Crop Insurance Basics: Historic Drought Loss

It has been an exceptionally difficult crop year for many of America’s farmers and ranchers as drought conditions in the West and northern Plains have distressed crops and grazing lands. Approximately 210 million acres of crops are experiencing some level of drought conditions.

Millions of farmers trust crop insurance to help manage their risks, including drought, and farmers have already spoken out about the importance of the farm safety net and crop insurance during years like these.

“Many of our risk management programs, like crop insurance, will be vitally important this year for those producers,” National Association of Wheat Growers Executive Director Chandler Goule said after touring drought-stricken wheat fields in the Dakotas and Minnesota. “Most of the producers we’ve talked to…I’m not going to say they were optimistic but very thankful they had crop insurance programs.”

While the full extent of drought damage is yet to be revealed, crop insurers are already engaged with farmers and ranchers on the ground to help them navigate this historic drought. Currently, more than 90 percent of America’s row crop farmland is protected by crop insurance, and we stand at the ready to keep America growing – no matter the size or scope of the disaster.

So, how does crop insurance respond to a historic drought? We don’t need to look very far back in the history books to find the answer.

In 2012, drought gripped America’s heartland, leaving most of the country reeling from at least some level of drought. It was one of the worst disasters to hit American agriculture in decades.

“Going out in the fields… is a thoroughly depressing experience,” Illinois farmer David Andris told National Crop Insurance Services at the time. “If we didn’t have crop insurance…this year might be the end of it for me.”

The decrease in corn production per acre in 2012 was the largest caused by a drought since 1988.

Farmer Robert Geddes emphasized the importance of having crop insurance during 2012 for the “nasty years like this.” Growers in his area had invested a lot into growing the best crop possible, only to see it lost to drought. If farmers didn’t have the safety net provided by crop insurance, “they’d truly be hurting.”

Thankfully, crop insurance performed extremely well. It quickly and efficiently delivered aid to rural America – exactly as Congress designed.

The public-private partnership of crop insurance meant that farmers weren’t left waiting for years for some form of ad-hoc disaster assistance. Private-sector insurance adjusters quickly assessed damage in the field and crop insurance companies worked swiftly to finalize more than one million claims. This gave farmers the certainty to plan for the next planting season.

Not only did crop insurance help farmers and ranchers weather the drought of 2012, ensuring the security of our food and fiber supply, but crop insurance had a positive impact throughout the rural economy.

An economic study commissioned by Farm Credit Services of America found that in Iowa, Nebraska, South Dakota, and Wyoming alone, crop insurance indemnities from the 2012 drought generated enough off-farm income to save 20,900 non-farming jobs.

Our thoughts are with the farmers and ranchers who are currently dealing with this devastating drought. But history shows us that we will face this challenge together – just as we have before.

Responding to Drought: Crop Insurance’s Proven Track Record

As America’s farmers and ranchers face severe drought conditions, we’ve been reflecting on the historic drought that swept across American farmland in 2012. That disaster showed just how efficiently the Federal crop insurance program can deliver aid when everything is on the line for America’s farmers.

Former USDA Under Secretary Michael Scuse commended the crop insurance industry for its response to the 2012 drought saying, “To this day, I have yet to have a single producer call me with a complaint about crop insurance. That is a testament to just how well your agents, your adjusters, the companies, and the Risk Management Agency (RMA) worked together in one of the worst droughts in the history of this nation.”

Crop insurance stepped up then to provide timely claims service and indemnity payments to keep America growing, and we are once again ready to provide critical relief to our producers.

Over the past decade, members of Congress from both sides of the aisle have continued to strengthen the successful public-private partnership that defines the Federal crop insurance program. Farmers have come to count on the efficiency of the private sector, and crop insurance companies are continually making additional investments to process claims quickly and accurately.

As a result, more and more farmers have turned to crop insurance to help manage their risks. As the cornerstone of the farm safety net, crop insurance currently insures more than 440 million acres of American farmland. That’s over 157 million more acres protected by crop insurance when compared to the acres covered during the 2012 drought.

