too common in agriculture,” said Dr. Crane.

The classes also allowed farmers and producers to network and share best practices with their peers, helping to build valuable business connections that could prove profitable in the future. “Not only did students walk away with valuable risk management plans and risk mitigation strategies, they also made invaluable contacts with other farmers who have faced many of the same challenges they do,” said Dr. Essel.

Essel gave an overview of many of the risk mitigation strategies available to farmers, including crop insurance. “Crop insurance can be very important to farmers who are growing crops that are insurable,” he said.

Many of the students and local extension agents who attended, applauded the workshop series and expressed hopes that follow-up courses would follow. “In addition to the students who have already attended these course to have a refresher, there are many, many more people in this area who would benefit from attending this seminar who just couldn’t make it this year,” said John Coleman, a research associate with Alcorn State University’s extension program.

Crop Insurance: An Approach That Better Fits This Nation’s Fiscal Reality

The historic drought that wilted the corn and soybean fields of Illinois and other Midwest states was one of the costliest events to hit rural America in decades. As the nightly news reported, losses on farms in large swaths of the Midwest were staggering, with some farmers having such low yields that harvesting was a waste of time.

Patrick editedI feel like I live in an oasis. The drought and heat wave that crippled farmers in neighboring counties and nearby states somehow spared my farm and a few others here in north central Illinois. I don’t know if it’s where the farm is located, the soil it sits on or just the luck of the draw in getting a few rain showers here and there, but somehow, I was spared. This makes me feel lucky, on one hand, since I did not face the dread of losing my crops, but guilty on the other hand because so many other farmers did.

In past years, a disaster on this level would have triggered a massive, ad hoc disaster bill in Congress, which would have given every farmer in Illinois and most other Midwest states – including farmers like me who had a good crop –federal disaster assistance. This approach to farm disasters is not only expensive for taxpayers but wastes money by offering a “one-size-fits-all” remedy.

Forty-two such emergency disaster bills in agriculture have cost taxpayers $70 billion since 1989. That’s a very expensive, cumbersome and untargeted approach to managing natural disasters. Realizing that fact, Congress, in the mid 1990s, decided to encourage farmers to purchase crop insurance by offering them a discount on their premiums if they did so. The idea was that if crop insurance was affordable and widely available, farmers would already have insurance in place when a natural disaster strikes.

And guess what? It worked. The year 2011 saw an unprecedented string of natural disasters, ranging from an early freeze, to floods, droughts, wildfires and hurricanes. The year 2012 saw the worst drought in decades. But despite these calamities, Congress wasn’t pressured for a major farm disaster bill, because more than 86 percent of planted farmland was protected by crop insurance in 2012.

That’s why I buy crop insurance every year to protect my farm, my family and my investment. Crop insurance is a public-private partnership that has become this nation’s new hybrid approach to risk management, and taxpayers don’t pay out all of the losses when disaster strikes. Private insurance companies take a hit, and farmers fund much of the payments through premiums paid out of their own pockets.

And farmers are happy to fork over more than $4 billion annually because they love crop insurance. First, farmers sit down with their crop insurance agents and design and purchase their own plans, tailored specifically to their farms, their crops and their comfort with risk. This gives farmers some peace of mind when the things go awry.

When disaster strikes and there is a verifiable loss, crop insurance indemnities are managed and delivered by private sector companies, usually arriving within 30 days of a claim being finalized. Large disaster bills – like the Hurricane Sandy relief bill – took three months just to pass Congress and will take months more to get help into the hands of the victims.

I started buying crop insurance about 11 years ago, because in farming, the costs of the inputs are so high, that you have to have some kind of backup plan in place. In addition, most of the farmers I know have to borrow operating loans every year from banks, which often require crop insurance as collateral for the loan.

Consumers should like crop insurance, too. The availability of a safe, affordable and healthy food supply requires the presence of some form of disaster protection for farmers, who increasingly face wild weather patterns that challenge the food production system. In the U.S., the ability for farmers to purchase crop insurance is actually this nation’s “insurance policy” against widespread food shortages or sharp price hikes in food products.

I sleep a heck of a lot better at night because I know I have crop insurance coverage. If I have a major loss, I know I have a backup plan. I certainly won’t make any money off of my insurance indemnity, but I also won’t lose the farm. And if I’m lucky enough to not have a loss, I collect nothing other than the proceeds from selling my crop — which is the way the market is supposed to work.

Patrick Solon is a corn and soybean farmer and lives in Streator, Illinois. This op-ed appeared in the Ottawa-Streator Times on March 15, 2013

Do No Harm to Farm Insurance

By Andrew Bowman, Oneida, Illinois

Hearings have started in Washington on the next farm bill. I count myself as one of the many farmers who will stand together and urge Congress to “do no harm” to crop insurance, which has become the front line risk management tool for American farmers.

Crop insurance is a public-private partnership whereby farmers like myself put “skin in the game” by purchasing policies to manage the many risks we face in this line of work. It does not guarantee profits, nor does it ensure farmers cannot fail. It protects farmers against circumstances beyond their control but does not prevent poorly managed farms from going under. Essentially, it allows market forces to work. Farmers gladly purchase crop insurance, and last year spent $4.1 billion out of their own pockets to do so.

How well is crop insurance working? Last year, most of the Midwest sizzled under a heat wave and drought that cut harvests in half for some farmers and virtually destroyed entire…

CROP INSURANCE IN ACTION: Marvin Jensen, Kensington, Minnesota

Local legend has it that a group of Vikings happened upon this part of west-central Minnesota in 1362 and left runic inscriptions on a piece of stone. Hundreds of years later, a local farmer found the stone, and the discovery has forever added an air of mystique to the town on Kensington, Minnesota, and the fabled Kensington runestone.

marv jensen pic.JPGMarvin Jensen grew up on a farm near Kensington, and has heard discussions of the runestone his entire life. Jensen, a second-generation farmer who cultivates about 1,900 acres of corn and soybeans, says that like the runestone, the local weather is an ongoing mystery that is sometimes impossible to plan for.

Jensen lives in a part of the state that was not as heavily damaged by the drought of 2012. But his farm wasn’t entirely unaffected.

“I’m not really in the bad part of the state that got really hurt,” he says. “I have some light soil that dried out because we didn’t get all that much rain, but much of the rest of my soil is heavier and it held what little moisture we received better,” he said. Jensen says that the corn in his lighter soils averaged about 60 bushels to the acre, with the heavier soils yielding around 208 bushels. “And that’s considered a pretty good yield for this area,” he said.

“We really didn’t have much rain at all, but it just came at the right time,” said Jensen, who added that getting his seed in the ground early also helped the success rate of his crop. He noted that while his farm obviously didn’t experience the worst of the drought, there were many farmers in the southern part of the state who did, and lost nearly everything.

And that kind of extreme variability — which can leave one farmer’s fields wilted while leaving those of another farmer just a county away in relatively good shape — is why Jensen purchases crop insurance every year.

Jensen said that he’s been purchasing crop insurance since the mid 1990s, when the federal government stepped in to encourage greater participation in the program and began to partially discount the farmers’ premiums. “ Before that, a guy really couldn’t afford it,” he said.

Jensen recalled a major disaster he faced in 1980, before most farmers could afford to purchase crop insurance. “A big storm came through with hail stones, some of which were about the size of cannonballs,” he said. “The hail was so big it punched holes in my aluminum roof,” he explained. “It wiped out my whole crop, and I didn’t have any crop insurance, or any hail insurance.”

Jensen says that when it hit, he was lucky because most of his land was already paid for and he was able to use that land as collateral to borrow on for his next year’s production costs. “So that’s what kept me in business,” he said.

Jensen said that handling natural disasters through the crop insurance program is much preferred to the past, when farmers couldn’t or didn’t purchase crop insurance and then found themselves relying on federal disaster assistance when calamity struck. “By the time a disaster bill got through Congress and the money arrived, it was two, three years late,” he said. “And a bank isn’t going to make a production loan based on a promise from the federal government that can take years to deliver,” he added.

Jensen is happy that the new emphasis is on the public-private partnership of crop insurance. “A crop insurance claim is much quicker, and you get your money in a month or two.”

Farmers Shoulder Nearly $17 Billion in Losses in 2012

Before farmers received a single dime in crop insurance indemnity payments, they shouldered $12.7 billion in losses as part of their deductibles to crop insurance policies, according to a guest editorial published today by Tom Zacharias, president of National Crop Insurance Services (NCIS).

“When combined with the $4.1 billion farmers paid out of their own pockets to purchase crop insurance last year, total farmer investment neared $17 billion,” explains Zacharias in today’s edition of Roll Call/CQ.

Zacharias noted that it was important to get those numbers out because of the ongoing assault on the “the men and women who put food on our tables and clothes on our backs” over their purchasing of crop insurance. “Critics called crop insurance a farmer bailout and said things like farmers were ‘laughing all the way to the bank’ and were ‘praying for drought, not praying for rain,’” the article notes. “Farmers even have been compared to cheap drunks at an open bar and told to pay their fair share.”

