Crop Insurance Basics: Risk Mitigation and Risk Management

Risk mitigation and risk management are two sides of the same coin when it comes to improving agricultural outcomes and promoting climate-smart decisions.

On the front of the coin, we have risk mitigation. This side represents all the steps farmers and ranchers take to reduce the amount of risk they face. For example, farmers utilizing precision ag technology, new seed varieties, or conservation practices like reduced tillage and cover cropping can increase their resiliency by improving yields and soil health.

On the back of the coin, we have risk management. This side represents all the steps farmers and ranchers take to manage the costs and impacts of the many uncontrolled risks they still face. Agriculture’s primary risk management tool is crop insurance, which is delivered by private-sector insurers and is partially funded by farmers through premiums.

For optimal effectiveness, these two sides should work in concert, not conflict, to encourage conservation while ensuring the ability of farmers and ranchers to continue operating after a disaster.

Crop insurance must be flexible enough to embrace the newest tools, technologies, and techniques being used to improve the land, conserve resources, increase operating efficiencies, and mitigate risk. Conversely, new conservation efforts must be consistent with the economics that underpin crop insurance’s widely successful risk management strategy.

These facts were reinforced by a recent study published in the renowned peer-reviewed Journal of Environmental Management. It noted that crop insurance is not a barrier to the adoption of conservation practices and is key to helping farmers maintain healthy soil.

The public-private partnership of crop insurance has evolved over the years to become the cornerstone of America’s farm safety net policy. And it has stood the test of time because of built-in flexibility responding to any situation that Mother Nature presents.

Specifically, the system is built on constant data analysis, up-to-date good farming practices, and actuarial soundness, which means premiums for coverage generally cover expected indemnities over the long term.

Crop insurance encourages smart farming practices on the most productive land through a self-correcting premium rating and underwriting system. In short, farmers who have a strong Actual Production History (APH) get better premium rates and thus lower premiums relative to their higher yields. Lower premiums motivate farmers to mitigate risk and build strong production histories with higher yields.

Crop insurance is also constantly improving, which is imperative as farmers deal with the ill effects of extreme weather. Section 508(h) of the Federal Crop Insurance Act allows for the private submission of crop insurance policy ideas and sets forth clear criteria for policy approvals by the Federal Crop Insurance Corporation Board of Directors.

The U.S. Department of Agriculture also works to continually improve crop insurance through the development of new policies. For example, the new Hurricane Insurance Protection – Wind Index Endorsement coverage arrived just in time to help offset devastating losses from the string of hurricanes that occurred during 2020. This new option was quickly added to fill a need in the agricultural community, and in its first year of implementation, it helped farmers rebound from eight significant wind events.

The new hurricane program – just like insurance products covering more than 130 crops in this country – works because it is rooted in sound science and economic principles.  These fundamentals of actuarial soundness will be essential as policymakers look for ways to encourage farmers to adopt more and more conservation practices. Policymakers must not lower insurance premium rates without proper justification – to do so would only place the entire risk management system in jeopardy and arbitrarily punish the farmers it serves.

Instead, incentives should reward farmers for their actions without upending actuarial soundness. State governments in Iowa, Indiana, and Illinois have found a way to do this with local programs that help offset a portion of farmers’ insurance costs.

In other words, the two sides of the coin must continue working together as they are designed to do.

Crop Insurance 101

Crop insurance is a critical program for maintaining our nation’s supply of food, fuel and fiber. It helps farmers and ranchers navigate the risks of farming and plant again after a disaster while providing them the necessary stability to continue investing in long-term conservation practices.

But with terms like “Actual Production History” or “Whole-Farm Revenue Protection,” it might sometimes feel like you need to be an insurance whiz to fully understand how this public-private partnership works.

That’s why National Crop Insurance Services (NCIS) put together CropInsurance101.org.

There, the public and policymakers can learn more about the history of crop insurance and how it works today to protect farmers and ranchers.

We’ve recently added a wealth of new content:

  • Links to the entire “Crop Insurance Basics” series, which explores crop insurance concepts in an easy-to-understand way.
  • Information on a peer-reviewed study in the Journal of Environmental Management which found that crop insurance is not a barrier to the adoption of conservation practices and plays a role in helping farmers maintain healthy soil.
  • New glossary definitions, including important program elements like Good Farming Practices and Section 508(h) submissions.
  • Farmer testimonials sharing how crop insurance is an indispensable part of their risk management toolkit.

Over the past year, farmers and ranchers have faced untold challenges, ranging from a global pandemic to devastating weather events. Looking forward, they’re building on decades of best farming practices to protect the soil, air and water that nurture their crops.

Rural America is resilient. But they can’t do it alone.

The strength of crop insurance has made it the cornerstone of the farm safety net. Last year a record nearly 400 million acres across America were protected by crop insurance.

Learn more about crop insurance keeps America growing by visiting CropInsurance101.org or following NCIS on Facebook and Twitter.

Crop Insurance Basics: Actuarially Sound

Unless you’re an economist, an insurance guru, or a pension fund manager, chances are good you’re not overly familiar with the term actuarial soundness.

In short, it’s a fancy way of saying “the math must work.”

For example, an actuarially sound pension fund will have enough money in the bank to meet future obligations. If not, and investments made by the fund are overly risky or too conservative – or expenses run amuck – then a whole slew of retirees could be left in the cold.

Federal crop insurance, by law, must be actuarially sound. This ensures that the amount of money in the system is sufficient to meet the costs of paying claims when disaster strikes – and to establish a small reserve for possible extreme losses in the future. To achieve this goal, premium rates are adjusted regularly to reflect current market and crop conditions – a process that requires constant number crunching and research.

This kind of diligence and regular adjustment becomes especially important for those areas where the weather is turning more and more extreme amid climate change. And on the flip side, adjustments can be made to reflect changing conditions that may indicate less risk.

By being actuarially sound, the crop insurance system has a loss ratio performance mandate of “not greater than 1.0” – meaning that over time, indemnity payments paid out to farmers should equal the total premiums invested into the system.

Actuarial soundness has helped the program survive extreme events like the devastating drought in 2012, the worst disaster to hit agriculture since the Dust Bowl. But the system was managed prudently in the preceding years meaning that insurers had reserves to help pay $17 billion in indemnities and keep rural America afloat. The same could be said for the flooding and string of hurricanes seen in recent years.

Things could have turned out much differently had crop insurance not been actuarially sound and historical premiums not been sufficient to cover long-term losses.

That’s why crop insurers invest in actuarial professionals, data collection and analytics. It’s also why decisions made by policymakers carry such huge ramifications for farmers’ most important risk management tool.

Lawmakers must guard against creating new policies that reduce premium rates below future anticipated indemnities, increase risk within the system, or negatively affect the coverage that can be offered. Such policies will likely upset the fine-tuned balance that defines the crop insurance system and makes it affordable, widely available, and economically viable.

In other words, the math must work.

Through Tough Years and Unexpected Hardships, Crop Insurance Helps Farmers Stay in Business

Just along the Texas-New Mexico border lies the small town of Texline. This west Texas community is where Valerie and Michael Diller raised their family while growing corn, wheat, hay and caring for sheep.

Farming isn’t easy, and the Diller family has experienced their fair share of heartbreak. They credit crop insurance with helping their farm weather disaster in an opinion piece recently published in the Amarillo Globe-News.

“For those tough years and unexpected hardships, I am thankful that Congress has supported a strong federal crop insurance program to help get us through,” Michael wrote.

When Valerie and Michael were beginning farmers, a storm badly damaged their wheat and corn crop. The safety net provided by crop insurance saved their farm and allowed them to once again plant the following year. After their firsthand experience with crop insurance, the Dillers became advocates for this critical risk management tool, even selling crop insurance themselves.

Michael wrote in the Amarillo Globe-News:

There is no better way to insure your crop than through the public-private partnership of crop insurance. The protection crop insurance products offer today help farmers manage the risks of Mother Nature and the markets so they can stay in business and grow the essential food, fiber and fuel products that are critical to our nation’s safety and security.

And this year has come with no shortage of obstacles for America’s farmers and ranchers.

…while farming always comes with risks, this year has presented some unique challenges. It’s been a rollercoaster ride on the market this year during this unprecedented time of the COVID-19 pandemic. Corn is at about the lowest price in memory.

Farmers in the west Texas panhandle are really scared about whether they are going to be able to make it next year. The tremendous rise in prices at the grocery store is not reflected at the farm level. These are issues that not only harm the farmers who are trying to make a living, but all of the small businesses and other jobs that farming supports in our community.

That’s why farmers like Valerie and Michael have made their message to Capitol Hill clear: we must maintain a strong and widely available system of crop insurance.

Crop insurance kept the Diller family in business. And crop insurance agents and adjusters are proud to work every day to give a helping hand to farming families across the country.

As Michael concluded, “Now more than ever [crop insurance] is needed to help farmers produce a reliable, high-quality and affordable food supply for our nation.”

North Carolina Apple Grower Says Crop Insurance Key to Food Security

Kenny Barnwell is a fifth-generation apple grower in the mountains of North Carolina. His family farm covers approximately 150 acres and is home to 26 different varieties of apples.

This year has been tough for apple growers in North Carolina, much like farmers across the country. Apple growers have faced weather-related damages to their crop and fear revenue losses due to the COVID-19 threat and a decline in agri-tourism.

Despite the uncertainty, Barnwell takes comfort in knowing that he can rely on crop insurance.

He recently shared the importance of maintaining a strong crop insurance program in a column he wrote in his local paper, the Hendersonville Lightning:

The fact that I have a safety net under me with crop insurance helps me sleep at night, especially this season. I worked as a crop insurance adjuster for about 10 years, so I know just how well this public-private partnership works.

Crop insurance uses the efficiency of the private sector to quickly get relief to farmers so they can stay in business and continue producing the food, fiber and fuel that now, more than ever, are critical parts of our collective safety and security.

Crop insurance covers 3.5 million acres in North Carolina and provides $1.7 billion in protection. And as Barnwell notes in his piece, farmers have a role to play in their own protection by investing in crop insurance policies.

“The government keeps crop insurance affordable and widely available but it’s not free,” Barnwell wrote. “Farmers bought 1.1 million crop insurance policies last year, collectively paying $3.75 billion in premiums and shouldering more than $10 billion in deductibles.”

Throughout the COVID-19 pandemic, America’s farmers and ranchers have continued their essential work, feeding our nation. Crop insurance has been by their side every step of the way. Barnwell noted the importance of protecting a steady food supply:

As our nation recovers from the pandemic, and consumers learn more about where their food comes from, I encourage lawmakers to maintain a strong system of crop insurance to help ensure the safety and security of our nation.

Every American can sleep a little bit sounder knowing that crop insurance helps our farmers and ranchers feed our nation, no matter what challenges lie ahead.

Texas Family Says Crop Insurance Saved Their Farm

Valerie Diller met her husband Michael while they were students at West Texas State University.