However, each of these acres is not affected equally by current drought conditions. While the 2012 drought was widespread across much of the country – affecting approximately 85 percent of corn production – the current drought is much more severe in the West and northern Plains. Fifteen states in the West, High Plains, and portions of the Midwest are experiencing extreme and/or exceptional drought.

“This is definitely the worst crop year we have had since we started farming 35 years ago,” Washington wheat farmer Marci Green recently told ABC News. “Years like this are the reason we have crop insurance.”

No matter where the damage happens, private-sector crop insurance companies are ready to deploy loss adjustment teams, determine losses, and quickly pay claims to growers. In fact, crop insurance adjusters have already been out in the fields for months, appraising crops and educating farmers on the specifics of their individual crop insurance policy.

One of the key strengths of crop insurance is that farmers share in the risk – and the cost – of crop insurance. That means American taxpayers will not be left 100 percent on the hook for the cost of the drought.

Farmers pay insurance premiums to purchase coverage before disaster strikes and, like other lines of insurance, shoulder a portion of losses through their deductible. Private crop insurance companies take on losses as well.

The Federal government plays a role, too. In 2012, the government fulfilled its role as a reinsurer under the terms of the Standard Reinsurance Agreement and stepped in to share in the severe and catastrophic losses.

Each component of the Federal crop insurance program worked together in 2012 to help American agriculture survive in the face of overwhelming disaster.

Now, as America’s farmers and ranchers face yet another historic drought, crop insurance is again working to help farmers on the road to recovery. The Federal crop insurance program has a proven track record of delivering for farmers and ranchers in challenging times, and we will continue to meet that call.

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.”

Texas Farmer Hopes for Rain, Counts on Crop Insurance

Rain in West Texas can be scarce. So scarce, in fact, that farmer Brett Schniers wrote in a recent op-ed for the San Angelo Standard-Times that “when you lay down at night, you pray for rain because you don’t know when you’ll see it again.”

Despite the incredible promise of 2020, it has been a tough year for farming and ranching families across the country.

The Schniers family has already faced blistering drought, softball-sized hail that leveled their corn crop and plummeting prices due to the COVID-19 crisis.

“This year, we’ve needed all the help we can get,” Schniers wrote. “That’s why I’m grateful Congress, through the Farm Bill, helps make crop insurance affordable and widely available.”

Farmers and ranchers are resilient. Even in years like 2020, where it seems yet another disaster is always just around the corner. But while he hopes for rain, Schniers knows he can count on crop insurance:

We prepared at the start of the pandemic because we knew, as farmers, we couldn’t stop working. We had to be ready to produce as much food and fiber as we could, even with Mother Nature’s threats and an uncertain market looming.

I’m proud of the work American farmers do every day to make sure our nation is not reliant on imported commodities.

I’m also proud that our leaders in Washington are backing a strong farm safety net with tools like crop insurance.

Crop insurance is a big part of the reason farmers are able to go to work every season despite storms and droughts and faltering commodity markets.

We are proud to provide a critical risk management tool. Crop insurance helps America’s farmers and ranchers produce the affordable and reliable food, fuel and fiber necessary to keep our nation moving forward.

Congress continues to support crop insurance as a cornerstone of the farm safety net and farmers invest their own money in crop insurance to protect more than 90 percent of insurable farmland.

Schniers credits crop insurance with keeping him in business this year, writing, “The American farmer is the backbone of this country. And crop insurance is the backbone of the American farmer. It’s what we stand on.”

We could not agree more. We’re proud to stand side-by-side with America’s farmers and ranchers.

Read Schniers’ full op-ed on the importance of crop insurance at the San Angelo Standard-Times.

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.

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.

CROP INSURANCE IN ACTION: John Michael Pillow, Yazoo City, Mississippi

John Michael Pillow is a fourth generation Mississippi farmer and spent the first part of his career managing his family’s farm.  In 2011, Pillow decided to strike out on his own and become a full-time farmer.

“Most of the 3,500 acres I planted that year were in corn, which is a crop whereby most of the cost is right up front,” he says.  By the time the entire field was planted, Pillow estimates he had not only his family’s future invested in the crop, but also  $2.5 million that he had borrowed from the bank to put the crop in.