The article points out that when assessing the value of crop insurance, there are undisputed facts of what transpired after the worst drought our country has seen in decades:

  • Indemnities to farmers cost about $17 billion, but “thanks to crop insurance’s design, these indemnities were not completely borne by taxpayers because farmers and insurers picked up a major portion of the costs and sustained significant economic losses.”
  • “This was the sixth time since 1983 that crop insurers lost money. Compare that to the property and casualty insurance industry, which has lost money only once as far back as data is available.”
  • “It is also important to note that when crop insurance premiums exceed losses, the government sees underwriting gains that help offset payments in bad years. In fact, the government experienced nearly $4 billion in gains from 2001-2010.” And just as importantly, “Congress was not asked to fund an ad hoc disaster bill despite the historic devastation endured by our agricultural producers.”

Zacharias welcomed reasoned debate on farm policies, but added that “lawmakers and the American public deserve an intelligent conversation about the future of agriculture that is kept to just the facts.”

To see the guest opinion in its entirety, click here.

###

Keep Crop Insurance Affordable in New Farm Bill

By Bing Von Bergen

There is a lot of buzz in Washington again this year about the prospects of a farm bill. For those of us in agriculture, a five-year farm bill is one of the few things Congress can do to take some of the guesswork out of farming.

That’s because farming is an inherently risky venture, and Mother Nature never seems to run out of tricks to play on America’s farmers. Floods one year, droughts the next, followed by a year or two of great weather peppered with a tornado, a late-spring freeze, and then a crash in commodity prices just as your crop comes into harvest.

How in the world can one businessman plan for all of those possibilities? The simple answer is crop insurance.

Crop insurance is a nationwide program that enables farmers to purchase insurance to partially protect themselves from both weather-related and market-related disasters. I’ve been a wheat farmer for 34 years, and when I started farming, crop insurance was just a shell of what it is now. Back then, it was not widely available, was not purchased by many farmers, and was completely administered by the federal government.

Today’s crop insurance policy is a completely different animal. It’s partially underwritten by the federal government but sold and delivered by private sector insurance companies, ensuring efficient handling of claims and speedy…

 

Bing Von Bergen of Moccasin is president and acting CEO of the National Association of Wheat Growers

Opinion column: President’s proposals would undermine agriculture’s success

By Rep. Adrian Smith (R-Neb.)

Earlier this month, President Barack Obama released his budget even though it was due on Feb. 4. While the House and Senate have already passed 10-year budget resolutions and the president’s proposals have little chance of being enacted, it is a revealing look at his priorities and vision for America.

Of particular interest to Nebraskans is how the president’s proposals would affect agriculture, the backbone of our local economy.

For example, President Obama’s 2014 budget proposes cuts to the federal crop insurance program. While we need to reduce our deficit and debt, it is counterproductive to undermine producers who manage risk.

Without crop insurance, only those producers able to purchase their own insurance will be able to afford to farm. Further cuts to this program will discourage participation which could increase premiums for producers and raise the cost of food for consumers.

Given the success of crop insurance, and in light of last year’s severe drought, we should be working to strengthen this fiscally responsible public-private partnership – not cutting it.

While the president has proposed cuts to crop insurance, he maintains increased funding levels for the Supplemental Nutrition Assistance Program (SNAP), also known as “food stamps.” Over four years, spending on the food stamp program has more than doubled, increasing from $35 billion to around $80 billion.

This amount accounts for most of the nutrition title, which comprises approximately 80 percent of the cost of the Farm Bill. Even during times of nationwide economic growth, food stamp spending increased. It is not unreasonable to consider modest changes without hurting families in need.

SNAP and agriculture programs have been enacted together in the Farm Bill since the 1960s, and more recently food stamp funding has been one major sticking point holding up passage of a long-term Farm Bill. Maintaining the status quo on food stamps while gutting crop insurance only complicates Farm Bill passage.

The president’s budget also makes a major shift in how the U.S. provides food aid around the world through the Food for Peace program. The White House budget would reduce the amount of food purchased from American farmers and ranchers and spend more to buy it from foreign producers or give cash payments to foreign suppliers.

We face logistical challenges to getting food to those most in need, and those problems deserve thoughtful deliberation. This does not mean we should push taxpayer dollars to foreign suppliers at the expense of high quality American products and jobs.

Despite these and other frustrations, I am pleased the president proposes bringing negotiations on the Trans-Pacific Partnership toward a conclusion by the end of 2013 – an ambitious goal which could open markets to more American agriculture products. I hope the president continues to pursue avenues of new market growth.

As the budget process continues, Congress should prioritize the programs and policies which encourage growth. Agriculture remains a bright spot in an otherwise bleak national economy – we cannot afford to undermine it.

Congressional Leaders, Administration Officials and Farm Groups Praise Crop Insurance

“Over the last 15 years, crop insurance is where we have been trying to help move farmers in terms of taking advantage of risk management tools for their crops,” House Majority Leader John Boehner told Agri-Pulse during a taped interview. The leader’s comments came as both the House and Senate began hearings on the next Farm Bill and would be debating the future of farm safety net programs.

Boehner assured listeners that crop insurance would remain as a centerpiece for managing risks on the farm. “It is still the central focus of where we think farmers ought to be able to have easy access to insure their crops and insure some type of revenue out of it. It makes the most sense to me and always has,” he noted.

Crop insurance enjoys strong support in the Obama Administration as well. USDA Under Secretary Michael Scuse told attendees at the 2013 crop insurance annual conference that recent weather disasters have put the nation’s crop insurance system to the test, and the popular public-private partnership had met the challenge. “To this day, I have yet to have a single producer call me with a complaint about crop insurance,” he said. “That is a testament to just how well your agents, your adjusters, the companies, and Risk Management Agency (RMA) worked together in one of the worst droughts in the history of this nation.”

Just days after those comments were made, a coalition of more than 40 commodity groups, lending organizations, input suppliers and other agricultural industry stakeholders sent a letter to members of the House and Senate Agriculture Committees in support of meaningful and affordable crop insurance.

The letter reminded elected officials that in agriculture, risk is always present and that crop loss will occur in some part of the United States each year.

“The significant, widespread crop losses of 2011 and 2012 have clearly demonstrated the need for crop insurance protection and the public-private partnership of program delivery,” the letter stated.

The signatories noted that crop insurance is the cornerstone of most farmers’ risk management portfolios, and that farmers pay a premium to enjoy its protection. “Federal crop insurance provides and effective risk management tool to farmers and ranchers of all sizes when they are facing losses beyond their control, reduces taxpayer risk exposure, makes hedging possible to help mitigate market volatility and provides lenders with greater certainty that loans to producers will be repaid,” the letter stated.

Farmers Rely On Crop Insurance When Nature Turns on Them

There is a huge story playing out right before our very eyes this year in agriculture that nearly everyone is missing: Despite the fact that this nation has faced two of the worst farming years in decades – with devastating drought in the Southern Plains and flooding in the Midwest in 2011, and widespread drought over major corn and soybean growing regions in 2012 – there has not been a single call for an ad hoc disaster bill from America’s crop farmers.

And why no calls for disaster assistance from crop farmers? Because 86 percent of planted farmland in 2012 was protected by crop insurance, the best risk management tool available to farmers. Before crop insurance was widely available, natural disasters like we have just experienced would have triggered a very costly, unbudgeted ad hoc disaster bill. Forty-two such emergency disaster bills in agriculture have cost taxpayers $70 billion since 1989, according to the Congressional Research Service.

Crop insurance was designed by Congress to largely replace the need for ad hoc disaster legislation, thereby helping to shelter taxpayers from the full costs of agricultural disasters and avoiding the need to enact new disaster assistance following every major farm disaster, such as was recently experienced with Hurricane Sandy.

Farmers rely on crop insurance, and they show their support by voting with their pocketbooks. In fact, since 2000, farmers have spent nearly $30 billion out of their own pockets to purchase crop insurance protection. Yes, crop insurance premiums are partially discounted by the federal government, but first and foremost, farmers must put skin in the game to gain coverage.

Farmers must suffer a verifiable loss to collect an indemnity. Contrary to allegations, most farmers purchase crop insurance and do not collect an indemnity. In fact, of the nearly 1.1 million policies purchased in 2012 – the worst drought we have faced in decades — less than half of the policies were indemnified. And that is in a really bad year.

When farmers who purchase crop insurance suffer a loss, they usually receive their indemnity checks within 30 days of finalizing the claim. By contrast, it took the federal government three months to pass the Hurricane Sandy relief bill, and it could take months more before those funds reach the victims.

