USDA Chief Actuary Highlights Crop Insurance Strengths

America’s farmers and ranchers face an incredible number of risks every year, ranging from catastrophic weather events to market disruptions. That’s why rural America relies on the risk management tools provided by the Federal crop insurance program.

Dr. Thomas Worth, Chief Actuary at the U.S. Department of Agriculture’s (USDA) Risk Management Agency, recently spoke at an Agri-Pulse forum and highlighted some of the strengths of crop insurance, especially as farmers take action to combat climate change.

Farming is a dynamic environment, Worth said. So, the Federal crop insurance program has to be dynamic as well to accurately reflect risks and help farmers adopt conservation practices.

USDA is constantly updating premium rates and analyzing data to reflect a farmer’s actual risk.

“We’re always looking at and making refinements to mapping out high risk land like flood plains” Worth cited as an example, as well as evaluating weather trends and looking at region-specific agronomics.

One way that the Federal crop insurance program is designed to incentivize practices that benefit the environment is by utilizing a farmer’s Actual Production History. This is a self-correcting feature that discounts premiums for any producer who improves their performance.

This naturally incentivizes farmers to adopt best practices and techniques for their area – and avoid practices that would harm their performance, such as planting on land not appropriate for their crop.

“Farmers are highly motivated to take measures to mitigate [their risks] and crop insurance is structured so that farmers are best off when they grow a full crop,” Worth said, calling this a “results-based discount.”

Worth pointed to cover crops as an example of one practice that is gaining popularity. The USDA recognizes cover crops as a Good Farming Practice, which encourages farmers to use cover crops to prioritize soil health and resiliency. Ultimately, the use of cover crops can help reduce risk and improve a farmer’s yields, resulting in lower crop insurance premiums.

In fact, the Journal of Environmental Management recently published a peer-reviewed study that credited crop insurance with encouraging the adoption of conservation practices, such as cover crops.

Importantly, Worth emphasized the importance of crop insurance to the farm safety net and said it plays a critical role in helping farmers adapt to the challenges of tomorrow.

“The investments needed to make a farm resilient are generally long term in nature or may take a number of years before the benefit is fully realized,” Worth said. These types of investments can be difficult to make when a farm could go under after one bad year.

“Crop insurance provides the kind of financial stability, that will enhance the ability of farmers to think long-term, and to make the investments needed to adapt and be more resilient,” Worth said.

Crop insurance is proud to work with America’s farmers and ranchers to improve conservation practices and support a healthy environment.

Celebrating the Incredible Women of Crop Insurance

Last week, as we celebrated Women in History Month, the U.S. Department of Agriculture (USDA) hosted a special conversation to honor the women who work in the crop insurance industry.

Kendall Jones, chair of the National Crop Insurance Services (NCIS) and president and CEO of ProAg, and crop insurance agents and industry leaders Iris Sáenz and Pat Swanson participated in the discussion moderated by Richard Flournoy, Acting Administrator of the USDA’s Risk Management Agency.

Each of the women spoke about their careers in agriculture and the important contributions made by women in the crop insurance industry over the years.

“This industry is led by so many female agents in the field, so many female adjusters, people who do so much hard work,” Jones said. “I’m impressed with so many of the agents that I know today – not only are they running their agencies, they’re helping run farms or running the farms themselves, they have other businesses, they support the industry, their communities… They’re an inspiration to us all.”

Sáenz spoke about how women have always been key to food and farming.

“From the field to the table, women have always played an important role in agriculture. Since Indigenous tribes freely roamed these lands, women have been the primary providers of nourishment for their families and communities. Perhaps that is why many of us here today are inclined to dedicate ourselves to our agricultural communities… that is why it is so important that we, as women, come together to lift each other up.”

It’s important to honor the incredible work of the women in the crop insurance industry – and continue to share the stories of these women to inspire future generations of farmers, ranchers and agents.

Jones advised women who are just beginning their careers to be curious and take risks. Mistakes are inevitable, but with mistakes will also come successes that will build your confidence.

Swanson echoed this advice to be continually curious.

“My biggest advice to everyone… never stop learning. I feel it is so important to continue learning about your industry, about your farmers, about your customers you serve,” she said. “Never be afraid to ask questions.”

While each woman’s story and experience in agriculture has been unique, each found a fulfilling career working in the crop insurance industry and helping America’s farmers and ranchers manage their risks.

“From the cherry orchards in Michigan to the boardroom of the USDA building in Washington, DC, crop insurance has given me endless opportunities along the way,” Sáenz said.

We applaud the women of crop insurance for sharing their inspiring stories and grateful that they are helping continue the legacy of strong women in agriculture.