“2011 started out exceptionally dry for us, and by mid-summer, the crop was already starting to show the signs of drought stress,” said Pillow.  But then Pillow’s luck changed drastically as the drought was broken by rain.  And then more rain, and then some more rain.

And although Pillow’s farm and homestead are protected by a sophisticated levee system, the levees simply weren’t high enough to accommodate the unending downpours.   “Before I knew it, the Yazoo River was knocking on my front door.”

At that point, Pillow suddenly realized the value of crop insurance, and why it was worth buying every year.  “Crop insurance, for me, not only proved to be essential, it’s the reason I’m in business today,” he said.

Just as luck would have it, Pillow’s crop insurance agent had approached him at the beginning of the crop year prior to planting to discuss various high-loss scenarios with him.  “Out of the blue, my crop insurance agent floated the worst-case scenario by me about how well I’d handle a crop loss of 80 to 85 percent,” recalls Pillow.  “I told him that a loss that high was simply inconceivable, that it would never happen.”

But Pillow notes that, given the fact that this was his first year of farming on his own and that he would require a $2.5 million operating loan from the local bank to put his crop in the ground, he decided the prudent thing to do would be to plan for the worst.

“I had to cut a check in excess of $60,000 in February to purchase the level of coverage the agent suggested for a level of loss that I didn’t really believe was possible,” he recalls.

And then it happened.  Roughly three months after writing that check, the Yazoo River had spilled over its banks and most of Pillow’s farm was underwater.

“I lost 80 to 85 percent of my crop that year,” said Pillow.  “And to add insult to injury, after the waters receded, although most of the corn was completely washed away, the corn that was left had been severely damaged by drought,” he said.

Pillow said that just like car insurance, crop insurance gives you a degree of stability in times of disaster.  “If you wreck your car, the insurance will replace it and you can still go to work the next day,” he says.  “Why would you not have insurance on your food source, since it’s the most important thing we have?”

Pillow notes that through the whole process, his crop insurance agent and company were by his side.  “When I found out that we were going to flood, the first call I made was to my crop insurance agent,” said Pillow.  “He was very reassuring that it would be okay.”

Pillow said that when the flood was at its height, his agent, the adjuster and the supervisor were all on his farm at some point surveying the damage and assuring him that his indemnity check would be on the way so he could bounce back from this.

“Needless to say, I would be doing something else other than what I love besides farming, and I would be repaying the bank for the $2.5 million I borrowed to put the crop in for the rest of my life,” said Pillow.  “In fact, me, my wife and my kids would have been paying the bank back for a generation or more,” he added.

While Many Parts of the Country are Waterlogged, California Remains Locked in Drought

A quick look at the U.S. Drought monitor says it all.  For the vast majority of the country, the years-long drought has been all but eliminated.  A year ago, 13 percent of the contiguous U.S. was locked in “extreme” or “exceptional” drought, the two most severe stages.  All of this area was west of the Mississippi, and concentrated most severely in the southern plains states of Texas and Oklahoma and then westward to California.

U.S. drought mapWith the extreme shift in the weather pattern experienced this crop year, the two worst levels of drought have been all but eliminated in the entire contiguous U.S., with the exceptions of California and Nevada.

California remains in desperate shape, with fully 70 percent of the state locked in extreme or exceptional drought, with the entire state remaining in some level of precipitation deficiency.  California farmers are scrambling to submit plans to reduce their water consumption, hoping to stave off deeper, mandatory cuts that could come down pipeline from the Governor.

To accomplish this, farmers are opting to plant less water intensive crops and some have decided to leave fields unplanted altogether.  The Golden state’s cities and businesses have been ordered to reduce their water consumption already by 25 percent.

Although California grows roughly half of the vegetables, nuts and fruits consumed in the U.S., the drought has yet to send food prices skyrocketing since farmers in other regions are making up the difference.

California Drought Worsens as Rainy Season Ends, Growers Fret

“California’s reservoirs obviously will not be significantly replenished by a melting snowpack this spring and summer,” concluded the year-end snow survey by the California Department of Water Resources.