Of course, it is easy to criticize insurance after a costly disaster, which is why opponents of crop insurance, like the Environmental Working Group (EWG), are jumping on the bandwagon right now. EWG is not only critical of farm policy, but farmers as well. In fact, this summer, EWG claimed that farmers were “praying for drought, not praying for rain,” a statement that makes no sense whatsoever and points to EWG’s lack of understanding of the farm community and rural economy.

In an unusual and catastrophic year like 2012, there will be heavy losses and all participants will feel the pinch. That is how all insurance works. In crop insurance, losses are shared by farmers, who pay premiums — $4.1 billion last year — and who have deductibles, thus shouldering a percentage of loss; private insurers when premiums do not offset losses, as was the case in 2012; and, the government, which acts as a reinsurer and provides premium support.

But losses by the federal government are buffered by underwriting gains that they make during the good years. That was the case from 2001-2010 when the government saw $3.99 billion in underwriting gains.

So while opponents of crop insurance criticize a policy that has been embraced by farmers, farm groups, bankers and politicians of all political stripes, it is noteworthy that critics have conveniently glossed over the fact that this policy ensures that taxpayers are never stuck with the whole tab, as they were in the era of ad hoc disaster assistance, and they can rest assured that the food production system is financially stable.

But two bad years in a row might actually turn into three. Unless the spring rains break this pattern, 2013 is starting off as an incredibly dry year for many farmers, with roughly 57 percent of the continental U.S. in some level of drought. Thankfully, most of those farmers will purchase crop insurance, a

smart, fiscally sound and reliable approach to risk management.

This op-ed appeared in The Hill’s Congress Blog on March 1, 2013. Tom Zacharias is president of National Crop Insurance Services in Overland Park, Kansas.

CROP INSURANCE IN ACTION: Paul Penner, Hillsboro, Kansas

In 2012, the drought in Kansas was in its second year, and wheat, corn and soybean farmer Paul Penner was just trying to survive to the next season.

Crop insurance has been Penner’s lifeline for the last two years and the years before that. It has given him and his wife, Deborah, the means and security to plan ahead and prepare for another year should the drought persist. “Without it, many farmers, including us, would face financial uncertainty as revenue would be insufficient to cover production expenses,” said Penner, 60, of Hillsboro, which is about 45 miles north of Wichita.

In 2012, the Penners had a 75 percent insurance coverage plan for wheat crops and 70 percent coverage for fall crops, such as corn, soybeans and sorghum. Just like car insurance, his goal is to “never have to use it.”

Penner has been covered by crop insurance policy for more than 25 years now. If not for this federal safety net, he said, “I wouldn’t be in farming today.”

The insurance helps him recover part of his losses. “It pays for a little bit of your crops or production if we had a bad year like the last two to three years’ drought. The insurance pays me a certain percentage of the revenue I have lost. They don’t pay all of it,” he explained. “They will never pay you 100 percent.”

But he said he’s OK with not recovering 100 percent because even in a bad year, he said a farmer does not really lose a 100 percent of his production. “At least you’re given enough so you can pay your bills,” he said.

Insurance estimates are based on actuarial history of crop yield and the price of the commodity, among other parameters. Premiums could be higher for one crop per acre than the other. In Penner’s case, corn has a higher premium cost than wheat and soybeans.

Filing is straightforward process. A farmer reports his losses to the crop insurance agent, and the insurance company will then send an adjuster to verify the claims based on established guidelines. The farmer and the adjuster will work through production data sheets. Once approved, help is on the way.

His agent is a local, family-owned company with businesses around the Midwest. It’s the third insurance company Penner has contracted over the years, as many have folded up and sold their business.

The premium varies year to year. Penner said he has paid anywhere from $8,000 to $20,000 over the years he has been using crop insurance. The federal government picks up part of the premium – about 60 percent – as the cost to the farmer would be “prohibitive.”

With the current mood in Congress to cut the national debt, there are some who would like to see the entire crop insurance bill “disappear,” he said. He asserted not all so-called “subsidies” should be painted with the same brush, and it’s his view that ad hoc disaster legislation “is a thing of the past.”

Like many in Kansas, Penner was born to farm. Kansas ranks sixth in farm exports. Beef, grain sorghum, and wheat – introduced to the state by the early Russian Mennonite settlers – are the major products. Hillsboro, where Penner Farms is located, has a population of about 3,000.

“Farming is a risky business as weather is the biggest uncontrollable factor,” Penner said. “Without an adequate risk management tool like crop insurance, a farmer cannot make marketing plans with the reasonable certainty he will be successful.”

Penner says that he can’t fathom managing all the risks of farming without crop insurance. “Crop insurance is absolutely necessary, period,” he said. He says that what crop insurance helps this country do is to ensure food security — the country’s ability to provide a reliable and safe food supply for its people, and not be forced with “going to China and Brazil to purchase our food.”

CROP INSURANCE IN ACTION: Tom & Mike Audet, Orwell, Vermont

Ledge Haven Farm might be one of those Vermont farms that would be most likely to end up on a postcard. The place is just about everything you would think of when you put the words Vermont and agriculture together. The 550-acre farm, owned by brothers Tom and Mike Audet, is a family-run dairy and maple sugaring operation located near the idyllic shores of Lake Champlain, just down the road from historic Mount Independence in Orwell, Vermont.

The Audet brothers have been in business together since 1972, having been raised on a farm just down the road that is still operated by yet another Audet brother. “We have been making pure Vermont Maple Syrup for over 40 years right here on our farm,” says Tom Audet. “It is an Audet family tradition with three generations of our family pitching in to make the final product,” he says.

The brothers manage their risk using one of the gold medal standard rules of modern agriculture: Diversify. The brothers milk 270 dairy cows, attend to another 280 young stock and breeding stock, manage 450 acres of corn, hay and alfalfa, as well as tapping hundreds of maple trees on the 50 wooded acres of the property. “Diversifying is our first line of defense in managing risk, and crop insurance is the second,” said Audet.

Audet explains that in addition to raising a diversity of products, they also rotate their crops, hoping to further hedge their risk. “But we wouldn’t think of planting this many acres of corn without mitigating our risk with crop insurance,” he adds.

2011 would turn out to be one of those years when Audet would thank his lucky stars for writing that crop insurance premium check and purchasing the small peace of mind that comes with coverage.

The spring of 2011 was very wet, and very cold, and the brothers had a lot of prevented planting as a result. Despite the setback from the wet spring, the brothers reseeded some of their lost acres and kept their fingers crossed for a nice settled weather pattern over the course of the summer and a bountiful fall harvest. And then came Irene.

Tropical Storm Irene, which came ashore in North Carolina as a major hurricane and had devastated the state’s tobacco industry, continued moving north, and slammed into the hilly New England farmland with high winds and prodigious amounts of rain. “Irene hit us in late August and drenched us with 7 inches of water in two days,” he said. “You throw all of that water on these clay soils late in the season, and they just don’t dry out.”

Irene so thoroughly saturated Ledge Haven Farm that it made it impossible to get the corn out of the fields. In fact, the fields were so saturated that even professional harvesters were rebuffed on two separate occasions. “We’ve never in our lives seen a corn harvester that couldn’t make it out of the fields, but this time, they didn’t fail to get the harvest out once, but twice,” he said. “That’s how wet Irene left us.”

In addition to not being able to get the vast majority of their corn out of the fields, the yields on the corn that they were able to harvest were poor. “Our yields were the worst they’ve ever been,” noted Audet. “That’s the beauty of crop insurance, it not only protects you from risks you have no control over, but the record keeping of the agent and the system helps you keep track of what you did this year and what you’ve done in the past,” said Audet.

After the multiple attempts to harvest the corn had failed, accompanied by the realization that the hay quality was sub-par and overall yields were well below where they should have been, the brothers contacted their crop insurance agent. “We were reassured that we were covered from what Irene had thrown against our farm and the adjusters would come out soon,” he said.

Audet noted that the year had been so plagued with issues for the brothers that they had already established a good working relationship with their crop insurance agent prior to Irene making her dreaded appearance. “I got to know him quite well because we had several phone calls that year, starting with the calls in the spring and ending with Irene.”

The crop insurance adjuster came out to the farm, tallied the losses and told the Audets that their indemnity check to help defray the losses they had experienced would be on its way quickly. “I was quite surprised by how quickly we had an indemnity in hand,” said Audet. “Our losses were quite substantial and the check was here in about three weeks,” he explained. “Pretty timely, particularly since I knew they were dealing with a lot of folks like us with major losses.”

While crop insurance doesn’t fully compensate farmers for what they would have realized with a full harvest, it does help them put together the pieces and get back on their feet. “Yes, it’s 2012 and off we go again,” says Audet, who is a bit concerned about the weather patterns and progress thus far this year but remaining optimistic about the possibilities.

“It’s sure nice to know that we have crop insurance, and that it’s affordable —because of the subsidy — so that small farmers like me can get the coverage we need and survive to plant and harvest yet another day.”