Crop Insurance Backs Farmers During Unprecedented Uncertainty

Crop insurance has been there for rural America through the many uncertainties that farmers and ranchers face every single day. It’s helped agricultural producers survive droughts, tornados, blizzards, floods, low prices, prevented plantings and even volcanos.

Still, over the past few months, the COVID-19 pandemic has introduced new and unprecedented challenges as farmers navigate supply chain disruptions and try to predict how this crisis will affect demand for the products they raise. Yet, despite these difficulties, farmers continue their essential work to feed, clothe and fuel our nation.

So, we have no doubt that we will weather this storm, together, as well.

Crop insurance helps manage some of the risk that farmers still face. Because Mother Nature does not abide by stay-at-home orders and droughts, floods and freezes will inevitably occur, regardless of the pandemic.

Now more than ever, as farmers are planting their crops while facing an unpredictable future, crop insurance is a familiar tool, with a track record of success, that farmers can rely on as they work to feed America and the world. And we are proud to be a trusted partner to so many famers across the country, protecting more than 90 percent of planted acres.

Crop insurers, agents and our partners at USDA have been hard at work to support our producers and we are proud to maintain our incredible record of service to the America farmer during these uncertain times.

We are so grateful for rural America’s tireless commitment to ensuring that we have safe, affordable and nourishing food to provide for our families. That’s why, through this pandemic –  and all storms large and small – we’ve got your back.

Crop Insurance Vital to America’s Family Farms

Just before the end of 2018, the Economic Research Service at the United States Department of Agriculture released a report analyzing data from a 2017 survey of farmers across the country. This report – titled “America’s Diverse Family Farms” – presents the facts behind farming in America.

According to the USDA:

  • Ninety-eight percent of U.S. farms are family farms, and they account for 87 percent of farm production.
  • Family farms categorized as midsize or large produced 62 percent of America’s food and fiber and accounted for 6 out of 10 harvested acres in 2017.
  • One-third of U.S. farm goods are produced under forward contracts to help manage price and production risks.
  • Seven in 10 American farms have an operating profit margin in the “red zone,” indicating a high risk of financial problems.
  • Farm income has declined almost 40 percent since 2013, and more than 40 percent of farms are now relying on income generated off the farm to make ends meet.

The crop insurance system that protects these family farms and makes forward contracting possible in today’s difficult financial environment was also mentioned in the report.

Two-thirds of midsize farms and three-fourths of large farms participate in crop insurance, the report found.

National Crop Insurance Services has traveled the country for the past year hearing first-hand from family farmers in Iowa to Colorado to North Carolina and elsewhere about their experiences. The message has overwhelmingly been that crop insurance is an invaluable tool for America’s farmers and ranchers, and that policymakers should “do no harm to crop insurance.”

Be sure to check out their stories and learn more about crop insurance’s importance to your state at www.cropinsuranceinmystate.org.

USDA: Farmers Face Unrivaled Income Volatility

According to a survey of more than 20,000 American farmers, 58 percent have experienced income fluctuations of at least 50 percent over the course of two consecutive years.  Fewer than 10 percent for all U.S. households experienced the same level of variation.

USDA’s Economic Research Service examined farmers’ income volatility from 1997 to 2013 using the Agricultural Resource Management Survey, the most comprehensive survey of U.S. farm households.

The report suggests that the 1.4 million people who consider farming their primary occupation may struggle to obtain credit, expand and pay debt due to such extreme shifts in income.

“Farming is risky business and this new study helps define just how risky,” said Tom Zacharias, an economist and president of National Crop Insurance Services. “But the study also shows the public-private partnership that is federal crop insurance is helping farm families deal with that risk.”

Farms growing insured crops were reported to have their annual income volatility decline faster than other farms.

“These results suggest that efforts to increase risk management as a center piece of farm programs have had a positive effect in lowering farm income variability,” Zacharias observed. “The study is part of a growing body of scientific evidence that shows crop insurance is a fiscally responsible tool for farmers and the American taxpayer.”

Crop insurance is delivered by the private sector, which helps maximize efficiency. Farmers collectively pay $3.5 to $4 billion a year for protection, so taxpayers aren’t left holding the entire bag after disaster strikes. It also means faster payments after verified losses instead of waiting for Congress to approve disaster relief legislation.

Today, it covers more than 130 different kinds of crops and protects a record 311 million acres of ranch and farmland – an area the size of California, Texas and New York combined.

Crop insurance gives banks confidence to extend loans because it helps farmers manage their business’ unique risks and avoid bankruptcy after floods and droughts.

“The well-documented track record of crop insurance, along with this new study and the many that have come before it, makes a strong case for continuing to provide a safety net for farmers that maintains a strong crop insurance component,” concluded Zacharias.