The mountain snowpack is critical to the state’s water needs and provides roughly one-third of the water for California’s farms and cities. “Today’s final snow survey of the year found more bare ground than snow as California faces another long, hot summer after a near-record dry winter,” the report said.

The May 1 survey found the state’s snowpack at a mere 18 percent of average for the date. “With most of the wet season behind us, it is highly unlikely late-season storms will significantly dampen the effects of the three-year drought on parched farms or communities…” the report noted.

According to the May 13, 2014 U.S. Drought Monitor the entire state of California is experiencing severe drought conditions. More than three-quarters of the state is suffering a state of “extreme drought,” a seventeen percent increase from three months earlier this year, with nearly 25 percent of the state experiencing “exceptional” drought, a fifteen percent increase from three months earlier.

The ongoing drought is hitting the state’s farmers and growers hard. California is the nation’s top agricultural state, with farming generating approximately $37.5 billion a year, growing roughly half of the nation’s fruits, nuts and vegetables.

California farmers purchased more than 25,000 crop insurance policies in 2013, protecting more than 5 million acres. Those policies protect crops ranging from almonds, apples and avacadoes to sugarbeets, Valenicia oranges and walnuts. To purchase those policies, California farmers paid more than $95 million out of their pockets and protected more than $6 billion in liability.

Three Year Drought Continues to Stalk Farm Country; Maps Show Dramatic Progression

The area of the continental U.S. plagued by drought has more than doubled since February 2011, according to the U.S. Drought Monitor. Even more disturbingly, the portion of the country locked in a level of drought considered “severe, extreme, or exceptional” has increased by more than 400 percent over that same period of time, according to archived data and maps from the first week of February 2011 through the first week of February 2013.

Although one of the biggest stories in agriculture in 2011 was the intense drought and heat wave in the southern plains that seared crops and eventually led to widespread wildfires, only about 24 percent of the continental U.S. was experiencing drought on February 8 of that year, with nine percent of that sample facing “severe, extreme, or exceptional” drought.

The drought caused major losses that year, and combined with other natural disasters, set a new crop insurance indemnity record of $10.8 billion.

The year 2012, by comparison, started off quite a bit drier, with roughly 38 percent of the continental U.S. in some level of drought by the first week of February, with 18 percent of that area considered “severe, extreme, or exceptional.” The drought continued to intensify and spread into the nation’s breadbasket over the course of the summer, leaving farmers not accustomed to losses with fields that produced little.

The drought was the largest weather story of the year, and caused deep losses for farmers. While crop insurance indemnities have not been finalized, they have already eclipsed the 2011 record by nearly $3 billion.

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. Forty percent of that area is considered “severe, extreme, or exceptional.” Drought is covering nearly 20 percent more of the continental U.S. than it did a year ago, with the amount of area locked in the most severe stages of drought more than doubling in that same time period.

Looking ahead, unfortunately, the persistence of drought throughout a good portion of the heartland remains a definite possibility.

According to the U.S. Seasonal Drought Outlook, published by the National Oceanic and Atmospheric Administration, a break for farmers doesn’t appear to be in the cards, at least not in the short term. So while farmers are surely praying for rain, it also helps that they can manage their risk through the purchase of crop insurance.

 

 

2012 Drought Extends Its Grip Into 2013

The 2012 growing season has ended for most of the nation’s farmers, but the drought that dogged many of them appears here to stay. According to the December 11, U.S. Drought Monitor, nearly 62 percent of the continental United States remains in some stage of drought. Forty-three percent of that area is considered to be in severe, extreme or exceptional drought.

Should this weather pattern continue, many farmers would start off the growing season with lower soil moisture contents than they had in 2012. According to the U.S. Seasonal Drought Outlook, which forecasts through the end of February 2013, “persistence of drought is deemed the best bet across central and southern portions of the Intermountain Region, the Rockies and the Plains. Persistence of existing drought, or the development of new drought areas are expected in Texas.”

The long dry spell is already taking its toll on the winter wheat crop. USDA says that this year’s wheat crop is the poorest at this stage in development since the agency started tracking crop condition ratings 25 years ago, according to Feedstuffs Online.