CROP INSURANCE IN ACTION: Jimmy Miller, Interlachen, Florida

For centuries, blueberries were gathered from the dense forests and bogs by Northeastern U.S. Native Americans, and are one of the only fruits we consume that are native to North America. So when most of us hear about blueberry farms, we conjure up images of cool, damp climates and cold winters.

Except on Jimmy Miller’s blueberry farm, which is located in Interlachen, Florida. Miller has operated the farm, which is the oldest existing blueberry farm in the state, since 1979. Miller, along with his two daughters and son-in-law, operates the 124 acre operation using a variety of blueberry developed by the University of Florida that tolerates the summer heat and mild winters.

One of the main issues for blueberry growers in Florida, Miller explains, is that they must have at least 200 hours every winter where the temperature goes below 45 degrees in order for the bushes to flower, and fruit, later that spring. Lack of enough cool days can mean very low fruit production the following year.

The Millers sell their blueberries, which are among the first in the nation to ripen each year, to both national and international fresh fruit markets. While they are relative newcomers to the blueberry market, they have been dealt quite the lucky hand by Mother Nature. That is, until early spring, 2012.

“We never had a real loss until this year,” said Miller, who explained that their primary risk is a freeze or hail. “And the way we manage freeze is with overhead water protection,” he explains, which protects the bushes by allowing a layer of ice to form on the plants and the berries, keeping the plants warmer than the outside air.

Florida, like much of the rest of the country, had a very early spring in 2012, which resulted in the bushes pushing out new growth and eventually blossoming several weeks earlier than usual. “The plants become vulnerable in late January or early February, and then the berries start to form,” Miller noted.

“It was an early spring, and then all of the sudden, we had a front blow through that dropped our temperature to 24 degrees,” he explained. That usually wouldn’t be a huge problem, given the sprinkler system, but this freeze was accompanied by 15 to18 mile per hour wind gusts, which made the water evaporate as quickly as you spray it.

“When water evaporates, it cools the plants, and we were trying to warm them,” he said. “We had plants that were vulnerable because they were in full growth, and then we had the wind,” he added. “The second night, the temperature actually got down to 18 degrees, but we were fine because we didn’t have the wind.”

The next day, the Miller clan was hopeful that it would be ok, “but we also knew that it could be catastrophic,” he said. Miller explained that one of the risk management strategies they have employed is the use of different varieties of plants that have different cold tolerances and will go into bloom at slightly different times.

The problem was, the bushes that should have fared well with the cold snap didn’t fruit fully that year because the mild winter had not met the requisite number of cool days. “And the plants that did put out a good amount of flowers were severely damaged by the freeze and accompanying winds,” he said.

Thankfully, for Miller, he always purchases crop insurance, and if the blueberries didn’t look better in a few weeks, this could be his first crop insurance claim. After the cold snap ended, Miller called his crop insurance agent who came out for an initial assessment.

“When you feel like it looks pretty bad, you need to give your agent notice,” said Miller. As the agent came out to inspect the bushes, Miller noted that “initially, as the plants came out of the cold snap, we were all hopeful.”

But hope wasn’t enough. As the season progressed, it became apparent that the losses would be staggering. “Without crop insurance, it would have been bad, real bad,” said Miller. In the end, the blueberry farm suffered a seventy percent loss.

“I would have been forced to borrow money just to get through the next year,” said Williams, explaining that without crop insurance, he would have to go to a bank and ask for a loan just for operating capital for the year. “And then two bad years in a row, and you are really out on the ledge,” he said.

“This is a tool, a necessary tool,” he said of crop insurance. “You can’t absorb this kind of loss, so you need to have a tool in place to transfer some of the risk to a private company.”

Luckily, the blueberry bushes appear to be recovering in the warm Florida sunshine and Miller is optimistic about his family’s and his farm’s future. “I feel like we’re going to be fine,” he said.

CROP INSURANCE IN ACTION: Andy Bell, Climax, Georgia

On the first Saturday after Thanksgiving, you can chase a greased pig in the southwestern Georgia town of Climax as it celebrates its Swine Time Festival, which normally draws up to 30,000 people in an area where only 300 people live.

There is also corn shucking and a squeal-off. Climax is the highest point on the railroad line between Savannah and the Chattahoochee River. After its founding in the 1880s, the town served as a rail junction and an agricultural community. It was incorporated in 1905.

The weather for a farmer in Climax can be tricky. The town is located only a few dozen miles from the Gulf of Mexico which can bring in hurricanes as powerful as Katrina, which struck New Orleans with devastating fury in 2005. But this corner of southern Georgia has also been hit by a drought that rivals the one which hit this year in the U.S. Midwest, shriveling the cotton and peanuts that farmers grow in the area.

“We’re 90 miles from the Gulf of Mexico. We had a tropical storm come through in [20]09. We’re so close to the coast that we have to have some type of insurance,” said Andy Bell, who farms about 2,000 acres outside of town. On the other hand, “2007 was a terrible, dry year.”

“We buy crop insurance every year,” said Bell. “We typically buy 70 percent [of coverage]. You’re not going to make any money but it will prevent you from losing the farm.”

His main crops are peanuts, cotton and corn. Some 700 acres are sown to peanuts, about 1,100 acres to cotton and about 200 acres to corn. There is also a small herd of about 200 beef cattle.

Bell said there were some anxious moments before Hurricane Isaac veered away from their area a few months ago and headed for New Orleans. The storm season, which does not end until November 30, remains a threat, but the end to hurricane season is not far off.

For once, Bell is looking forward to harvest season as it looks like the weather is going to cooperate. “I think the peanut crop is going to be good this year. We dodged a bullet when the storm went the other way,” said Bell, who began farming in 1982.

The average yield for peanut farms would run around 1 to 3 tons per acre.

But just as Bell suspected, this year yields will be at record highs. USDA forecasts it at a record 3,714 pounds per acre, which would be 400 + pounds higher than last year.

Bell’s cotton crop is also in pretty good shape, with the Georgia farmer saying they may approach the yields of a few years ago when the harvest stood at 1,300 to 1,400 lbs an acre. That is pretty good considering the national average is about 800 pounds an acre.

His main problem though is the price of cotton. Since scaling a record high at $2.27 a pound in March 2011, cotton prices have shriveled and are now trading around $.75 a pound. “We have (had) a price collapse,” he said.

In good years and bad, Bell said crop insurance is indispensable simply because the weather in his area is so unpredictable. “It can rain here and then five miles down the road, you get no rain,” he said. Bell noted that crop insurance is ”not a fix-all,” but it gives farmers a chance to come back after a bad year.

For him, removing crop insurance is unthinkable. Banks and other lending institutions would not extend any credit to farmers if there is no safety net like crop insurance to give them some assurance that they will get part of their money back.

“I think it would be catastrophic,” Bell declared. “He [the American farmer] would be out of business. We’ve got to have some form of insurance.”

 

CROP INSURANCE IN ACTION: Whitney Blodgett, Shoreham, Vermont

Whitney Blodgett has been farming in the family’s Vermont apple orchard, commercially known as “Sentinel Pine Orchard,” his whole life. Blodgett says that the family purchased the orchard in 1964, and have since grown, adding the abandoned dairy farm next door.

Sentinel Pine Orchard, is comprised of 220 acres of apple trees, mostly planted in the Macintosh variety. When harvest time comes, Blodgett along with his wife and farm hands, store, pack and ship fresh fruit to market. “That is our niche market because we can grow those apples very well in this climate,” he says.

Blodgett explains that because of the nature of the business – there aren’t a lot of ways to protect an orchard from the whims of Mother Nature – his chief risk management tool is crop insurance. “We had crop insurance claims in 2004, 2007 and 2011,” he explains. “And all of them were because of hail.”

Hail has always been dreaded in the orchard industry because it hits later in the summer, with the coming of the severe summer thunderstorms, and can damage the apples to the point that they’re no longer marketable as fresh fruit. But 2011 was a very different story.

The hail hit in the early spring, just as the blossoms had fallen from the fruit and the small apples were beginning to form. “There’s nothing we can do against hail because we can’t build a roof over the whole orchard,” he said.

“It was very odd in 2011, the hail hit early in the development of the apples and deformed them,” said Blodgett. “We had to wait and see how they developed and then decided if they would be able to be sold as fresh fruit,” he explains. The other option, if the fruit formed but wasn’t marketable as fresh, was to sell the apples for cider.

Blodgett says they held their breath and said their prayers for months as the apples slowly developed, keeping their fingers crossed that the hailstorm didn’t alter the apples beyond the point of marketability. But in the end, with the apples looking dented and battered, they were forced into the cider market.

“So we reluctantly decided to put the apples into cider,” he explained, which in financial terms, is a six-fold reduction in the value of the year’s harvest.

Luckily for Blodgett, he had purchased a “fresh apple” crop insurance policy that had a 50 percent coverage level. Blodgett explains that immediately after the hail incident, he had contacted his crop insurance agent who sent an adjuster out to the orchard within days. “The adjuster did a preliminary determination, but there would not be a final determination until final harvest,” he explained. “It’s a nail biter right to the very end, since you don’t know how bad things are going to be right away.”