They decided to return to his hometown of Texline, start a farm and raise a family.

About two years after they started farming, a terrible hailstorm destroyed all of their wheat and badly damaged the corn crop.

Fortunately, they had crop insurance. Without it, the Dillers say in a new video, they would have been out of business

That storm was pivotal for their farm and their lives. They started selling crop insurance after the storm because they saw just how important it was during a disastrous time.

“Truly, we wouldn’t be here today without it,” Valerie Diller says. “We would not be able to live where we live and do what we do. I decided at that point if there was a way to help people, if we could, I wanted to do that.”

Today they grow corn, wheat, hay and raise sheep. Their children decided to come back to farm. Their son is farming with them and their daughter is involved in the sheep business.

It’s been a rollercoaster ride on the market this year for the Dillers, and farmers across America, during this unprecedented time of the COVID-19 pandemic. Corn is at about the lowest price in memory.

Farmers in the west Texas panhandle are scared about whether they are going to be able to make it next year, the Dillers say. The tremendous rise in prices at the grocery store is not reflected at the farm level. They want Congress to know crop insurance is more important than ever.

“When I talk to a guy about federal crop insurance, I tell them there is no better way, no cheaper way, to insure your crop than through federal crop insurance,” Valerie Diller says. “You can’t farm without it.”

Watch the Dillers’ story at CropInsuranceinAmerica.org.

Thank a Farmer This Labor Day

Labor Day is a day to celebrate the achievements of the millions of men and women who keep America running.

This year, don’t forget to thank a farmer.

Approximately 2.6 million Americans work directly on a farm. Nearly 20 million more work in food and other agricultural-related industries.

Farming and ranching are certainly not your average 9 to 5 job. It’s sunup to sundown and sometimes all night long. Farming is a lifetime of commitment to caring for animals or producing a sustainable crop. It’s boots-on-the-ground work that requires equal measures of grit and grace and a little bit of good luck.

Despite the immense challenges that they have been presented with this year, America’s farmers and ranchers have continued to work every day in order to provide America with the most affordable, abundant and safest food supply in the world.

American agriculture keeps our grocery store shelves stocked, even in the midst of crisis, and supports our rural economies. That’s why we’ve made it our work to support America’s farmers and ranchers.

Crop insurance policies protect 380 million acres of land, or more than 90 percent of insurable farmland. Crop insurance is there when disaster strikes to quickly lend a helping hand and ensure that farmers can plant again another year.

We’re proud that America’s farmers invest their own money into sustainable risk management tools by purchasing crop insurance. And we are grateful for the continued bipartisan support from Congress for a strong Federal crop insurance program.

We will always work to ensure crop insurance remains affordable, widely available and economically viable. It’s a critical component of the farm safety net that protects our farmers and ranchers as they do what they do best: work hard to feed the world.

As you head into the holiday weekend, give a moment of appreciation for our farmers and ranchers. We certainly will.

Wheat Growers Count on Crop Insurance

This year, America’s farmers and ranchers have faced one challenge after another. For wheat farmers in the west and Midwest, their crop is now threatened by severe drought conditions that could contribute to yield reductions or total crop loss.

Thankfully, more than 90 percent of insurable planted acres are protected by crop insurance, including many of America’s more than 47 million acres of wheat.

Without crop insurance, “producers in these drought-stricken areas could lose their crops without any risk protection, which could drive those farming operations out of business,” wrote Dave Milligan, president of the National Association of Wheat Growers, in a recent op-ed for the High Plains Journal.

One wheat farmer in Kansas reported less than one and a half inches of rain in the last year. Others worry about the increased threat from wildfires.

Milligan is a Michigan wheat farmer himself and very familiar with the inherent dangers of farming and the nature of disasters like drought. He wrote that producers need to have reliable access to crop insurance to effectively manage their risks.

Farming is a risky business, and crop insurance is one of the most important policy tools that is relied on to mitigate risk…

As a crucial component for protecting producers and the feasibility of farming, crop insurance provides a risk management tool for unpredictable weather and assists producers in qualifying for the necessary operating loans to produce a crop. With this in consideration, any cuts or reduced access to crop insurance programs could be detrimental to farmers who rely on it to stay in business when disaster strikes.

Crop insurance has been so successful because it relies on a unique partnership between the federal government and the private crop insurance industry. This allows crop insurance to utilize private-sector efficiency to process claims and deliver payments quickly.

As Milligan makes a point of noting, farmers invest their own money into crop insurance:

Crop insurance is such an important policy tool for farmers that they invest their own money to purchase this protection. Farmers spend $3.5 to $4 billion per year to purchase crop insurance and bearing a significant portion of losses through deductibles. The federal government spends less than a quarter of 1% of its budget on farm safety net programs, making this a worthwhile investment to protect the world’s most affordable and safe food supply. Adequate funding of crop insurance should be a high priority for policymakers as agriculture is being hit with low prices, the effects of COVID-19, and other unpredictable disasters.

Milligan also cites the critical role that crop insurance plays in supporting the rural economies that depend on the income generated by farmers and ranchers. Because if America’s farms fail, their communities will be likely to crumble.

We hope that America’s wheat growers experiencing drought will soon see the rain they need. But no matter the storm – or the drought – crop insurance is here for America’s farmers and ranchers.

Maryland Farmer Thankful for Crop Insurance During Uncertain Year

In farming, the future is never certain. It requires trust that a planted seed will sprout and then flourish and hope that weather or market conditions will not upend that year’s crop.

One thing America’s farmers and ranchers did not predict this year: a global health care crisis.

Brooks Clayville grows row crops on his family farm located on the eastern shore of Maryland. Clayville recently authored an op-ed for The Dispatch sharing that, like many farmers, he began 2020 with high hopes before the COVID-19 pandemic took hold.

“Corn and soybean prices, for the first time in a long time, were expected to improve with the resolution to the ongoing trade wars that have hit rural communities hard,” Clayville wrote. “But the COVID-19 pandemic has dramatically interrupted our economy and our food supply chain.”

Every year, Clayville writes, he purchases crop insurance to help protect his crops and ensure that his family farm can survive any challenges that may arise. Including the current pandemic.

Now, more than ever, Clayville believes that crop insurance is an important tool:

Although rural America faces mounting uncertainty related to the COVID-19 pandemic, Mother Nature certainly won’t give anyone a pass this year. Farmers in Maryland and all across America need to maintain the tools that allow them to protect their farms and keep supply chains moving.

The best tool out there for mitigating the risks of weather and prices is the public-private partnership of crop insurance…

Farming is an expensive and risky business. Farmers have to buy all of the inputs that go into growing a successful crop before they know what the final harvest prices will be and without knowing whether a big storm is going to ruin all of their hard work or whether a pandemic will create new challenges that we didn’t plan for this planting season.

And Clayville is concerned not only about the farmers growing our crops, but the rural economies and small-town jobs that are supported by agriculture:

I think about the banks and equipment dealers, hardware stores and grocery stores in my town. If farmers weren’t spending money on Main Street, we’d have no town keeping our rural economies alive and grocery stores stocked is critically important.

The bottom line: farmers require the strong farm safety net provided by crop insurance to provide certainty as they navigate an uncertain world and continue their essential work of feeding and fueling America.

Crop Insurance Protects Essential Food and Fiber Supply

Steve Ward talks to as many lawmakers as he can about farming. Specifically, growing cranberries.

Ward grew up helping his dad on the family farm in Massachusetts, building cranberry bogs and digging ditches. Now, he farms that land with his son.

But growing cranberries is extremely labor intensive and carries a large amount of risk, not the least of which is the constant threat from Mother Nature.

Ward recently wrote a letter to the editor of his local paper, the Taunton Gazette, emphasizing the critical role that crop insurance plays in protecting America’s farmers:

At every step in this process, Mother Nature can destroy the crop.

Too much water can erode a bog. Not enough water can stress the plant. Hail can destroy berries and flowers in minutes. Fire worms can chew through a bog and leave what looks like ashes in their wake.

You can be left with no crops, no income to cover all the input costs and no money to grow again next season.

That’s why the strong farm safety net of crop insurance helps me sleep at night. I would not be in business without crop insurance.

The public-private partnership of crop insurance means farmers get financial help fast after a disaster. It allows them to stay in business and continue to produce the food, fiber and fuel that are essential to our nation’s safety and security.

Crop insurance saved me. I would not be in business without it.

Our farmers and ranchers have continued to work day-in and day-out throughout this pandemic to provide Americans with a safe and affordable food supply. Let’s ensure we continue to provide the protection they need by supporting a strong crop insurance program.

Crop Insurance an Essential Part of Farmers’ Hurricane Preparedness Kits

June 1 marked the beginning of hurricane season in the Atlantic Ocean and its already off to a roaring start. One month in and three named storms have already affected the United States – two of those storms formed before the season even officially began.

Most recently, Tropical Storm Cristobal made landfall in Louisiana, and it will very likely be far from the last storm this year. In fact, the National Oceanic and Atmospheric Administration is predicting a 60 percent chance of an above-normal hurricane season.

For those farming in the Gulf and Atlantic states, a hurricane could destroy everything they’ve worked to grow or care for in just one catastrophic event.

But after the floodwaters recede and the winds die down, America’s crop insurance industry will be there to help set them on the road to recovery.

Just as we were there when Irene destroyed Cash Ruane’s corn crop in 2011.

By the time Hurricane Irene reached the picturesque mountains of Vermont, she was only a Tropical Storm but her capacity for destruction was unmatched. Historic flooding left water on Ruane’s fields for more than four days and at one point threatened his cow herd.

Thankfully, Ruane had purchased crop insurance, as he always does, and immediately called his crop insurance agent.

“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.

One crop insurance agent based in Maine recalled the following Spring that for many farmers in New England, “crop insurance was the only thing that saved… them from losing their farms to bankruptcy and instead allowed them to return to their fields.”

We were still there the following year when Hurricane Sandy slammed into the East Coast.

Because the unique partnership created by the Federal crop insurance program is able to leverage private sector efficiencies, adjusters were on the ground in just days to assess damages and indemnity checks arrived in weeks, not months.

And crop insurance helped Justin Price when Florence left his soybean crop a total loss in 2018.

“I had been smart in my decision making, and carried crop insurance, which you know that’s not a salvation but it’s a help.”

We don’t know what this year’s hurricane season will bring, but we know that crop insurance will never leave our farmers or ranchers behind. Not when a pandemic strikes and certainly not when a hurricane hits.

The crop insurance industry is proud to provide an affordable, accessible and personalized safety net to America’s farmers and ranchers.

America’s Farmers Remain Open to Feed America

Chip and Karla Bailey own KC Bailey Orchards in Williamson, New York, where they grow apples. They’re proud to help provide for their neighbors as well as customers across America, especially during the COVID-19 pandemic.

The past few months have resulted in some dramatic changes in our daily lives, but for America’s farmers, like the Baileys, there are still crops to be planted, fields to be fertilized and apple trees to be pruned.