In its November 26 “Crop Progress” report, USDA pointed out that only 33% of the wheat crop was rated in good to excellent condition, while twenty-six percent of the crop was rated poor to very poor. Fifty-two percent of last year’s crop, by comparison, earned the top two condition ratings, while only thirteen percent scored in the bottom two tiers.

The persistent lack of rain is not only hurting the Heartland’s farmers, but also other agribusinesses and commerce in general. The ongoing drought is pushing water levels in the Mississippi so low that portions of the river south of St. Louis might have to be closed to shipping soon.

Tom Allegretti, president of American Waterways Operators, says that more than 20,000 jobs are at risk, as well as $130 million in wages and benefits if the river is closed for two months. Allegretti estimates that more than $2.3 billion of agricultural products, $1.8 billion in chemicals and $1.3 billion worth of petroleum products normally ship on the river in December and January.

Hurricane Sandy Robs Some Delmarva Farmers of A Promising Harvest

Delmarva farmers weren’t directly in the eye of Hurricane Sandy when the storm slammed into the East Coast, but they were awful close.

Most of the Delmarva Peninsula, comprised of Delaware and the Eastern shores of Maryland and Virginia, was just south of where the hurricane came ashore in Cape May, New Jersey. The peninsula is sandwiched between the Atlantic Ocean and the Delaware Bay on the east and the Chesapeake Bay on the west, and is thus susceptible to storm surges.

Before the storm, the area’s farmers had already suffered steep losses on their corn crop, which was stunted by the long summer’s drought. The patches of corn that survived had been harvested early – due partly to the early spring planting, continued drought conditions and high demand from local poultry feeders.

But the soybean crop was a whole other ball of wax, said crop insurance agent Harry Daisey, who was born and raised on a peninsula farm and lives in Bridgeville, Delaware. Before Sandy’s arrival, the area had received some much-needed, late-season rains, which breathed new life, and new hope, into the soybean crop.

“That’s really the sad part,” said Daisey. “The soybean crop, which had looked sad and shriveled all summer long, received a good shot of rain late in the season, and that sent the soybeans into a whole new growth cycle, with new blooms popping up and plants taking off,” he said. “It really looked promising.”

But then came Sandy. Unfortunately for the area’s farmers, much of their soybean crop was still in the field when the hurricane hit, and “it was literally a hit or miss situation,” said Daisey. Daisey noted that for someone who wants to know the reason why farmers need to purchase crop insurance, it can be summed up in one word: “variability.”

Daisey said that the losses varied greatly from farm to farm, which underscores the value of crop insurance, since it allows each farmer to personalize their risk management plan based on their crops, soil conditions and tolerance to risk.

“Many of the farmers who are closer to the bay had their fields inundated with salt water, which is never good,” he said.

Daisey explained that in addition to suffering damages to their immediate soybean crop, farmers were concerned that the salt water inundation could impact next year’s crop as well. “It all depends on how sandy their soil is and how quickly that salt can be washed out of it,” he added.

One farmer’s entire field was under water, and when the bay finally receded, the field was so waterlogged that the beans fell over. “It’s questionable if the farmer will even be able to harvest that field, given the combination of waterlogged soil and toppled-over plants,” said Daisey.

Daisey also noted that Sandy left the viability of the area’s winter wheat and barley crop in question. “With 10 inches of rain in a very short period of time, if the grain had sprouted already, it might be able to withstand the water,” he said. “Or it might have drowned the young wheat altogether, or it could have just washed it all away.”

The farmers who are determined to get their soybeans out of the field could very well suffer damage to their tractors and other machinery from the disheveled plants and deep mud; costly damages that will not be covered by crop insurance policies. “Those who have been saying that farmers can get rich off of crop insurance have a very shallow understanding of all of the costs of modern agriculture,” said Daisey.

“Both land and equipment are expensive, and when they’re damaged, it’s usually money right out of the farmers’ pockets,” he said.

CROP INSURANCE IN ACTION: Bob and Mike Buntin, Thompsonville, Illinois

The choices Illinois farmers faced in the past when drought struck the Midwest were unpleasant all around. They could borrow money from family, drain their hard-earned savings or go under.