But this wasn’t the first time he had looked to his crop insurance policy for a lifeline.

Blodgett explained that he took over the business from his father shortly after they had a large fire in their storage facility, which was full of apples. “The facility burned down, and that was the start of some very lean years,” he said. And although his father had always shied away from crop insurance, Blodgett decided that he needed the risk protection it afforded.

“I purchased a crop insurance policy in 2004, when things were pretty lean and we couldn’t withstand a lot of loss,” he said. “We were stretched very thin at that time.”

Coincidentally, that also happened to be the first year they experienced a large hailstorm, which stole their harvest and would have left them in very desperate times. “Without a doubt, when that first hail storm hit in 2004, we would have been knocked out of business for good,” he said.

“My father had never purchased crop insurance but thankfully I had decided to,” he said.

“Without crop insurance, I wouldn’t own an apple orchard right now,” he says. Blodgett explains that while crop insurance has kept his family in business, it has also had a positive “trickle down” effect on many of the areas businesses, where he buys his crop protectants, fertilizers and equipment. “If we went out of business, it would impact a lot of people,” he said.

Blodgett notes that crop insurance is essential for his business because even if you get a damaging storm at the beginning of a season – and your lose your entire crop – you still have to spend the money to take care of the trees and manage the orchard in preparation of next spring’s crop. “Even when we lose the crop early in the year, as we have done in the past, we still have to maintain the orchard for the rest of the year,” he said. “Otherwise, your orchard will be a mess the following year.”

And despite the disappointment of sending his whole 2011 crop into the cider market, Blodgett is still farming this year, hoping that what started off as an “iffy” year with a late freeze will still produce a respectable, and marketable, crop.

“Things are looking up, although we have some damage and loss, “ he says. “But this year, we will have a fresh crop of apples to sell.”

“It could be better, it could be worse.”

CROP INSURANCE IN ACTION: Cash Ruane, North Clarendon, Vermont

It’s perhaps no great coincidence that Ben and Jerry’s Ice Cream was founded in Burlington, Vermont, given that dairy is the Green Mountain State’s largest agriculture industry. Cash Ruane, from North Clarendon, Vermont, is one of those Vermont dairy farmers.

Cash has been farming his whole life, starting his own farming business with his beloved wife and business partner Karen in 1992. Together, the Ruanes milk a herd of 75 dairy cows with an additional 90 calves and breeding stock. In addition, and primarily to keep the cattle fed, the Ruanes raise about 160 acres of corn, used mostly for silage, as well as hay, used for feed.

On a good year, the Ruanes can raise enough corn to make all of the silage they will need for the year, plus sell some to neighbors. Ruane says that 2011 was looking like a great year. “My corn crop was doing super, and I already had two cuttings of hay,” he explains, adding that he usually gets four. The promising corn crop and adequate hay supply would mean that the Ruanes would not only have enough feed for their farm for the year, but some to sell to the neighbors as well.

The Ruanes had never experienced any major natural disasters. The main source of adversity and risk on their farm was milk prices, which “fluctuated too much and too often” for most farmers’ taste.

But 2011 was going to prove to be quite the unusual year for the duo, when the arrival of Tropical Storm Irene, turned Otter Creek, which runs right through their farm, into a destructive and wild torrent.

When Hurricane Irene was downgraded to a tropical storm, many in New England thought they had dodged a bullet and would get by with some wind and a few showers. But Irene was big a storm that moved very slowly, dumping record amounts of rainfall in a very short period of time on a very rugged part of the country.

Hours after the rain began, Ruane looked out the window of his house to check his cornfields. “All I could see were the tassels of the corn,” he said, as a wall of water rushing down the mountains had swallowed the entire field.

Sometimes flashfloods do not spell doom for corn crops, if they are short in duration and not too deep. But in this case, water came, it came deep and then it refused to leave. “The water did not recede for four and ahalf days,” said Ruane. At one point, the rising water was approaching a barn full of cows, which required immediate rescue. “Luckily, we got the cows out in time,” he said.

When the water finally left, the couple realized that in addition to losing their entire corn crop for the year, they probably would not be able to cut hay for quite some time, due to the silt and debris left in their hayfields. “We lost about 35 to 40 percent of both our third and fourth cutting of hay,” said Ruane. “Which we knew was going to leave us short on feed for the dairy cows for the approaching winter.”

And while there was actually corn left standing despite the rapids that cut through the field, it was soaked to the point that it was ruined. “As time went on, some of the corn just molded and rotted right on the stalk,” he said. Adding, “surprisingly, some of the corn was so waterlogged that it actually sprouted, right on the cob, standing there in the field.” The crop was a complete loss.

Thankfully, Ruane had purchased crop insurance, as he always does, and immediately called his agent when the angry waters left his property. The crop insurance adjuster quickly assessed the damage and the payment soon followed. “I had my indemnity payment within 10 days to two weeks,” he said. “I was impressed, because I was expecting two to three months,” he said.

Unfortunately for the Ruanes, while a crop insurance indemnity can help a farmer get back on his or her feet, it doesn’t replace the income that you would have gained had you sold a bountiful harvest in a good market. “I lost so much feed, I had to borrow money and corn throughout the winter to feed the dairy cows,” he said.

“This was the first time I ever had a claim,” he said. Ruane used his crop insurance indemnity to pay off his 2011 lines of credit, which allowed him to borrow for his next year’s input costsand plant again in 2012. The indemnity, along with help from local charities for farmers and townsfolk who had lost so much in the flooding, helped the Ruanes weather the storm and come back again this year to farm.

“I was really impressed with the generosity of the public, even people I didn’t know and will likely never meet, who extended us a helping hand,” he said. “And my crop insurance indemnity, which allowed us to keep our dairy running for yet another year.”

 

New NCIS Video: Criticisms Against Farmers Who Purchase Crop Insurance Naïve, Untrue

Critics who said that farmers who purchased crop insurance were “praying for drought, not praying for rain” or were “laughing all the way to the bank” during last summer’s historic drought were strongly rebuked by farmers, crop insurance agents and claims adjusters in a new video released by National Crop Insurance Services (NCIS).

Marvin Andris, a farmer from Milford, Illinois, responded to Environmental Working Group’s accusations, noting that their comments underscored how little they know about farmers. “They obviously haven’t brushed shoulders with any farmer,” he said. Andris said he didn’t know a single farmer who farmed for an insurance check. “We’re into this because we want to raise crops, and the more bountiful, the more excited we become,” he said.

“I certainly don’t see anybody, as far as I know, that is seriously farming looking for a drought, and looking for a crop insurance check,” said Ben Hanawa, a field claims adjuster from San Benito, Texas. He explained that crop insurance can help you make it through a bad year, “but it certainly is no way to make a living.”

David Finch, a claims adjuster from Tulia, Texas, noted that charges that farmers are happy to incur losses demonstrated both a misunderstanding of the nature of farmers and how crop insurance works. “I’ve never heard of anybody or talked or visited with any farmer who would rather have an insurance check than he would have a good crop that he could bank on his own,” he said. “It’s a matter of pride.”

Robert Geddes, a farmer from Hoopeston, Illinois, explained that crop insurance is not any different than other forms of insurance that consumers buy on a daily basis, like homeowner’s insurance or car insurance. “You don’t buy insurance on your car with idea of going out and having a wreck,” he said. “It’s to take care of [you], when things truly go against you.”

Todd Harris, an insurance agent from Rossville, Illinois, explained that most of the farmers in that part of the state have never had a claim of this nature. “All you got to do is be a mathematician, really, to figure out if you’d be better with a claim, or a crop,” he said. Harris noted “if you ask that question of a farmer, they’ll laugh at you.” That’s because farmers make far more from a good crop than an insurance claim, he explained.

These were not the only misrepresentations farm policy critics made during last year’s historic drought. Claims were made that indemnity payments for the drought would range from $30 billion to $40 billion. The Congressional Budget Office noted earlier this month that 2012 indemnity payments will be closer to $16 billion.

Those same critics also led people to believe that taxpayers would be responsible for nearly all crop insurance payments to farmers, which is another fallacy. Final program costs will reflect the $4.1 billion in premiums farmers paid to purchase insurance policies, losses by private crop insurance companies, as well as government investment.

 

Crop Insurance One Way to Help Protect Farmers

Right before our very eyes, the nation’s specialty crop capital has turned into the nation’s frozen food section, as the San Joaquin Valley suffered several consecutive nights of freezing temperatures. While the extent of the damage to some crops could take weeks to assess, one thing is clear: Some farmers will take a big loss.