The Baileys recently wrote an op-ed published in their local paper, the Times of Wayne County, talking about the essential work America’s farmers and ranchers continue to perform at this critical moment:

This crisis has demonstrated the importance of supporting our farmers and ensuring that we have a stable, safe and affordable food supply.

But with farming comes immense risk. The Baileys write that they are always dealing with weather threats. Hail and frost are not only hard to plan for, but they can be devastating to an apple crop.

That’s why they purchase crop insurance. The Baileys consider crop insurance a fundamental part of the farm safety net and are asking Congress to continue to support this important program:

Farming is our passion. As first-generation farmers, we know the difficulties that come with growing food. The COVID-19 virus has created more challenges and that’s why we are thankful for the steps that Congress has taken to help support rural America by passing aid packages with help earmarked for farmers.

However, it’s important that Congress also support, long-term, the farm policies that assist our family farm and allow us to survive even the difficult years.

That includes tools such as crop insurance.

America’s farmers are still farming. Let’s make sure they have the tools they need.

 

New York Dairy Farmer Thanks Crop Insurance

Dairy farmer Steve Durfee milks about 1,000 cows at his farm in upstate New York. It’s a family operation, started by Durfee’s grandparents in the 1940s after they lost everything during the Dust Bowl in Nebraska and moved east to start again.

Now, if anything were to happen on Durfee’s farm, he has peace of mind knowing that his crop insurance policy will help protect his family and give them the opportunity to rebound.

Durfee shared his experience with crop insurance in a recent guest column he wrote for the Madison County Courier:

When I think back to the challenges my grandparents faced as they packed up and left Nebraska, it reminds me just how much farming has changed. I think they’d be surprised and pleased at how successful our family farm has become.

We wouldn’t have been as successful without a strong farm safety net. The centerpiece of that safety net is the public-private partnership of crop insurance.

I recently invited representatives from the crop insurance industry to my farm to tell my story and show them how we use crop insurance to manage the weather and price risks that, for my grandparents, were nearly unmanageable.

The large investment required for each acre we plant makes crop insurance a must. Buying insurance helps take out some of the risk on those acres.

As Durfee notes, farmers would rather sell their products on the market than file an insurance claim. Thankfully, crop insurance helps America’s farmers and ranchers pick up the pieces when disaster strikes, ensuring they can continue providing our nation with food, fuel and fiber.

He concluded his column by urging Congress to keep families like his in mind as they discuss protecting and strengthening farm policy.

I’d like to thank Congress and the American public for backing a strong system of crop insurance in the Farm Bill. As the political cycle heats up and we head toward the 2020 elections, I hope policymakers will remember just how important crop insurance has become to rural America.

Find more first-hand stories highlighting the importance of crop insurance at CropInsuranceinAmerica.org.

National Crop Insurance Services Launches New Website to Educate Public, Policymakers on Importance of Crop Insurance

Our nation’s farmers and ranchers face unpredictable hazards, many of which can destroy a hard-earned livelihood in moments. Thankfully, farmers can count on crop insurance to help them navigate these risks and protect their operation should disaster strike.

However, the continued success of crop insurance depends on keeping the program affordable, widely available, and economically viable. And that starts with educating both the public and policymakers as to the important role crop insurance plays in the farm safety net.

National Crop Insurance Services (NCIS) has launched a new website at CropInsurance101.org that aims to be an easily-accessible resource where visitors can learn more about the history of crop insurance, download fact sheets, or find a glossary of common terms. As part of this initiative, NCIS also debuted a new Crop Insurance 101 video that explains how crop insurance works.

The Crop Insurance 101 website was officially launched at a congressional briefing today hosted by the new House Crop Insurance Caucus.

Created by Reps. Cheri Bustos (D-Ill.) and Glenn “GT” Thompson (R-Pa.), this bipartisan caucus will provide a forum for all members to learn more about the value of the public-private partnership that makes crop insurance unique while encouraging bipartisan collaboration to strengthen this program for rural America.

Members of the caucus include: Reps. Cindy Axne (D-Iowa), Mike Bost (R-Ill.), Salud Carbajal (D-Calif.), TJ Cox (D-Calif.), Angie Craig (D-Minn.), Rodney Davis (R-Ill.), Alcee Hastings (D-Fla.), Dave Loebsack (D-Iowa), and Jefferson Van Drew (D-N.J.).

Illinois farmer Ron Moore provided congressional staff at the briefing with a first-hand perspective of the importance of crop insurance.

“The crop insurance program is a critical tool to protect against the risks that come with farming,” Moore said. “As the rural economy faces another tough year, it is encouraging to see members of Congress from both sides of the aisle come together to stand up for America’s farmers.”

And with crop insurance policies protecting nine out of every 10 planted acres of principle crops, crop insurance does more than provide economic security – it safeguards our nation’s food and fiber supply.

Learn more about how crop insurance works for both farmers and taxpayers alike by visiting CropInsurance101.org.

How Does Crop Insurance Impact Your State?

Crop insurance is a cornerstone of U.S. farm policy.

But what does that really mean for America’s farmers?

To put it all into perspective, National Crop Insurance Services has highlighted the state-by-state impacts of crop insurance at CropInsuranceInMyState.org.

There you can find individual fact sheets that illustrate the unique significance of agriculture in each state.

It’s probably to be expected that oranges are a staple in Florida, but did you know that New Jersey can thank tomatoes for being the largest agricultural contributor to the Garden State’s economy? Idaho might be famous for their potatoes, but potatoes lead the list of top crops for Maine as well.

And the federal crop insurance program helps these crops drive the economy by providing an invaluable safety net for those farmers and ranchers harvesting oranges, tomatoes, potatoes and the more than 100 additional covered crops.

Everything is bigger in Texas, and with 38 million acres protected by crop insurance, they come in at number one in acres covered. But corn-production powerhouse Iowa can boast the highest value of crops covered by federal crop insurance, with nearly $12 billion in protection.

And because crop insurance requires farmers, private insurance companies, and the federal government to share the burden of risk, each fact sheet outlines how much farmers and insurers invested into the federal crop insurance program through premiums and indemnities.

In total, federal crop insurance protects more than $100 billion worth of crops across more than 300 million acres in all 50 states.

Visit CropInsuranceInMyState.org to download a fact sheet for your state and view first-hand testimonials from the farmers and ranchers who rely on this valuable risk management tool.

Pennsylvania Farmers Consider Crop Insurance a Must-Have Tool

Brian Campbell always knew he wanted to be a farmer. He started a produce stand when he was just 14 years old. Now, his Pennsylvania farm produces mostly vegetables, including broccoli, sweet corn, lettuce and pumpkins.

But weather can be unpredictable in the Northeast, and his farm has seen challenges. In 2011, a severe flood wiped out approximately 50 percent of his expected revenue for that year. Banks no longer wanted to do business with him and he had to dig deep to recover.

Thankfully, the introduction of the Whole Farm Revenue Protection program with the passage of the 2014 Farm Bill allowed Campbell to adequately insure his diverse crops against risk.  

National Crop Insurance Services visited Brian Campbell Farms as part of our mission to tell the first-hand stories of the farmers and ranchers who rely on the safety net provided by the federal crop insurance program.

Campbell credits crop insurance for his growing success, saying, “If it wasn’t for whole farm revenue protection today, you know, I may not be at the size that I am.”  

And he’s always looking forward to the next year, “I love what I do. It’s a passion. I really enjoy it.”

For family farmer Dave Clark, farming is also a passion that he just couldn’t shake. He briefly tried working off the farm but returned to his roots in 2001 when he and his wife purchased the family farm in Huntingdon County, Pennsylvania.

“I always say it’s in your blood. I love farming,” Clark says.

Clark considers crop insurance a must-have business tool. He relies on crop insurance to help protect his farm against the inherent risks that come with putting your faith in weather to grow your crops and a favorable market in which to sell them.

As John Ligo says, “Risk in farming is part of the landscape. The risks that we face, some are controllable, and some are not.” But he emphasizes that one way to help mitigate these risks is to purchase crop insurance.

His farm in Grove City, Pennsylvania is home to approximately 600 head of cattle and he grows about 400 acres of corn alongside 600 acres of grass and rangeland.

Last year, Ligo’s farm saw 40 inches of rain and by early June he was short 100 acres of what he intended to plant. Crop insurance helped his farm survive. During those years when drought hindered grass production, crop insurance helped him then, too.

“It does change the way I farm, knowing that my risks are at least covered to a certain extent,” Ligo says.

Third-generation dairy farmer Billy Smith feels deeply connected to his family legacy of farming.  

“I feel that it’s our God-given right here to take care of this land,” he says. “I feel that we’ve been blessed in many ways. You know, it’s our livelihood.”

He’s had to file a couple of crop insurance claims. But knowing that this valuable federal program exists helps ease the worries that come with farming. By reducing some of the risks that can arise on his farm, crop insurance allows him to better plan for the future.

“It’s always there to back us up whenever we need it.”

View more stories from across the country at cropinsuranceinmystate.org.

Crop Insurance Wins Wide Support on Capitol Hill and In Countryside

Federal crop insurance and the critical role it serves as part of the farm safety net unexpectedly took center stage at a recent Senate Finance hearing with the United States Trade Representative, Robert Lighthizer.

Michigan Senator Debbie Stabenow questioned USTR Lighthizer on the Office of Management and Budget’s (OMB) proposed spending plan for Fiscal Year 2020, which takes aim at the United States Department of Agriculture. OMB suggested making cuts to a popular farm risk management tool: crop insurance.

While this budget is unlikely to ever be adopted by Congress, Senator Stabenow, who is the top Democrat on the Agriculture Committee, rightly noted that cuts to the USDA and crop insurance would be contrary to the policy objectives established by the overwhelmingly bipartisan passage of the Farm Bill in December 2018.

Finance Committee Chairman Chuck Grassley (R-IA) immediately interjected, emphasizing that cutting crop insurance is a non-starter.

“It would gut the program,” the Chairman said of OMB’s proposal, “and that’s the one thing that our farmers and ranchers and growers all over the country said was the number one issue.”

He wasn’t alone in criticizing the plan.  Senate Minority Whip Dick Durbin (D-Ill.) made his objections heard a couple of days earlier.

“More than 310 million farm acres protected by crop insurance would be at risk,” he said of the plan, which he noted, “undermines our farmers.”

And those farmers have been very clear in their message to Capitol Hill to “do no harm” to crop insurance. Some of these farmers reiterated this ask at this week’s Agri-Pulse summit in Washington, D.C.

Luke Howard, an organic farmer from Millington, Maryland, shared how crop insurance helped his farm after a record rainfall last year, stating it was a lifesaver and “a smart use of tax dollars.”

And a first-generation farmer, John Shepherd from Blackstone, Virginia, emphasized that he may not have survived his first few years of farming without the safety net provided by crop insurance.