USDA Under Secretary Scuse on Crop Insurance: “I wouldn’t dream of farming without it.”

scusemichaelUSDA’s under secretary for Farm and Foreign Ag Services, Michael Scuse, openly admits he didn’t always buy crop insurance on his Delaware farm back in the 1980s and 90s.   But today, he wouldn’t consider farming without it.

“Back in the 1980s and 90s, you couldn’t give me crop insurance. It didn’t work on my farm,” said Scuse during a recent meeting with participants of the Illinois Farm Bureau Marketers trip to Washington that appeared in Farm Week Now.

Scuse noted that “since (USDA) changed the program and developed revenue (protection) products, I wouldn’t dream of farming without it.”

Of course, in response to producer demands and the 2014 Farm Bill, new crop insurance products are being tested to come on the market nearly every year and USDA continues to refine crop insurance programs through the Risk Management Agency (RMA).  ”We continue to get requests to include more crops and to make it more user-friendly,” he said.

Given the increased volatility of the weather that we’ve seen over the last decade, those new products will be critical for farmers and ranchers alike.  With input costs rising, crop prices falling and the elimination of direct payments to farmers, crop insurance is by far the most important risk management tool in virtually any farmers’ tool belt.

RMA Associate Administrator Tim Gannon told the group that the crop insurance program has come under public scrutiny in recent years as the Federal government looks to control spending.  That is why farmers need to defend the program and ensure that consumers and members of Congress understand why crop insurance is critical to the overall well being of America’s rural sector.  “Your ability to tell the story of what crop insurance represents will be critical,” he said.

Gannon pointed out that crop insurance saved many farmers after the drought of 2012. “It’s not just a handout,” he noted.

Illinois farmer Martin Andris explained in a 2012 interview during the heart of the historic drought that in the past when drought stuck the area, he wasn’t protected by crop insurance.  “Those recoveries were tough.  When you struggle to have a crop in a given year, then you’re taking two to three years to recover…” he said.  “My goodness, it is so much easier to sleep at night when you have the protection of insurance,” he added.

Congressional Leaders, Administration Officials and Farm Groups Praise Crop Insurance

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

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

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

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

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

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

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

The 2011 Crop Year is Off to a Challenging Start

The hopes of the largest and most profitable harvest in U.S. history are being placed into question by a series of historic weather events that are inflicting major damage to America’s agricultural heartland.

A cold spring followed by heavy, constant rain and flooding in the corn belt has resulted in extensive delays in plantings with only about 63 percent of the U.S. corn crop being planted to date – considerably less than the five year average of nearly 75 percent – according to the May 16th USDA Crop Progress report.

Illinois, the second largest corn producing state, is still lagging behind the national average with only 69 percent of the crop being planted, compared to the average of 74 percent over the last five years.

In other states, the news is much worse. In Minnesota, the fourth largest corn producing state, only 47 percent of the crop has been planted compared to the historic average for this date of 81 percent. Indiana, the fifth largest corn producing state only has 29 percent of its crop planted. Ohio, the seventh largest corn state is still in the single digits at seven percent compared the historical average of 70 percent and North Dakota finally broke into the teens at 14 percent.

The National Agricultural Statistics Service shows that more than half the winter wheat in Kansas – the nation’s largest wheat producer – is now rated in poor to very poor condition. Reports are even worse to the south, where 80 percent of the Oklahoma winter wheat crop and 75 percent of the Texas crop are in poor to very poor condition. Among the 18 major winter wheat-growing states overall, 44 percent of the crop is rated in poor to very poor condition.

The flooding that has swept through the Midwest and is moving south will result in further damage to this year’s crop.

Underpinning the vast majority of these crops is crop insurance, which according to estimates by National Crop Insurance Services (NCIS), would be written for at least $110 billion worth of crop insurance liability this year, the largest amount in U.S. history. Farmer participation in crop insurance continues at historically high levels. In fact, in 2010, nearly 80 percent of the U.S. crop – 256 million acres of farmland – were protected by crop insurance.

“The advantage of protecting our farmers with crop insurance is that when Mother Nature strikes as she is doing this year, it will be private industry working with USDA to ensure that we maintain financial stability for our agricultural production sector, ” said Tom Zacharias, NCIS president.

“The crop insurance industry is deeply concerned about the recent flooding situations and damage to this year’s crop. At this time, it is too early to tell how severe the damage will be, but in partnership with USDA, the industry stands ready to assist insured farmers in assessing the damage to their crops and farmland,” said Zacharias. “The federal crop insurance program is designed to provide protection for farmers affected by natural disasters, which unfortunately occur in the unpredictable and volatile business of agricultural production,” he added.