Loss is common in agriculture, and there has been a lot of it lately, though most of it was not here in California. In 2011, we saw a freeze in Florida that hit the citrus crop, then Midwestern droughts, floods in the South and even hurricanes. Last year started off looking like a banner year but morphed into the worst U.S. drought in decades. Much of the Midwest is still suffering.

Thankfully, most farmers are protected by crop insurance, a backstop for when the bottom falls out. Crop insurance helps farmers manage risk. It combines the public sector with the competitiveness of the private sector. Farmers buy policies that are partially underwritten by the government, but the private sector services the policies and pays off when the farmers takes a loss.

For many farmers, particularly the thousands who grow specialty crops, crop insurance is the only risk-management tool available. Most of the growers I know buy crop insurance every year, yet nine times out of 10 they don’t collect a dime.

It’s not cheap. In fact, some growers spend $100,000 on policies they seldom use. Those who say farmers are getting rich off crop insurance, do the math.

When there’s a natural disaster, losses can be steep. If a farmer loses his entire crop to disease or disaster, many could go under without a backup plan. That plan is crop insurance.

California’s citrus industry is a window into the national crop insurance program and how it works. It was first introduced after a devastating freeze in 1990. Initially, growers were hesitant to spend large sums for protection. But participation has grown over time as premiums dropped.

The growth of crop insurance is a testament to the market and the dedication and professionalism of those who service the plans.

But there are those in Washington who will take the failure to pass a four-year farm bill and use it as an opportunity to eviscerate crop insurance. Every day I speak to California farmers, who, like farmers elsewhere, are worried about what would happen if their only risk management tool is weakened or eliminated.

Their message is to “do no harm to crop insurance.” If Congress feels the need to revisit the program, it should only be to strengthen it and expand the number of crops it covers.

California agriculture generates more than $37 billion a year. Sixty percent of our farms are less than 50 acres, just one indicator of the growing number of specialty crop operations. California needs specialty crops, and specialty crops need insurance.

 

Jordan Roach is the CEO of Global Ag Insurance Services in Fresno, the only crop insurance provider headquartered in California.

This op-ed appeared in the Modesto Bee on February 8, 2013.

 

Despite Record Losses Crop Insurance Program Remains Strong: March 15 Sales Closing Deadline for Most Spring Crops

OVERLAND PARK, KAN – While 2012 crop insurance indemnity payments have hit a new record high, the taxpayer-funded portion of those losses will be much lower than crop insurance critics warned last summer.

That is good news for the future of the program and good news for farmers who are closing in on the March 15 deadline for signing up for crop insurance on most spring planted crops. March 15 is also the deadline to make any changes to existing policies.

The 2012 indemnities hit $14.7 billion, as of February25, and will climb higher as claims are finalized in the next few weeks.

There will be some government loss in the program for 2012 but it will be mitigated by the $4.1 billion in farmer paid premiums as well as losses absorbed by the participating insurance companies that deliver and service the crop insurance program.

The Congressional Budget Office foresees a sharp decline in indemnities in 2013 and has lowered its projections for total federal outlays for crop insurance by nearly $8 billion over the next 10 years.

All of this contributes to a sense of optimism over the future of the crop insurance program. After all, unlike many previous years of weather disasters, there were no calls for additional ad hoc disaster assistance.

Farmers will use their indemnities to recover from their loss and then plan for this year’s crop and that plan will no doubt include a careful review of their crop insurance options before the March 15 deadline.

 

###

 

Despite Record Losses Crop Insurance Program Remains Strong: March 15 Sales Closing Deadline for Most Spring Crops

OVERLAND PARK, KAN – While 2012 crop insurance indemnity payments have hit a new record high, the taxpayer-funded portion of those losses will be much lower than crop insurance critics warned last summer.

That is good news for the future of the program and good news for farmers who are closing in on the March 15 deadline for signing up for crop insurance on most spring planted crops. March 15 is also the deadline to make any changes to existing policies.

The 2012 indemnities hit $14.7 billion, as of February25, and will climb higher as claims are finalized in the next few weeks.

There will be some government loss in the program for 2012 but it will be mitigated by the $4.1 billion in farmer paid premiums as well as losses absorbed by the participating insurance companies that deliver and service the crop insurance program.

The Congressional Budget Office foresees a sharp decline in indemnities in 2013 and has lowered its projections for total federal outlays for crop insurance by nearly $8 billion over the next 10 years.

All of this contributes to a sense of optimism over the future of the crop insurance program. After all, unlike many previous years of weather disasters, there were no calls for additional ad hoc disaster assistance.

Farmers will use their indemnities to recover from their loss and then plan for this year’s crop and that plan will no doubt include a careful review of their crop insurance options before the March 15 deadline.

 

###

 

Under Secretary Scuse Commends Crop Insurance Providers for a Job Well Done

(INDIAN WELLS, CALIF) – Last year’s drought put the country’s crop insurance system to the test, but the public-private partnership passed with flying colors, USDA Under Secretary Michael Scuse said today at the 2013 crop insurance annual conference.

During the disaster, Scuse traveled across rural America and gave farmers business cards with instruction to call if there were any problems or concerns about crop insurance or the speed of assistance delivery.

“To this day, I have yet to have a single producer call me with a complaint about crop insurance,” he said. “That is a testament to just how well your agents, your adjusters, the companies, and Risk Management Agency (RMA) worked together in one of the worst droughts in the history of this nation.”

Scuse noted that despite the volume of claims and acres covered, farmers received indemnity checks within 30 days of finalizing claims. “Meanwhile, all of this happens with RMA and [crop insurance] providers consistently operating at a very, very minor error rate,” he said, noting that America’s taxpayers are viewed as important stakeholders in the federal crop insurance program.

This success explains why Scuse noted other countries are looking to America’s crop insurance system as a model for their own farmers and ranchers.

Scuse noted that the USDA and the industry will continue to work together to offer new products for today’s ever emerging agricultural industry. “As agriculture grows and expands, the need for new and better products will continue,” he said, and “because of that we need to continue building on this great partnership that we have.”

“The risk to our farmers and ranchers continues to increase each and every year, and not just by the weather but by the increases in cost of production,” Scuse concluded. “We need to continue this partnership and working together… and make sure that the American citizens have the most abundant, safest and most cost-effective food supply to be found anywhere in the world.”

###

Farm Leaders Again Urge ‘Do No Harm’ to Crop Insurance; Reaffirm Crop Insurance as a ‘Top Priority’ in Farm Bill

(INDIAN WELLS, Calif.) — Echoing the same message heard throughout the halls of Congress last year, a panel of farm leaders urged Congress to “do no harm” to crop insurance in the upcoming Farm Bill and to remember that crop insurance is a top priority for most of America’s farmers.

Robbie Minnich,senior government relations representative with the National Cotton Council, pointed out that one of the key strengths of crop insurance is that farmers and agents sit down and draw up arisk management strategy tailored specifically for that farm. “Crop insurance policies come in a wide array of styles and coverage and the farmer can very closely tailor their policy to their specific farm situation and risk tolerance. It’s certainly not a ‘one-size-fits-all’ strategy,” he said.

“It is critically important that farm policy includes avenues for farmers and ranchers to manage the risk of bad yields and wild market swings,” said Mike Stranz, a government relations representative with National Farmers Union. “The current system of crop insurance has done a good job of that and must to continue to improve,” he added. “Crop insurance helps ensure that the nation’s food, feed, fiber and fuel supply remains stable and affordable.”

Brooke Shupe, manager of government affairs for risk management for the National Association of Wheat Growers, noted that crop insurance is critical in wheat country, particularly given the ongoing drought. “Crop insurance is a critical risk management tool for wheat producers. That’s why the vast majority of the nation’s wheat farmers purchase it every year,” she said.

Sam Willett, senior director of public policy at the National Corn Growers Association, said,“cuts in the crop insurance program would reduce the effectiveness of the most important risk-management tool farmers have. We can’t afford to dilute our best risk management tool.The federal crop insurance program’s performance this past year in protecting producers from financial disaster, especially younger farmers, explains why it is the most important risk management tool.”

Several of the panelists expressed concern that crop insurance could come under pressure as budget constraints tighten, which could harm both the participation levels and overall effectiveness of the program. “One of the keys to the success of crop insurance is the widespread participation by farmers,” noted Mary Kay Thatcher, senior director of congressional relations with the American Farm Bureau Federation.“If Congress does anything to reduce the level of participation, there could be a tremendous outcry for some sort of federal intervention the next time we have a widespread natural disaster,” she added.

Reece Langley, vice president of government affairs with the USA Rice Federation, pointed out that crop insurance and other farm policies have already taken budget cuts in the name of deficit reduction. “When making decisions in the upcoming Farm Bill, it should be remembered that agriculture has already sustained more than $12 billion in budget since 2008.” Langley noted, “USA Rice has been actively working in recent years to improve crop insurance so that it is more effective and affordable for rice producers, and we are encouraged by some recent steps taken by the Risk Management Agency. However, crop insurance cannot serve as the sole safety net for producers, especially with respect to multi-year price declines.”