Their stories and similar testaments from farmers and ranchers are clear.

We simply cannot balance the federal budget on the backs of America’s farmers and ranchers. And agriculture cannot thrive without a strong crop insurance system.

Eastern North Carolina farmers on long road to recovery after Hurricane Florence

WALLACE, NC – Justine Price was looking forward to a great soybean crop this fall. His beans were coming in strong, covering the fields of his eastern North Carolina farm in a lush green.

Mother Nature had other plans.

As Hurricane Florence approached the North Carolina coast, he moved his equipment to higher ground and prepared as best he could for what was expected to be a storm with Category 4 winds.

What he wasn’t expecting was the rain. The storm stalled once it made landfall and dumped almost 30 inches on his farm. The river flooded, and water rose to about 5 feet in his garage as Price and his wife moved their furniture to the second story of their home.

Today, piles of debris from the inside of gutted homes lines the street in his hometown of Wallace.

In his fields, brown and rotting soybeans are tangled. Old tires, a refrigerator, gas cans and wooden crates are strewn across another nearby field.

Price spends his time now trying to rebuild, helping his family and loading supplies at the fire department to help with the relief effort. His crops are a total loss.

“I had been smart in my decision making,” he says, “and carried crop insurance, which you know that’s not a salvation but it’s a help.”

Down the road in Mt. Olive, Reginald Strickland faces the same damage. His cotton crop is rotting in the fields and his tobacco is destroyed.

“Every dollar will help,” he says, “because we are going to be in the hole.”

And it’s not just this year. Eastern North Carolina has suffered hurricanes, droughts and low prices for several years running.

The damage left in Hurricane Florence’s wake is a reminder of the reason American agriculture needs a strong, affordable and widely available system of crop insurance. The adjusters will make their assessments and get payments to farmers here much faster than any ad hoc federal relief bill.

“Crop insurance is very important to all of Ag,” Strickland says. “We really need it. We have to have it. It is the only way we can continue to produce the food and fiber it takes to feed the world.”

Price says the payments won’t cover everything and they won’t provide him income until the next crop is harvested. But they will help him farm another season.

For now, he is putting his faith in a higher power.

“Just trust in the Lord,” he says. “That’s the biggest thing.”

Watch these stories and more at cropinsuranceinmystate.org.

New Study: Farmers Will Buy Less Crop Insurance If It Costs More

In their quest to harm farm policy, critics have long contended that crop insurance is so vital to farmers that changes in premium rates will have no impact on participation.

Such claims may be convenient for special interests hoping to weaken farmers’ most important risk management tool by making it more expensive, but the claims are also incorrect, according to a new peer-reviewed study.

Crop insurance “would likely respond fairly abruptly to large cuts,” explained Dr. Josh Woodard, an associate professor at Cornell University, whose work was recently published in the Journal of Risk and Insurance.

Woodard observed that crop insurance demand is clearly responsive to price, as proven by the uptick in participation following Congressional actions over the years to provide premium support instead of ad hoc disaster payments.  A similar decrease in participation would naturally occur if coverage costs more, he explained.

Results from Woodard’s analysis of the demand for crop insurance on Illinois corn found that participants would purchase lower levels of insurance coverage as premium prices rise.  In fact, some participants may drop out of buy-up coverage altogether, Woodard noted.

“Crop insurance is already expensive for farmers but is necessary to obtain loans to invest in new technologies and conservation activities,” he wrote.  “Significantly cutting this support will not only hinder farmers’ ability to invest in sustainable farm operations, but may push many farmers out insurance and eventually out of business.”

The findings are groundbreaking as past analysis of crop insurance assumed demand to be unresponsive to price, due to a shortcoming in the way past researcher’s estimated demand. Woodard’s methodology corrects for that limitation, which should improve the reliability of future research in the field.

Though the paper does not advocate for or against crop insurance, it notes, “Policy makers should be properly informed by the most applicable and relevant research when seeking to estimate the impacts of policy changes on demand. This is particularly true in light of consideration of prospective rate-making changes in the program.”

The study was published shortly after the House and Senate concluded debate on the 2018 Farm Bill.  Both chambers passed bills that kept crop insurance strong and rebuffed efforts to make the program more expensive by cutting funding, capping benefits, and limiting participation using an arbitrary income means test.

“A lot of farmers simply would not be able to afford their insurance coverage any longer if Congress were to substantially increase premium rates,” Woodard concluded.  “The long run costs of that should be factored into any policy decisions. I think lawmakers, correctly, understand this reality.”

Lawmakers’ support for crop insurance, which has become a cornerstone of U.S. farm policy, is not surprising.  Prior to crop insurance’s rise to prominence, taxpayers were called upon to fully fund ad hoc aid after disasters.  That was both expensive and inefficient.

With crop insurance, farmers pay for a portion of their safety net – collectively between $3.5 and $4 billion a year – so taxpayers don’t shoulder all the risk.  And aid arrives in weeks, not months or years, because private-sector insurers process claims instead of the government.

The program’s popularity has steadily increased as Congress has made investments to make crop insurance more affordable and available for farmers.  In 2017, it protected more than $100 billion worth of agricultural goods on a record 311 million acres of land.

NCIS Launches Website Highlighting Crop Insurance in All 50 States

The Senate officially begins its Farm Bill process June 13, as the Agriculture Committee debates a draft bipartisan bill released last week by the panel’s top Republican and Democrat.

And thanks to a new website just unveiled by the National Crop Insurance Services (NCIS), Senators and other interested parties won’t have to look very far for information about how crop insurance affects every state in the country.

The new website, Crop Insurance In My State, offers an interactive map that provides visitors with access to state-specific information such as: number of crop insurance policies, acres insured, value of insurance protection, how much farmers paid for coverage, how much insurers paid to cover losses, and hail protection coverage.

In addition to the interactive map, the site includes 50 downloadable and printable fact sheets, as well as farmer testimonial videos and articles from several states. There’s also a dynamic social media feed.

“Crop insurance is a cornerstone to modern-day farm policy, and growers from coast to coast have called it their top Farm Bill priority,” explained Tom Zacharias, president of NCIS.  “This site really shows, on a state-by-state basis, the success of crop insurance and why it’s agriculture’s most important risk management tool.”

The new site pairs with the already established site Crop Insurance In America, which takes a national look at crop insurance and the record 311 million acres it protects.  The Crop Insurance In America site was first introduced 10 years ago, and has since been added to the Library of Congress’ prestigious historical collection.

Former RMA Administrator Opines on Crop Insurance Critics

Kenneth Ackerman, a former Administrator of the USDA’s Risk Management Agency, recently published an article entitled Top Priority for the 2018 Farm Bill: Protect Federal Crop Insurance.

We thought the piece summed up the current political debate surrounding crop insurance well, and wanted to share it more broadly.  Ackerman, who currently works at OFW Law, embodied the term “public-private partnership” when he worked for the government, and, as you can tell, is still a champion of a strong crop insurance system.

Crop insurance critics have a blind spot, seen in the recent CBO report…issued December 2017. At several points, CBO asks whether the cost to taxpayers for the current FCIC program is justified compared with the alternative, that is, simply protecting farmers against unusual disasters by providing what it calls “supplemental assistance,” or what used to be less-delicately labelled “ad hoc disaster bailouts.” CBO ultimately ducks the question. “It is not possible to know,” the report says, “nor are data available,” it argues, and “it is not possible to compare” the two. Here, they are wrong. Data does exist to compare the two approaches. All that’s required to access it is a memory.

Young farmers today probably don’t remember what it was like to be dependent for survival after a natural disaster almost entirely on politicians in Congress working feverishly to produce emergency one-time-only ad hoc rescue packages. These ad hoc bills have largely gone extinct since around 2011 as FCIC crop insurance has replaced them. This accomplishment is no small thing. Even the recent House-passed special emergency bill for 2017’s devastating Hurricanes Harvey, Irma, and Maria, which does provide aid for certain crop losses, links that aid directly to crop insurance participation.

But before 1994, FCIC crop insurance was a tiny program, with participation barely a fourth of modern levels and total guarantees barely a tenth. As a result, every farm disaster required an emergency ad hoc disaster bill. During the decade before 1994, these ad hoc disaster bills averaged about a billion dollars per year, peaking at $4 billion each following the monumental 1988 drought and 1993 flood. These disaster bills, in turn, discouraged farmers from buying coverage.

This was the system that modern crop insurance was designed to replace. The disaster bills at the time were necessary lifelines in the absence of other support, but they were also a nightmare: for farmers, for taxpayers, and for USDA staff trying to administer it. Beyond the sheer uncertainty, a parade of reports from GAO, the Washington Post and other newspapers, and Congressional oversight committees disclosed legions of mis-payments and program abuses, not the fault of farmers or agency staff but simply the fact that USDA was required to implement these bulky, multibillion-dollar programs with little notice and inadequate infrastructure, the result of being, in fact, ad hoc.

FCIC crop insurance, unlike disaster aid, is a business model that rewards farmers for being good managers and good businessmen. Claims are paid reliably in 30 days after being filed, based on stable, pre-set contracts. Farmers purchase their coverage, paying good money from their own pockets, yes at subsidized rates, but still large enough to force them to make serious choices about risk. Producers who keep good production records enjoy better guarantees, and those who incorporate crop insurance into business plans linked with credit, banking, precision agriculture, and related risk-management tools like forward contracting and futures and options, do even better. For farmers who pre-contract their crops to processors, FCIC policies are often designed to incorporate those contacts seamlessly with their coverages. No wonder that private lenders today routinely require crop insurance as a condition of extending credit, as do other rural businesses.

The “reforms” that claim to “fix” crop insurance, be it through means testing, eliminating coverages like the Harvest Price Option, or similar steps, all work against the program’s basic strength, its business basis reflected in established systems for underwriting and rating.

Farm Credit Services Report Touts Crop Insurance

Crop insurance saved nearly 21,000 jobs in four states during one of the worst droughts in two decades, according to a report from Farm Credit Services of America.

The 20-page paper breaks down the history of the crop insurance program from the start in 1930s, with the Great Depression and Dust Bowl, to expansions in the 1980s and 1990s after a string of unbudgeted disaster relief bills strained federal coffers.

The paper says farmers have plenty of “skin in the game” when it comes to crop insurance and their participation helps minimize risk exposure for taxpayers.

FCS provides a step-by-step guide to the public-private partnership that makes the crop insurance program efficient when it comes to covering losses. It also highlights key points including the fact that private companies sell the insurance products and that farmers, like all other insurance customers, pay deductibles and premiums.

But the story of the drought of 2012 is where the paper really shines in showing just how important crop insurance is to keeping America’s food, clothing and fuel supplies secure.

The drought was a devastating hit in a year that was supposed to be favorable for planting. Corn, soybean and hay production declined throughout that summer as the drought intensified.

Corn production was down more than 29 percent and soybeans fell 6 percent. The low yields were coming on a year that started with low beginning stocks, the report notes, and tight U.S. and global supplies.

Projected prices rose in anticipation of short supplies. Farmers faced low yields and ended up facing big expenses to buy crops at higher prices to fulfill forward marketing obligations and to feed on-farm livestock.

Crop insurance helped cover the shortfall and saved 20,900 jobs across Iowa, Nebraska, South Dakota and Wyoming, with an annual labor income of $721.2 million, according to the report.

That’s money that ended up in Main Street shops and restaurants. Money that allowed farmers to continue to pay the bills and get ready for the next season even after a disaster like the drought of 2012.

And best of all, farmers didn’t have to go to Congress for an ad-hoc relief bill – just like Congress designed.

“Crop insurance kept me farming,” farmer Denny Marzen, of Iowa, said in the report. “It’s a business tool I use with my marketing program and to help me deal with Mother Nature.”

Thank You, Chuck Conner!

charles_f-_conner_official_usda_photo_portraitPrior to the holidays, National Council of Farmer Cooperatives President and CEO Chuck Conner found himself in a strange place – onstage at a farm policy conference sitting between two of agriculture’s biggest opponents: EWG and Heritage.

Unsurprisingly, demands to rip holes in the farm safety net and mandate new government regulations were made.  It was an uncomfortable spot for an aggie indeed, but Conner defended agriculture fiercely and effectively against attack.

“Farmers and ranchers and the people of rural America, believe me, feel like they have been under attack over the past several years…these attacks range from the heavy hand of the EPA to unfounded criticism from consumers,” he explained.  “I believe it has had a huge impact in how they responded in the last presidential election.”

And that kind of “grass roots populism in rural America,” he said, will be vital to maintaining a strong farm policy in the future.

“If agriculture groups are successful in unifying themselves and tapping into this this powerful rural advocacy, then folks, I honestly do not expect, in all due respect, organizations such as the ones that are part of this panel, to have a huge impact on the next Farm Bill debate or on farm policy,” Conner explained.

“If we are divided…then these respective organizations will be successful in altering significant sections of the Farm Bill, including farm payments, payment limits, crop insurance, [and the] sugar program, just to name a few.”

And when it comes to crop insurance the critics were already making a case for weakening farmers’ most important risk management tool by excluding some farms from participation.  In response, Conner delivered a lesson in the realities of insurance.

“You cannot have an actuarially sound insurance program… if you exclude large portions of agriculture that are more likely to not collect,” he noted.

Conner continued: “For good sound crop insurance, you need to spread it over all producers, all regions and all crops in order to limit [agricultural] risk.  It doesn’t work, in my opinion, just to start saying we are going to lop off whole chunks of American agriculture…you’re only going to hurt everybody by creating a program that can’t stand on its own.”

Keeping crop insurance whole and protecting other key policies in the upcoming Farm Bill, he said, will be particularly important given today’s struggling farm economy

“[Farm] loans are being very, very carefully reviewed,” Conner explained, adding, “lenders do not handle risk well” and “uncertainty will eat [farmers] alive with their bankers.”

Getting a Farm Bill done in a timely fashion and keeping risk management tools in place are the best ways to overcome these challenges.

“Every time there is uncertainty, whether it is crop insurance, whether it is one of the [other farm] programs,” he concluded, “the lender has to sharpen that pencil more, and the margin between what they can lend, and what equity that farmer has, gets wider and wider.”

One thing that is for certain: crop insurance and the agricultural community have a great friend in Chuck Conner.  Let’s just hope his fellow panelists were paying attention.

Senator Grassley Touts Crop Insurance Amid Recent Flooding

Crop insurance enjoys widespread bipartisan backing on Capitol Hill. And this week, one high-profile leader, Senator Chuck Grassley (R-IA), was emphatic in his support, saying the recent floods in eastern Iowa serve as an important reminder why crop insurance is so essential.

grassley-floodGrassley recently surveyed the flood damage in several eastern Iowa cities, and discussed his experience on Money Matters, a program on the Iowa Agribusiness Radio Network.

“I saw debris and damage left by receding floodwaters, many homes underwater, preparations to mitigate flooding downstream and farmers surveying their flooded crops,” Grassley told program host Ben Nuelle.

Grassley says crop insurance, which is partially funded by farmers and delivered by the private sector, will be crucial for farmers whose crops flooded this year so close to harvest.

“With grain prices as low as they have been in years, that program will provide some relief to insure producers who will be forced to take a complete loss on their flooded fields. It is important reminder heading into the farm bill of the critical role crop insurance plays in the farm safety net.”

“Without crop insurance, some of the impacted farmers could be knocked out of the business altogether,” Grassley added. And that would be bad news for farmers, rural communities, and consumers alike.

Current Farm Economics Reminds Us Why We Need a Farm Safety Net

With a third straight year of declining farm income and reports of agriculture credit conditions deteriorating, we are reminded why lawmakers put a safety net in place for farmers, and why that safety net must be affordable and widely available to all producers in the country.

A recent report from the Federal Reserve Bank of Kansas City, which revealed the results of an ag credit survey, noted, “agricultural producers continued to reduce capital and household spending as profit margins generally remained weak.” And, these strenuous conditions are expected to continue for the foreseeable future.

It’s a fact that Todd Van Hoose, the president and CEO of the Farm Credit Council, recently discussed in an editorial for Farm Policy Facts.

“There is a lot of pain in farm country right now and we are seeing a lot of farmers limiting or foregoing equipment purchases and recalibrating other expense controls to balance their operations against the new commodity price level,” Van Hoose explained.

Consequently, the problem is not isolated to farmers and ranchers. It extends to the entire rural economy and beyond. Randy Nelson, the president of CHS Capitol, LLC, the financing arm of a large farmer-owned cooperative, told members of the House Agriculture Committee earlier this year that, “this is a far-reaching problem that goes down Main Street in the rural communities.”

Recent headlines suggest as much with John Deere announcing in July that it would cut more than 100 jobs at its East Moline, Illinois plant. This was followed by an August announcement to lay off another 120 jobs in Waterloo, Iowa. The company said both decisions were made due to anticipated decreases in the sales of agricultural equipment.

These are uncertain times for our agricultural producers and rural Americans, and the last thing they need is to have risk management tools like crop insurance ripped out from under them as some special interest groups in Washington, D.C., are pushing to do.

Critics spread false information about the mechanics and cost of crop insurance and then propose gutting it altogether. Meanwhile, they fail to appreciate that crop insurance has been the one thing that farmers, ranchers, and their lenders can count on in lean times.

“The role that farm policy and crop insurance plays in enabling that production cannot be overlooked or dismissed,” concluded Van Hoose. “In order to maintain and support a healthy, vibrant, competitive, and innovative farm sector, we must continue to invest in it.”

Crop insurance a key for producers

My husband and I have been farming in Southeastern Colorado for more than 40 years, and during that time it’s safe to say there have been a lot of changes not only in farming practices, but also in farm policy.

The biggest policy change through the years has been the affordability and availability of crop insurance.

When we first started farming, crop insurance was not an option because we couldn’t afford it.

It wasn’t until Congress made reforms to the program a couple of decades ago that we were able to participate. Additional reforms through the years have made crop insurance more widely available for a variety of crops, regardless of farm size or method of production.

It is still an expensive part of the operation, but it is a necessary part because it provides us with stability — something we can count on. This is helpful not only when we need to show our lender at the bank what our estimated income will be, but also for our own peace of mind.

You have to realize that out here, we can have a beautiful crop and phenomenal yields one year and then get wiped out by a hailstorm or drought the next.

For the last three years, the ongoing drought and the late spring freezes have dogged our crops. With crop insurance, we have been able to level out the highs and lows so we can make it to another year.

The enactment of the 2014 Farm Bill made crop insurance the centerpiece of the farm safety net — and for good reason. It is an effective risk-management tool for not only farmers, but also for taxpayers.

Gone are the days of large, unbudgeted disaster bills aimed at helping farmers when natural disasters strike. Now, because of crop insurance, everyone — policymakers, farmers and bankers — can plan and budget for those disasters.

Recently, there has been talk in Washington about yet again trying to make changes to crop insurance. This is arising just one year after the Farm Bill was enacted.

Specifically, there have been discussions about cutting the premium support that farmers receive for purchasing crop insurance. This does a disservice to everyone.

If such proposals succeed, it would only serve to increase the costs to farmers and undermine their ability to manage risk. As my husband and I can attest, premium support has helped us to afford crop insurance, which, in turn, has helped our overall farming operation.

Each new farm bill ushers in new changes to farm policy. We’ve experienced those changes firsthand, but the one part that should remain constant going forward is crop insurance. It is the key to a steady, safe food production system in the U.S. The beneficiaries of crop insurance are not just farmers but also consumers.

Cathy Scherler is the president of the Colorado chapter of Women Involved in Farm Economics (WIFE), a national non-partisan organization committed to improving the profitability and production of the agricultural industry. She and her husband grow wheat, grain sorghum, sunflowers and corn on their farm in the Eastern Plains. This op-ed appeared in the Pueblo Chieftan on April 11, 2015.

Keep Crop Insurance Affordable

Living through the drought of 2012 as an Illinois farmer gave me a whole new appreciation for risk management tools.  There are things that farmers can do to try and deal with the curve balls served up by Mother Nature and with the ups and downs of market swings, but many things – like a massive drought or a heat wave – are completely out of our control.

If this drought would have happened a decade before, it would have left many farmers completely devastated and on the verge of bankruptcy, with nowhere to turn but to Congress for an expensive, taxpayer-funded bailout package.   In fact, past disasters have cost taxpayers tens of billions of dollars since 1979.

What was different about the drought of 2012, which was the worst natural disaster to hit this state in my lifetime, is that the vast majority of the state’s farmers had purchased the best risk management tool around:  crop insurance.  In fact, farmers spent well over $4 billion out of their own back pockets in 2012 purchasing the protection and peace of mind of crop insurance, which meant when disaster struck, they had a backup plan in hand.

The recent Farm Bill took three long years to pass and cut $23 billion out of farm programs.   But for those who for whatever reason are always looking to criticize farm policy that still wasn’t enough.   Now they have their sights set again on crop insurance, and are pushing forth ideas to make it more expensive for farmers to purchase.

What these misguided groups and members of congress seem to miss is that the reason why crop insurance has become the best risk management tool for farmers is that it’s affordable and reliable.  In fact, 90 percent of planted cropland was protected by crop insurance in 2014.  It’s this level of protection – made possible by crop insurance’s affordability – that keeps expensive disaster bills from hitting taxpayers when Mother Nature strikes.

Unlike direct payments in the past, crop insurance is not a handout. In fact, when farmers purchase crop insurance, they receive a bill, not a check, and only receive a payment if they incur a loss, and only after paying a deductible Just like homeowners insurance, when farmers buy crop insurance, they do so hoping that they will never have to use it.  And many of them rarely do.  In fact, since 2000, farmers have paid out more than $38 billion purchasing the protection of crop insurance, and in most years, they don’t collect a dime.