Dennis Nuxoll, vice president of federal government affairs with Western Growers underscored the importance of crop insurance to his organization. “Crop insurance is already a critical management tool for many farmers. But for specialty crop farmers, the use of crop insurance products have not been as common,” he said. Nuxoll explained that the farmers he represents grow hundreds of different crop types under a huge variety of growing conditions. “Thus, there’s work ahead for us to tailor these products so they serve as the best, strategic risk management tools possible,” he said. “With ever-growing challenges, our growers are increasingly focusing on these products as tools they could use.”

###

CROP INSURANCE IN ACTION: Trent Patterson, Lake County, Tennessee

For Trent Patterson, 2012 was a very dry year.

Drought parched much of Tennessee, where he farms about 4,500 acres planted to cotton, corn, soybeans and wheat. The drought forced farmers like Patterson to switch crops from the flagship cotton to soybeans, which requires less agricultural inputs. With crop insurance as part of most farmers’ backup plans, many of them were able to get by.

“The drought of 2012 caused hardship from planting to harvest,” said Patterson of Lake County in northwest Tennessee. “We planted, replanted, spot planted and in some fields abandoned the cotton crop and planted beans only to plant and replant those and get half a stand.”

Corn yields took the biggest hit during the year-long drought. “We were unable to fill our contracts,” he said.

Tennessee is a major producer of cattle and is a key grower of crops like cotton and soybeans. The farm sector alone is responsible for nearly $3 billion in farm gate receipts, according to the Tennessee Department of Agriculture. About half of the state’s land area, or some 11 million acres, is comprised of farms. The western portion where Patterson farms is prime land fed by the flood plains of the Mississippi River. This area is largely devoted to soybeans, wheat, corn, cotton and sorghum.

Crop insurance has been a much-needed lifeline for Patterson and other farmers like him. Crop insurance has allowed them to survive drought, floods and other disasters that form part of the natural landscape farmers must contend with on a yearly basis in much of the U.S.

For farmers in Texas, 2011 was the worst drought in a century. For farmers in Louisiana, the program was critical in 2005 when they endured the double-barreled disaster brought on by hurricanes Katrina and Rita. For farmers in Tennessee and in much of the Midwest, the drought of 2012 was the worst in 25 years. And while crop insurance only covers a percentage of the loss in most cases, the money provides the much-needed infusion to help farmers survive until the next season.

Said Patterson, “Without crop insurance as a risk management tool, a disaster as we have had in 2012 is not survivable to many farming operations.”

Each year is a “make or break situation” for most farms, he explained. For his part, he has filed the paperwork to receive insurance claims for cotton crops that had to be switched to beans. The insurance adjuster has visited his farmlands and reviewed his paperwork, which includes a history of his yield production.

Patterson says that crop insurance is a key component of the farm safety net and a major feature in ongoing Farm Bill discussions. If the country’s goal is to keep U.S. food and fiber industries viable, then the farm bill must include crop insurance to help American farmers manage their risks. These comments reflect the sentiment of many farmers and lawmakers from across the country who have strenuously argued that a viable crop insurance program is essential for the future of U.S. farming.

Patterson says that crop insurance is either a subsidy or an investment, but either way, it’s especially critical to a chancy, “risky business” like farming. He underscored the “wisdom” of protecting the American farmer and the industry.

“I don’t want to have to go hungry and naked because I didn’t help my neighbor with his garden if I was eating out of it,” he said. “(So) is it a subsidy or an investment?”

 

Crop Insurance Wins High Praise from Farmer Leaders

(INDIAN WELLS, CALIF.) Farmer leaders from across the country yesterday called crop insurance their “most important risk management tool” and said it is essential to keep agriculture strong and bring young farmers into an aging business.

Curt Friesen, a member of the Nebraska Corn Board, said his son-in-law, who is currently a university teacher, is coming back to his fourth-generation farm. And given the capital requirements and risk associated with farming today, he said, a strong crop insurance policy will be the key to his son-in-law’s ability to succeed.

“He sees a future in agriculture,” Friesen noted. “I’m excited to bring him back but a little scared because I know times aren’t always going to be this good – crop insurance is going to be critical down the road for me to help him get started.”

Crop insurance helps highly leveraged beginning farmers qualify for financing, he told the group at the 2013 crop insurance industry conference. Mark Nichols, a cotton grower from Oklahoma agreed, adding it is important for growers of all ages.

“In our area, whether it’s a guy 25 years old trying to get into farming, or a guy like me in his 50s, it’s not a choice whether we have federal crop insurance,” Nichols said. “Our banks look at it as our main risk management tool.”

Bill Bridgeforth, chairman of the National Black Growers Council, knows first-hand why banks look to insurance as a way to protect a farmer’s investment. A fifth-generation farmer from Alabama, Bridgeforth told the group that he “has used crop insurance every year since 1980.”

“We’ve had some pretty good years, and we’ve had some years that, if it hadn’t been for crop insurance, we probably wouldn’t be in business today,” he explained.

“Friesen applauded crop insurers for the speed in which claims were processed following the historic 2012 drought. But crop insurance isn’t just about obtaining financing or surviving disaster, it is also a useful marketing tool, he noted.

“It allows me to market my crop better,” Friesen told the group. “I use it to set a [price] floor. It makes me a lot more comfortable using Chicago Board of Trade futures to market grain. I can market early, I can adjust my positions and I know I’ll have a backstop with crop insurance as my base.”

When asked during a question and answer session about critics attacking crop insurance, panelists were quick to defend the public-private partnership, noting its cost effectiveness and the lack of expensive taxpayer-funded ad hoc disaster legislation following the 2012 drought.

Bing Von Bergen, a Montana wheat farmer and director of the National Association of Wheat Growers, also explained that in good years the government makes underwriting gains on crop insurance because farmers pay premiums.

He criticized legislative attempts to reduce crop insurance participation by attaching arbitrary benefit caps, income limits and duplicative conservation compliance mandates to the program. Such attempts, he said, could wind up increasing premium rates for all farmers.

###

 

Max Erickson Presented Crop Insurance Industry Outstanding Service Award

Max Erickson, Erickson Insurance Group, Havre, Montana, is the recipient of the 2013 Crop Insurance Industry Outstanding Service Award in recognition for outstanding service and outreach to small, limited resource, and socially disadvantaged farmers. Steve Rutledge, Chairman of the National Crop Insurance Services (NCIS) Board of Directors, and Tom Zacharias, President of NCIS, presented the award at the 2013 Crop Insurance Industry Annual Convention.

Following graduation from Montana State University, Max worked for the Montana Fish, Wildlife and Parks department doing research in the Yellowstone Valley of Montana. Shortly thereafter Max decided to make a career move and went to work in the insurance business as an agent for Farm Bureau. In the winter of 1980 he moved to Havre in North Central Montana.

While Max was switching gears in his own career and starting to learn the insurance business, Federal Crop Insurance was going through its own changes with the Federal Crop Insurance Act of 1980 and the formation of the long standing public-private delivery system we have today. With his move to Havre, Max was now at the forefront of a brand new opportunity and was literally in the center of one of the largest wheat producing areas in the entire nation, known around the world as the “Golden Triangle.”

Max spent those early years of crop insurance working with the pioneers of the industry and building a strong successful customer base, many of whom he still serves today. In 1983, Max decided to leave Farm Bureau and formed a multi-line independent insurance agency with E.J. “Bud” Baldwin called Erickson-Baldwin Insurance Associates located in Havre. The agency grew to be a very successful partnership spanning more than 25 years. In 2010, Max formed his own independent agency, Erickson Insurance Group.

Over his now more than 30 years of selling and servicing crop insurance in an industry dominated by white male farmers, Max has had the opportunity to cultivate a lasting business relationship with a number of producers who don’t fit that profile, including Native Americans, women and a religious sect known as Hutterites. In fact of the more than 90 policies serviced currently by his agency, 25 percent represent one of these groups. Max actively markets his agency to these groups and their unique circumstances, particularly the Hutterite Colonies, by helping them to understand their coverage better and making sure their policy fits their needs appropriately.

Max continues to work every day to help his clients learn to diversify and effectively manage their agricultural risks and looks forward to a long future in this very successful industry that has come to be the envy of the world.

Max was nominated for the award by Rain and Hail LLC, Johnston, Iowa.

Photo Caption: (left to right) Steve Wedel, Rain and Hail LLC, Max Erickson, and Tom Zacharias, National Crop Insurance Services.

Linda Vickers Presented Crop Insurance Industry Lifetime Achievement Award

Linda Vickers, Rural Community Insurance Services (retired), was presented with a 2013 Crop Insurance Industry Lifetime Achievement Award at the 2013 Crop Insurance Industry Annual Convention.

Ms. Vickers was raised on a cattle and wheat farm in northwest Oklahoma. She attended college at Northwestern Oklahoma State University and graduated with Bachelor of Arts In 1969 and Master of Arts in 1975.

In 1977, she joined Ed Jaenke and Associates as a congressional lobbyist. Ed Jaenke was a former Governor of the Farm Credit Administration. In 1978, Ms. Vickers went to work at the Federal Crop Insurance Corporation (now the Risk Management Agency) as a Congressional Liaison. Later that year she joined Secretary of Agriculture Bob Bergland’s staff as a Congressional Liaison with responsibility for passing the Federal Crop Insurance Act, which expanded the crop insurance program. In 1980, the Act was passed by Congress which allowed the private sector to begin selling and servicing federal crop insurance policies.

Linda went to work for the National Association of Crop Insurance Agents in early 1981 as a lobbyist for the crop insurance program. She stayed in the private sector and eventually began working for Rural Community Insurance Services and all its predecessor organizations until December 31st, 2012, when she retired.

She was integral in shaping, drafting and eventual passage of all major pieces of farm legislation, in particular, crop insurance legislation, including the Federal Crop Insurance Act of 1980, 1994 and 1996, and the Agricultural Risk Protection Act (ARPA) of 2000.

Ms. Vickers spent many hours educating Congressional members, as well as their staff, on the benefits of a sound multi-peril crop insurance program. She was known in the halls of Congress as “Mrs. Crop Insurance.” She was also instrumental in bringing the commodity groups and trade associations together, which has resulted in regular meetings between these groups to address issues facing crop insurance.

Linda has been married to Gene Vickers, an international agriculture consultant, since 1975, and they currently live on the Oregon coast.

 

Photo Caption: (left to right) Greg Deal, Chairman of American Association of Crop Insurers, Linda Vickers, and Tom Zacharias, President, National Crop Insurance Services.

Convo 22

But there are those who are making uninformed and uneducated criticisms about crop insurance – and America’s farmers – in the midst of this national tragedy. According to the Washington-based Environmental Working Group, farmers have been ‘praying for drought, not rain.’ Really?  I’ve seen a lot of looks on the faces of my fellow farmers this past summer, as their crops and have withered despite their best efforts and their hopes for a great harvest have been dashed.”

CROP INSURANCE IN ACTION: Paul Penner, Hillsboro, Kansas

In 2012, the drought in Kansas was in its second year, and wheat, corn and soybean farmer Paul Penner was just trying to survive to the next season.

Crop insurance has been Penner’s lifeline for the last two years and the years before that. It has given him and his wife, Deborah, the means and security to plan ahead and prepare for another year should the drought persist. “Without it, many farmers, including us, would face financial uncertainty as revenue would be insufficient to cover production expenses,” said Penner, 60, of Hillsboro, which is about 45 miles north of Wichita.

In 2012, the Penners had a 75 percent insurance coverage plan for wheat crops and 70 percent coverage for fall crops, such as corn, soybeans and sorghum. Just like car insurance, his goal is to “never have to use it.”

Penner has been covered by crop insurance policy for more than 25 years now. If not for this federal safety net, he said, “I wouldn’t be in farming today.”

The insurance helps him recover part of his losses. “It pays for a little bit of your crops or production if we had a bad year like the last two to three years’ drought. The insurance pays me a certain percentage of the revenue I have lost. They don’t pay all of it,” he explained. “They will never pay you 100 percent.”

But he said he’s OK with not recovering 100 percent because even in a bad year, he said a farmer does not really lose a 100 percent of his production. “At least you’re given enough so you can pay your bills,” he said.

Insurance estimates are based on actuarial history of crop yield and the price of the commodity, among other parameters. Premiums could be higher for one crop per acre than the other. In Penner’s case, corn has a higher premium cost than wheat and soybeans.

Filing is straightforward process. A farmer reports his losses to the crop insurance agent, and the insurance company will then send an adjuster to verify the claims based on established guidelines. The farmer and the adjuster will work through production data sheets. Once approved, help is on the way.

His agent is a local, family-owned company with businesses around the Midwest. It’s the third insurance company Penner has contracted over the years, as many have folded up and sold their business.

The premium varies year to year. Penner said he has paid anywhere from $8,000 to $20,000 over the years he has been using crop insurance. The federal government picks up part of the premium – about 60 percent – as the cost to the farmer would be “prohibitive.”

With the current mood in Congress to cut the national debt, there are some who would like to see the entire crop insurance bill “disappear,” he said. He asserted not all so-called “subsidies” should be painted with the same brush, and it’s his view that ad hoc disaster legislation “is a thing of the past.”

Like many in Kansas, Penner was born to farm. Kansas ranks sixth in farm exports. Beef, grain sorghum, and wheat – introduced to the state by the early Russian Mennonite settlers – are the major products. Hillsboro, where Penner Farms is located, has a population of about 3,000.

“Farming is a risky business as weather is the biggest uncontrollable factor,” Penner said. “Without an adequate risk management tool like crop insurance, a farmer cannot make marketing plans with the reasonable certainty he will be successful.”

Penner says that he can’t fathom managing all the risks of farming without crop insurance. “Crop insurance is absolutely necessary, period,” he said. He says that what crop insurance helps this country do is to ensure food security — the country’s ability to provide a reliable and safe food supply for its people, and not be forced with “going to China and Brazil to purchase our food.”

Crop Insurance Will Help Missouri Farmers Plant Again Next Year

It’s no big secret that Missouri is facing its worst drought in 30 years. This has had a catastrophic impact on the state’s farm and livestock sector, prompting Secretary of Agriculture Tom Vilsack to declare every county in the state a disaster area in July. And while tropical storm Isaac brought us some much-needed rain, every county in the state remains in some level of drought.

As a Missouri farmer, I can tell you that there are few disappointments in life bigger than losing a crop. The loss not only robs you of the income that it should bring – especially with commodity prices at record highs – but also robs you of the joy of the harvest, which is what we farmers are all about.

If I hadn’t purchased a crop insurance policy this year to help me through an event like this, I possibly wouldn’t be able to farm again next year. But that’s the main reason why the federal government teamed up with the private sector years ago to form this public-private partnership that helps farmers manage their risk while shielding taxpayers from expensive farm disaster bailouts.

Droughts like this don’t happen often, but they do happen. And when they happened in the past – before crop insurance was widely available and affordable for most farmers – Congress responded with expensive ad hoc disaster bills. In fact, these disaster bills totaled $45 billion from FY1989 to FY2001.

They don’t call Missouri the “Show Me State” for nothing, and crop insurance has proven its value. Last year, although conditions here were fairly good, there was a string of natural disasters across the rest of the country – from freezes to floods to hurricanes and even wildfires – that left many farms in shambles. And despite these disasters, there wasn’t a single call for a federal farm bailout, because roughly 84 percent of all eligible land was protected by crop insurance.

Crop insurance isn’t cheap for farmers, who have forked over $4 billion out of our own pockets this year to purchase policies, which protect 128 different crops from a wide variety of natural disasters.

This is a great example of the federal government and the private sector working hand in hand for the common good of the country and the food, feed, fuel and fiber supply. In this unique partnership, farmers purchase crop insurance policies – that are partially underwritten by the federal government – and they only receive an indemnity if they incur actual losses. The crop insurance system is efficient, because it is sold, serviced and delivered by the private sector.

In fact, in years past, federal aid for farm disasters like the one we’re in would have taken months or years to get into the hands of the farmers. Compare that to crop insurance, which has been delivering indemnities to farmers as they filed their claims, and thus far this year has put more than $2 billion into the hands of farmers who suffered losses.

Agriculture is certainly a very risky business, which means that banks are often hesitant to lend to farmers, particularly those who are just starting off. But farmers who purchase crop insurance are deemed a much lower risk by the banks, who count the crop insurance indemnity as collateral for the loan.

As disagreeable as things might seem sometimes in Washington, D.C., the fact that crop insurance is a quintessential risk management tool for farmers is one of the few things that both Republicans and Democrats can agree on. And farmers made their feelings on the issue quite clear earlier this year when they delivered a unified message to Congress regarding the upcoming Farm Bill: “Do no harm to crop insurance.”

Of course, there are those who would like to see all farm programs cut, either because of their dislike of government spending or their dislike of family farming. They charge that farmers would rather collect a crop insurance indemnity than harvest a crop. Imagine if a similar charge was leveled against someone who purchased car insurance. Can anyone really believe that people purposely crash their cars to collect the indemnity?

If rains don’t come this winter, we could be looking at the second year of this. Mother Nature strikes in cycles, so that possibility isn’t entirely out of the question. But there are things that we can count on. And at the top of that list is this country’s crop insurance system, which will allow farmers like me who take a beating this year to come back to the table again next year for another try.

Jeremie Nothdurft is fourth generation farmer from Gordonville, Missouri who raises corn, soybeans and wheat on the family’s 1,200 acre farm. This op-ed appeared in the Kansas City Star on Sunday, October 28, 2012.