If crop insurance becomes more costly, then farmers simply won’t be able to afford it, and they will have nowhere to turn but the Federal government when disaster strikes.  This is a lesson we learned over and over again before crop insurance became widely available and affordable.

Crop insurance works so well and has been embraced so readily by farmers across the country because it’s a public private partnership that combines the best of the public and private sectors.  Crop insurance premiums are partially discounted by the government to ensure affordability and the policies are sold and serviced by the private sector.  And when disaster strikes, an indemnity check arrives in weeks, not years.

Like any other public policy, crop insurance isn’t perfect, and I’m sure Congress will do some fine-tuning to the program in the next Farm Bill just like they did in this one.  But the most important thing to keep in mind is that farmers are not only enormous producers, they are enormous consumers as well.  And with crop insurance policies in hand, they can bounce back from natural disaster or huge market fluctuations and continue to be the engines that drive the economy of rural America.

Keith Mussman is president of the Kankakee County Farm Bureau.  This op-ed appeared in the Champaign News-Gazette on April 27, 2015.

USDA Proposes Expansion of Crop Insurance to Cover Underserved, Specialty Crops

The United States Department of Agriculture (USDA) recently proposed to expand certain regulations to increase the availability of crop insurance to many farmers who currently can’t purchase coverage for their crops – including many fruit and vegetable growers – the agency announced recently.

“These improvements will help expand and improve crop insurance to underserved crops,” noted Risk Management Agency Administrator Brandon Willis.  The proposed rule will ease the burden on private submitters while making crop insurance policies for underserved and specialty crop commodities a priority.

Many of the recommended changes addressed provisions of the 2014 Farm Bill that were meant to expand the farm safety net options for modern agricultural practices, a move of significant importance given the elimination of direct payments to farmers.

“We are continuing our work to ensure that a wider variety of producers have access to sound risk management tools to keep themselves protected from disaster,” noted Willis.   USDA’s full announcement can be found here.

Steve Baccus: Farmers need protection of crop insurance

When the homesteaders came to Kansas, they were looking for land to farm and a chance at the American dream. If they were like my family, they arrived here in a covered wagon, and many of us still live on the land where they began to build their dreams.

But Kansas can be a cruel place to farm. On the turn of a dime, a lifetime’s worth of work and every penny you have can be wiped out by a single hailstorm, a heat wave or drought, a springtime flood or frost, or a market crash that erases any chance of profit regardless of how well your crops do that year.

And that, in a nutshell, is why the vast majority of Kansas farmers purchase crop insurance every year, and why it must remain available, affordable and viable. In fact, with the passage of the 2014 farm bill, crop insurance is the primary risk management tool available to commodity farmers and the only risk management tool available to many specialty crop farmers.

One thing that has dramatically changed in agriculture since my family homesteaded in Minneapolis, Kan., is that farming has now become an incredibly capital-intensive venture. It takes so much money just to put a crop in the ground and harvest it at the end of the season that anyone farming without crop insurance might as well be playing Russian roulette.

I’ve had lots of friends tell me over the past several years that if it weren’t for crop insurance, they would not have been able to put a crop in the ground the next year. Crop insurance is a public-private partnership whereby farmers purchase private policies from participating companies that sell and service the policies. One of the government’s main roles is to discount the policies to a degree that they are widely affordable to most farmers.

In 2014, about 90 percent of planted cropland was protected by crop insurance, paid for out of the back pockets of farmers to the tune of $3.8 billion. Nationally, more than 1.2 million policies were purchased, protecting almost 294 million acres of food, feed, fiber and fuel crops that accounted for more than $110 billion in liabilities.

With the cost of farming so high, most farmers have to actually show proof of having purchased crop insurance in order to secure a production loan from a bank. The farmers get to sleep better at night because they have purchased the protection of crop insurance, and banks are able to make production loans to folks who might otherwise be judged too risky.

Some think that crop insurance is a freebie. Let me set the record straight right now: It’s not. Farmers have skin in the game when they pay their premiums, which is not pocket change. I bet the farmers I know spend $35,000 to $40,000 every year to purchase their policies. And in many years, they don’t collect a dime.

The reason why food supply in the U.S. remains abundant is that we have tools in place to make sure that when farmers are knocked to their knees by the whims of Mother Nature, they have a policy tool in hand to pick themselves back up and plant again. Let’s make sure that crop insurance remains affordable, viable and available for generations to come, to ensure a continued legacy of abundance in America.

Steve Baccus of Minneapolis, Kan., is the immediate past president of the Kansas Farm Bureau.  This op-ed appeared in the Wichita Eagle on February 5, 2015.

Wyoming Farmers Can Depend on Crop Insurance

I have a unique perspective among American farm wives since I was born and raised as an Assyrian living in Teheran, Iran. I came to Wyoming as a student but fell in love with a farmer and have spent my life making a living from and raising my family on the land that we love.

Farming can be a risky business, which my husband and I have learned first hand since we began farming together in 1989. The risks that we face generally come from Mother Nature – drought, floods, pests or hail – so there’s only so much you can do to manage your risk. And that is why we have purchased crop insurance every year since we first bought our farm.

Crop insurance is no small expense for us or other Wyoming farmers, but it’s the best risk management tool in town. Last year, Wyoming farmers purchased over 2,500 crop insurance policies costing farmers more than $8 million out of their own back pockets. Nationally, farmers have spent more than $38 billion of their own money purchasing crop insurance policies since 2000.

Crop insurance not only helps you sleep better at night, but it’s a smart business decision, even though on most years we don’t collect a dime. But on those years when disaster strikes, farmers who haven’t purchased the protection of crop insurance could be facing a very gloomy future.

Last year, for example, we were hit with not one but four major hailstorms, which struck right when the plants were the most vulnerable. The leaves of area dry edible bean and sugarbeet plants were torn and tattered, which staunches their development.

In the past, before crop insurance became widely affordable, Wyoming farmers would have turned to the federal government for disaster assistance. But since roughly 90 percent of planted cropland was protected by crop insurance in 2013, farmers turned to their crop insurance agents, not the federal government, for help.

And unlike assistance from the federal government that can be agonizingly slow in arriving, crop insurance checks usually come within weeks or a month of completing the paperwork. That is one reason why it is so popular among farmers who have faced disaster, like us.

The passage of the 2014 Farm Bill placed crop insurance as the centerpiece of the new farm risk management strategy. Crop insurance is a public/private partnership whereby the federal government discounts a portion of a farmer’s crop insurance premium to ensure that it is widely purchased, and 19 participating crop insurance companies sell and service the claims.

Banks do not always require crop insurance, but they certainly feel better making loans to farmers who have purchased it. Why? Because bankers like to know that if disaster strikes, that some of the money they loaned will be coming back to them.

Crop insurance, like other public policies, has its detractors. Among them are those who say that farmers would rather collect a crop insurance check than raise a crop. That’s simply not true. With the high cost of farm inputs, including seed, fertilizer, fuel, labor and overhead, there is no way that you could collect enough insurance every year to cover your expenses, much less live on.

A farm simply could not float by collecting on crop insurance claims, and anyone who has any understanding of agriculture should know that.

Coming from a different nation, I also see a value of crop insurance that might not be readily apparent to some Americans. Farmers are a major economic force in rural America, pumping billions of dollars into the rural economy – purchasing fuel, equipment, storage building and paying farmhands – while producing the food, fiber and fuel this nation needs. Believe me, Americans really would not want to be reliant on other nations for our food security.

When we lose our food security, next will come our independence. And none of us want to lose that.

Klodette and Rick Stroh farm 1,800 acres near Powell, Wyo. Klodette is also a member of Women Involved in Farm Economics (WIFE).

This op-ed appeared in the Prairie Star on July 17, 2014.

North Dakota Farmers Know First Hand Why Crop Insurance is Money Well Spent

I’ve spent the last 17 years of my life farming in North Dakota and I’ve loved every minute of it. But it can be a very risky business. There are many steps that farmers can take to manage risk, like growing a wide variety of crops, rotating crops and growing cover crops to prevent erosion. And we do all of that.

But let’s face it, when we get an early August freeze, or a spring flood, or a drought, just about all of the best farming practices in the world will fail to protect us. And that is why I, like most farmers across the state, always purchase crop insurance. In fact, last year North Dakota farmers spent more than $38 million out of their own pockets purchasing crop insurance policies.

It’s just a smart business decision. There has never been a year when we didn’t have crop insurance. Sure, it costs a lot of money, and that money could be spent elsewhere. But that would be a penny wise and pound foolish, since going through a natural disaster can cost you the farm.

This isn’t a hypothetical argument. In fact, last spring during planting, we had 18 inches of rain in 21 days. In between downpours we planted what we could, but by the time the rain was finished, we couldn’t get back into the fields to finish planting. In other words, we started off our growing season with only half a crop. Thankfully, our crop insurance policy covered that kind of loss. We certainly didn’t make a dime from the policy, but the indemnity check helped cover the rent on the land and the lost fertilizer that had been laid on a field that couldn’t be planted.

The passage of the new Farm Bill this year marks a pivotal stage in U.S. farm policy. Gone are the days of direct payments and large disaster bills aimed at helping farmers after natural disasters. In its place is crop insurance, which has been embraced by farmers, farm groups and lenders alike. Farmers who don’t purchase crop insurance need to realize that the federal government is no longer going to come along with an ad hoc disaster bill and bail us out.

The centerpiece of the new risk management strategy on the farm is crop insurance, which is sold and serviced by private insurance companies and partially discounted by the federal government. The government’s role – helping to ensure that crop insurance is affordable to farmers – has remade the face of crop insurance from a policy that for many years was largely unknown and underused to a risk management tool that last year protected 90 percent of planted cropland.

Crop insurance is not only popular with farmers, but with bankers as well. In fact, most farmers need to show proof of a crop insurance policy when they meet with bankers to secure production loans. The banks realize what a risky loan they are making, and are more likely to take that risk if they have the relative protection of crop insurance.

Crop insurance is good public policy for farmers, bankers, and taxpayers alike. In the past, extensive droughts like what much of the nation experienced in 2012 would have triggered an enormous ad hoc disaster bill in Congress. But since the vast majority of the cropland was protected by crop insurance during the worst drought to hit the nation since the Dust Bowl days, farmers sought assistance from their crop insurance policies, not the federal government.

Crop insurance, like all public policies, has its detractors, however. And before the ink is even dry on the new Farm Bill, these groups are plotting their assault on crop insurance. They have their sights set on the premium discount, the very thing that makes crop insurance affordable to farmers. Without the discount, farmers like me couldn’t afford to purchase crop insurance. And if a large-scale natural disaster hits and farms across the country fail, where is our food going to come from? I don’t think most Americans would want to be in a position of relying on other nations for our food in addition to our fuel.

Crop insurance is good public policy because it helps underpin farmers, who are enormous consumers and literally drive the rural economy. Americans spend about10 percent of their incomes on food, among the lowest of any country. With the proper risk management tools in hand for farmers, the promise of a safe and affordable food supply will not only be a legacy for our children, but for the world’s growing population as well.

Diane McDonald, from Inkster, North Dakota, is the national media chairperson for Women Involved in Farm Economics (WIFE).

This op-ed appeared in Agri-Pulse on April 8, 2014.

Crop Insurance Is Critical to Michigan’s Specialty Crop Industry

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 fluctuations. That’s why in 2012, farmers in this state paid $63 million to purchase policies to cover those risks.

Before crop insurance was widely available, natural disasters like the drought of 2012 would have triggered a massive, expensive ad hoc disaster bill in Congress that would have cost taxpayers dearly. In fact, 42 emergency disaster bills in agriculture have cost taxpayers $70 billion since 1989, according to the Congressional Research Service.

Last year, after a late spring freeze that destroyed the tree fruit crop followed by the worst drought in decades, there wasn’t a single large-scale outcry for help from Congress. The reason is that 86 percent of planted cropland was protected by crop insurance. Farmers put skin in the game and helped take some of the burden off of the taxpayers.

When disaster strikes a farmer, he needs help now. While every farmer appreciated the disaster bills of the past, they took a very long time to arrive – sometimes up to two years. For a farmer who has lost everything, two years might as well be 200 years.

Crop insurance is not without its critics. In fact, there are some in Washington, D.C. who, during last summer’s drought, claimed that farmers were praying for drought, not rain, implying they’d rather collect a crop insurance check than a harvest. To set the record straight, crop insurance is not cheap, and the nation’s farmers spent more than $4 billion in 2012 buying it. Most of them will spend that money without collecting an indemnity. In fact, in 2011, about two-thirds of the crop insurance policies purchased never collected an indemnity.

Michigan grows a wide variety of specialty crops each year, leading the nation in the production of several specialty crops, including dry beans, red tart cherries, blueberries, Niagara grapes and squash, making the state second only to California in the diversity of its crops.

In some ways, that abundance is a miracle, in other ways it is not. If it weren’t for hard work, investment, infrastructure and crop insurance to manage some of the major risks, Michigan’s horn of plenty might not be so full.

Steve Umlor is the president of Centennial Fruit in Conklin, Michigan. This op-ed appeared in the Lansing State Journal on May 12, 2013.

 

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.”

Record 86 Percent of Planted Farmland Protected by Crop Insurance

Eighty-six percent of all planted U.S. farmland – some 281 million acres – is protected by crop insurance this year, up 2 percent from 2011 and a nearly three-fold increase from the late 1990s when only about 30 percent of farmers purchased policies, according to data from USDA’s Risk Management Agency.

The growth in coverage has been fueled by a number of factors, including fewer federal risk management alternatives for farmers, many farmers’ desire to have increased control of their risk management choices, federally-funded premium subsidies for those who purchase policies, a wide array of policy options and the value banks place on crop insurance when making loans.

But many would argue that private sector crop insurance agents, who operate largely on commission for the policies they sell, should be included in that list as well. Ruth Gerdes, a farmer and crop insurance agent from Auburn, Nebraska, nearly lost the land that she and her husband were farming 28 years ago and decided that other farmers needed to learn more about the benefits of crop insurance to avoid a similar brush with foreclosure.

One of the undeniable factors behind the growth of crop insurance, according to Gerdes, is “a motivated workforce” of agents. “We all strive to provide a quality service,” she said, adding that in an industry where premiums are decided by the government, the only way agents can distinguish themselves is through superior customer service.

“We all work to know the products and markets and are willing to be called upon at all hours when disaster strikes,” she said. Gerdes explained that agents, who are often farmers, or have farmed themselves, take great pride in their work and want their customers – the farmers – to be happy with both the insurance products they purchase as well as the service the agents provide. “And of course, part of it also is because we want the producer’s business again the next year,” she added.

Gerdes argues that “this competitive business model is good for the farmer and good for the system,” which is evident by the ever-increasing number of new crop insurance products developed, which today protect 128 different crops.

In 2012, some 1.2 million crop insurance polices were sold, covering 128 different crops. While 84 percent of the polices sold covered corn (34 percent), soybeans (31 percent) and wheat (19 percent), policies were also written for specialty crops including cherries, almonds, cranberries and avocados.

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: Todd & Ty Williams

Todd and Ty Williams grew up on their family’s farm near Gruver, Texas, a town of about 1,100 people in the panhandle region. Todd Williams says he’s been driving a tractor since he was about seven years old, so it was just the natural course of events that he and his brother Ty would end up on the farm together as adults.

The brothers have been farming together since 1984. Williams notes that the main driver behind his desire to farm is his love for the work and the land, “because the money certainly isn’t in there,” he says. But above all else, he adds “there’s no better place on earth to raise your kids.”

The Williams brothers farm about 1,800 acres of wheat, corn, cotton and milo. Todd says that when he looks back at 2011, he remembers a year of unbelievable extremes. “Some people were flooded out in other parts of the country while we couldn’t buy a drop of water to save our lives.”

But farming and risk go hand in hand, and that’s why Williams purchases a crop insurance policy every year. “Wheat farming is so risky that using forward contracting as your only risk management tool is nearly impossible,” he says. That’s because if Mother Nature strikes and a crop is forward contracted without crop insurance, a farmer can end up owing a huge sum of money to fulfill the contract, on top of not having anything to harvest to provide income for the rest of the year.

Williams says he learned that lesson the hard way. He explained that a few years ago, he had a bumper wheat crop that was ready to harvest, so he worked through the day and on into the night, harvesting as much wheat as he could. He finally quit around 10 pm, with lots of wheat left standing in the field but exhausted from the long day’s work. Later that night, a large hailstorm blew through, crushing the remaining wheat. “One day it was ready to harvest, the next morning there was nothing taller that two inches in the whole field,” he said.

“Playing futures is risky, but contracting your wheat is an even bigger risk,” he notes.

Texas is a state that is not unfamiliar with droughts, heat waves, tornadoes and other weather anomalies. And because of that kind of weather, many Texas farmers are prepared to lose some of their crop on most years; but never all of it.

The drought of 2011 was so widespread and so extreme that even irrigated crops could hardly be saved. “It was so hot and dry, our irrigation pumps just wouldn’t cut it and our crops dried up,” Williams said.

Williams explained that he and other farmers were pulling so much water out of the local aquifer that they had to continually lower their pumps to keep the water coming.

The Williams brothers were running five irrigation wells and still couldn’t keep up with the heat and the lack of rain. “The crops just withered despite the irrigation,” Williams noted. “It was 110-112 degrees, the wind was blowing and the rain was nowhere to be found.”

Average rainfall for that part of the Texas panhandle is usually about 18-20 inches annually. In 2011, they received less than six inches for the whole year. Williams explained that when all was said and done, they were able to save a tiny portion of their crop by focusing irrigation on certain areas, but for the most part, “almost the entire crop was lost.”

Luckily his crop insurance agent, who Williams describes as “a super guy,” had touched base with the brothers throughout the year and knew that some degree of loss was inevitable. After months of fighting the drought and watching their crops wither despite their efforts, the Williams brothers came to the difficult decision that their fields were simply lost.

“The loss of a crop is crushing, even when you have crop insurance, because the insurance doesn’t really make you whole, it only helps you to recover to a small degree,” said Williams. He explained that like other farmers, he always looks forward to harvest, because it not only means the infusion of money, it’s the accomplishment of a year’s work. “I’d much rather have a harvest than an indemnity check,” he said.

But when disaster strikes and you lose some – or all – of your crop, farmers hope that the indemnity payment from their crop insurance policy is quick to arrive. Williams said that for him, that has always been the case. “Usually, the indemnity arrives in a week to 10 days,” he noted.

“If we didn’t have federal crop insurance last year, I’d be working at Wal-Mart or somewhere else today,” Williams said. “There is not a chance in the world I’d be farming today.” Williams said that because of his crop insurance policy, he and his brother are back farming today, and although it’s a bit dry, it’s a huge improvement over last year.

“Without federal crop insurance we’d be toast.”

 

No, Virginia, this is not West Texas

Northeast Indiana looks more like West Texas this summer than America’s heartland. According to the U.S. Drought Monitor, nearly 70 percent of the state, including a wide swath from around the Kentucky border in the south, north through Fort Wayne and all the way to the Michigan border is in an “extreme or exceptional” drought. Sadly, there is not a county in the state where some degree of drought does not exist.

73 percent of the state’s corn crop, the nation’s most valuable commodity, is in poor or very poor condition. 53 percent of our soybean crop, the second biggest revenue-generating commodity in the state, is in poor or very poor condition as well. Ranchers in the state are quickly running out of options to feed their livestock, as 89 percent of the state’s pastures are in poor or very poor condition as well.

While we’ve been blessed with adequate rainfall for the past month, for the corn crop it’s a case of “too little and too late.” We’re also still at a level of sub-soil moisture that, if it doesn’t improve, will potentially make it difficult to produce a crop in 2013…

Rob Schuman is a corn, soybean and cattle farmer from Churubusco and is the vice president of the Whitley County Farm Bureau.

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Drought Worsens As USDA Cuts Crop Projections; Farmers Hopes Sink

The weekly U.S. Drought Monitor map released August 14 held more bad news for the contiguous United States, with 62 percent remaining in some level of drought. And the expanse that is gripped by extreme or exceptional drought rose nearly two percent last week to 24 percent.

The center of the drought remains directly over the Corn Belt. With some stage of drought covering the entire states of Indiana, Illinois, Iowa, Missouri and Kansas, the drought is certainly taking its toll on the corn and soybean crops. According to the August 10 estimates from USDA – the first “in the field” estimates of the year – production numbers are down substantially from what was projected at the beginning of the planting season.

Despite the fact that this was the largest corn crop planted since 1937, production is projected to be down 13 percent, the lowest output since 2006. Corn yields are expected to average 123.4 bushels per acre, down nearly 24 bushels from last year, which would be the lowest average yield since 1995. Soybeans tell a similar story. Soybean production is forecast to be down by 12 percent from last year, and if realized, would have the lowest average yield since 2003.

“Thankfully, the vast majority of the farms in these drought-ravaged areas are protected by crop insurance,” said Tom Zacharias, president of National Crop Insurance Services, in a statement released to the media. Zacharias noted that farmers purchase crop insurance policies to protect themselves against situations just like this, although many have never collected an indemnity. “This year, their decision to purchase crop insurance confirms their practice of sound risk management,” he said.

While there continues to be speculation about the ultimate cost of the 2012 drought, it is still too early to provide precise estimates of the losses. Zacharias explained that NCIS is analyzing the August 10 report and will compare that with reports from the field along with the crop insurance policy data that is still being processed and reported to the Risk Management Agency.

It will be hard to gain a complete picture of the situation and final outcomes will vary by state, crop and types of policies purchased. “What is certain is that the crop insurance industry is on the ground in the drought-stricken areas, mobilizing loss-adjuster teams,” Zacharias pointed out.

“Farmers can be assured their claims will be paid, and that the companies will move as quickly and as efficiently as possible, given the expected volume of claims, to assess damages and get indemnity checks into the hands of farmers.”

In order to be approved to sell federal crop insurance, companies must have adequate surplus and reinsurance at their disposal so that even if a catastrophe of this magnitude strikes, and then one strikes again the next year, the company is still capable of paying indemnities on the policies they sell.

In addition to company surplus and reinsurance, the federal government serves as the backstop reinsurer for all companies that sell crop insurance. As such, the federal government shares in the gains and the losses of the program. Gains in prior years can and will be used to offset losses in years like this one.

Zacharias explained that the industry has 5,000 claims adjusters and 15,000 agents working tirelessly right now to help growers cope. These adjusters are working hard to get money to farmers who have suffered losses, already paying out more than $1 billion in indemnities to date. Companies are also mobilizing adjusters away from other parts of the country that have not been affected by drought and sending those adjusters to the hard-hit states.

“With their crop insurance policies in hand, farmers will not only survive this drought but plant again next year, ensuring a continuity of the food, feed, fiber and fuel supply for this nation and an increasingly hungry world,” he added.

 

Tropical Storm Irene Proved the Value of Crop Insurance

One side benefit of the popular “eating local” movement is a growing recognition by urbanites and suburbanites of the importance of agriculture and the need to ensure that farmers are able to withstand the many challenges presented by Mother Nature. While farmers manage their many risks using a wide variety of tactics, there is one tool in most farmers’ risk management portfolio, which they consider indispensible: crop insurance.

The value of crop insurance to New England’s farmers was made crystal clear last year by Tropical Storm Irene, which brought heavy winds and even heavier rains just as crops were nearing harvest. While 2011 saw record losses across the U.S. with freezes in Florida, drought in the Southwest and floods in the Midwest, it was farmers in Vermont who sustained the highest loss ratios in the country. As a crop insurance agent, I can attest that many of our farmers saw their entire crops devoured in one day as floodwaters, sometimes six feet high, swallowed their fields.

After the waters finally receded and the extent of the damage to their farms was assessed, it quickly became clear that Irene’s wallop had the potential of being a “game changer” for many New England farmers. And crop insurance was the only thing that saved many of them from losing their farms to bankruptcy and instead allowed them to return to their fields this spring and plant.

Crop insurance is a public private-partnership whereby a farmer buys a policy that protects his crops from adversity. Just like homeowner’s insurance or car insurance, crop insurance is personalized to match each farmer’s degree of exposure to losses and comfort level with risk. It’s sold, monitored and delivered by the private sector, so farmers receive their indemnities quickly after catastrophe strikes.

But it wasn’t always like this. When I first became an agent in New England in 1984, probably only about 10 percent of our farmers purchased crop insurance. Lack of familiarity was one reason for that low percentage: It was a relatively new risk management tool for farmers in New England. But the biggest reason was cost. So every time a disaster hit, farmers would have to rely on receiving help through federal disaster bills because they didn’t have crop insurance. Such disaster relief is expensive for taxpayers and painfully slow to deliver help – taking up to one or two years at times – for the farmers who lost everything.

In the mid 90s, the federal government, weary of disaster payments and looking for a better risk management tool, put forward funds to help partially underwrite crop insurance premiums. Today, most farmers in New England and elsewhere have purchased crop insurance policies, which last year covered 80 percent of eligible crops covering 263 million acres.

Crop insurance is also great for consumers because it makes purchasing locally produced food possible. Consumers nowadays are concerned about the origin of their food, the cultural practices used to produce it and its overall safety. Many of us believe that the best food in the world is local, because we know that the farmer down the road has produced a product that is not only delicious but also secure. Without some kind of policy protection in place for those farmers, “buying local” could be a thing of the past.

And in the tight credit markets we live in, crop insurance has proven to be an indispensible tool for farmers seeking lines of credit from banks. When I first started in the business, it was rare to see a lender who would ask about crop insurance. Nowadays it’s almost ubiquitous, particularly for farmers who raise expensive specialty crops, like potatoes and apples.

Crop insurance has already shouldered $12 billion in federal funding cuts in the name of balancing the budget — about 10 percent of the total federal expenditure in 2008 and another cut of 7 percent in 2010. The federal government now spends about $90 billion on crop insurance subsidies. But if the government continues to bleed crop insurance, it will become either unaffordable for farmers to participate or incapable of meeting the challenges when a disaster strikes, or both.

When the next farm bill is written, Congress needs to remember that it should “do no harm” to crop insurance. Those who weathered Irene and lived to plant another day can attest to the fact that a robust crop insurance policy is in the best interest of not only farmers, but consumers as well. The farmers down the road that grow the food for your family and mine need some common-sense protection against Mother Nature. Crop insurance fits the bill.

Art Carroll owns the Arthur Carroll Crop Insurance Agency in Limerick, Maine, which insures farmers in all New England states and New York. This commentary was prepared with assistance from National Crop Insurance Services.

This op-ed ran in the Valley News on May 25, 2012.

 

Crop Insurance A Key to Credit Access, Bankers Tell House Subcommittee

Several witnesses representing key agriculture lending institutions and credit agencies told members of the House Agriculture Committee’s Subcommittee on Department Operations, Oversight, and Credit that access to credit is essential for farmers and crop insurance plays an important role in that access. The hearing, held May 10, went largely unnoticed but is pertinent given the need for most farmers to secure credit.

“Crop insurance is important to the adequate supply of credit to farmers and ranchers as it provides assurance that farmers will be able to repay their operating loans in the event of weather or price related calamities,” said Jeff Gerhart, a banker and chairman of the Independent Community Bankers of America.  Gerhart noted that crop insurance was a good risk management tool that their farm customers have learned to use to better manage risk. “The dramatic evolution of crop insurance in meeting the needs of most of our nation’s farmers has been truly impressive,” he said.

Bob Frazee, president and CEO of MidAtlantic Farm Credit, one of 87 Farm Credit cooperatives that is owned by more than 10,500 farmers from the region told the committee that crop insurance gives lenders the peace of mind to loan to farmers in a very risky environment.  “It is extremely important as a lender to agriculture that we know our customers have insured their production,” he said.  “This protects the farmer and it protects lenders as we provide credit to farmers to cover their operating expenses.”

Matthew Williams, testifying on behalf of the American Bankers Association, told the committee that crop insurance provides his customers with “the certainty they need to make responsible planting decisions and provides my bank with the confidence we need to extend credit to our customers.”  Williams reminded the committee that input costs to plant crops today are “staggering,” and explained that his customers use credit to get their crops planted and harvested.  “If federal crop insurance was in some way diminished, our ability to lend – in some cases – would be curtailed,” he added.

Subcommittee Chairman Jeff Fortenberry underscored the importance of access to credit and the essential role it plays in maintaining the United State’s abundant and affordable food supply.  “Ensuring a stable food supply is directly connected to farmers and ranchers having access to steady sources of credit,” he said.

Farmers Sometimes Need A Little Help When Mother Nature Throws a Fit

2011 was a year that American farmers will not soon forget. The year started off with a record freeze in Florida, followed by historic flooding in the Corn Belt. While farmers were trying to salvage their waterlogged fields in the Midwest, folks in the southern plains were baking under intense heat and a prolonged drought, which still hasn’t broken. And then there was Hurricane Irene, that ravaged the East Coast, from North Carolina to the Canadian border.

Thankfully, decades ago, Congress recognized that because Mother Nature is prone to be nasty at times, policies need to be in place to ensure that when she does, farmers are able to pick up the pieces, rebuild and plant again the following year. The policy that has gained national recognition as the best risk management tool available is crop insurance.

Crop insurance is a public-private partnership, designed to ensure that when disaster strikes, the private sector – crop insurance companies – are there to help shoulder the risk and the financial burden of rebuilding. Crop insurance policies are purchased by the farmer and suited to the farmer’s needs, comfort with risk and financial situation.

In the past, before purchasing crop insurance was the widespread and widely available option, disasters like last year’s would have triggered large, stand-alone disaster bills in Congress, aimed at trying to save as many farms as possible. Those bills would have cost taxpayers dearly, and unfortunately, would have taken months, or even several years to finally get into the hands of the farmers who need the help. Not a good situation for either party involved.

In 2011, with 80 percent of eligible lands protected by crop insurance, private sector companies paid out in excess of $10.7 billion in payments to farmers who had purchased plans and suffered losses. Those checks were often in the hands of the farmers in 30 days or less after they completed the necessary paper work. It’s because of the effectiveness and efficiency of crop insurance that many of us are in our fields planting today instead of being forced to auction off our farms.

The notion that crop insurance is some kind of freebee for farmers is nonsense, because a farmer can only collect an insurance payment if he suffers verifiable damages. The idea that a farmer purchases crop insurance in hopes of watching his crops be destroyed makes about as much sense as the notion that a person purchases homeowners insurance and prays every day that his house will burn down.

Not to mention, farmers pay out of their own pockets for a significant part of the insurance premiums. Stand-alone disaster bills, by comparison, are 100 percent funded by taxpayers.

Let’s not forget what it is that we’re asking farmers to do for the nation: Grow our food, grow our fuel, grow our fiber and grow the feed we need for the meat and poultry we like to consume. This is a big responsibility for the tiny fraction of our fellow Americans called farmers.

The taxpayer cost of ensuring security for these basic public needs would have been astronomical in 2011 without privately delivered crop insurance in place. Crop insurance has become the risk management tool of choice by farmers representing the vast majority of American crops and policy-makers representing both sides of the aisle for one simple reason. It works.

Congress is debating the 2012 Farm Bill and our message to them on behalf of farmers and the American public is simple: Do no harm to crop insurance.

John Mages is president of the Minnesota Corn Growers Association, and lives in Belgrade, Minnesota where he farms with his wife Cindy.

This op-ed appeared on May 11, 2012 on AgNet.

 

Keeping Crop Insurance Strong

This ongoing series presents one of the many strengths of crop insurance per month and details how the sum of the 12 essential crop insurance strengths has given us the successful program we have today. These strengths are especially important as policy makers contemplate further cuts to farm safety net policies.

Strength: Producers do not receive unnecessarily excessive payments.

Crop insurance payments are related to actual crop loss due to price volatility or natural disaster, whereas some farm program payments are not related to need or performance. In addition, a trained crop insurance loss adjuster assesses the producer’s claim, thereby rewarding proper effort and appropriately protecting against events beyond the producer’s control.

To ensure that this safety net policy works properly, crop insurance companies employ more than 4,700 certified crop loss adjusters who are well trained to accurately assess production losses. This ensures the veracity of the policy and helps to reduce waste, fraud and abuse.

To view all of the essential strengths, click here.