In the last decade, crop insurance has made it possible for brothers Robert (Bob) and Michael Buntin, owners of Buntin Bros., Inc. in Thompsonville, to avoid any of that even as this summer’s severe drought hit the state. For those without such a buffer, said Bob, 72, “It’s like losing a job. You get by the best you can.”

Thompsonville, with a population of nearly 600, is bordered on the south by Kentucky and on the east by Indiana.

This past summer, the entire state of Illinois experienced varying degrees of drought — worsened by excessive heat — causing crops to shrivel and die from the blistering temperatures.

The Buntins operate a 5,000-acre family farm, planted to corn, soybeans and wheat. This drought has been the worst since 1988, said Bob, and their yield this year is projected to be a little lower than ever before. From 147 bushels of corn per acre, 60 bushels of wheat and 45 bushels of soybeans, he sees production this year slowing to an average of 15 bushels each for soybeans and corn and “above average” for wheat.

“We’re tired of the dry weather,” he said. “This is the worst this year.”

This year, the brothers wrote a crop insurance premium check for more than a $100,000; “You don’t pay monthly like most insurance companies,” said Bob. “You just write one check.”

And like a regular car insurance policy, they make sure they are covered for one year at a time. “You never know when your car is going to break down. You reapply every year so you can change your options.”

Bob says the process of purchasing crop insurance and filing for a claim is uncomplicated with very little paperwork. “If you keep your records straight, what kind of yield you get and report all these to government offices, it makes it easier,” he said.

“We’re going to be all right this year,” he noted. Such confidence comes from part wisdom, part history: A lower crop production traditionally results in higher prices. The Buntins are buoyed by current market prices at sky-high levels, which, Bob said, “should cover my losses this year.”

The brothers recalled past years when their farm faced weather-related crises. “It was dry here last year, dry here in 1983 and dry here in 1988, and you go back to the 1930s and the ‘50s.”

The U.S. has been experiencing extreme weather over the last few years, with 2012 now judged as the hottest year on record. The number of disasters that have run up costs into the billions of dollars have multiplied sharply since the beginning of the century.

In 2011, the worst drought in a hundred years crippled Texas, the biggest producer of cotton in the U.S. The next year, the drought moved to the Heartland.

But in addition to worrying about the weather, there are some ideas being floated in Congress that are causing some concerns as well. “I don’t think there should be a cap on insurance policy,” Bob mused, arguing how a farmer with 500 acres or 5,000 acres should be allowed to take out a policy based on his own needs.

“You got all the expenses; the big guy’s got more expenses than the little guy, but he’s got expenses, too,” he said. For a farmer who is just getting started, the banks will strongly insist that he get insurance for his own protection “at least to some degree.”

“Even the big, more established farms can’t afford to take a hit three or four years in a row,” said Bob, who has been farming since he was a young man in his teens. And the family tradition of farming will continue as one of Bob’s sons two grandsons have joined him and their uncle in meeting the upcoming challenges to feed a hungry world.

CROP INSURANCE IN ACTION: Jerry McReynolds, Woodston, Kansas

On land where wheat stalks heavy with grain would normally wave on a breeze in the late summer, the searing drought of 2012 zapped nearly every inch of land across the Kansas plains, leaving it burnt and lifeless.

There was no way to hide from the drought in the Grain Belt. Just one year after the worst dry spell in a century devastated farmers in Texas, it spread like a virulent disease into the Midwest — the breadbasket for much of the world’s corn, soybeans and, of course, wheat.

The United States is a major wheat-producing country, with output typically exceeded only by China, the European Union and India, according to the U.S. Department of Agriculture (USDA) Economic Research Service.

The drought struck especially hard in Kansas, one of the biggest wheat producing states in the country. Jerry McReynolds, a well-known wheat producer in the northern part of the state, said the dry spell is “one of the most serious droughts we have ever encountered in my farming career.”

Each year, McReynolds plants 2,300 acres of winter wheat, 400 acres of corn, 250 acres of soybeans, 800 to 1,000 acres of grain sorghum and 150 acres of forage sorghum. He also runs his own cattle operation. His farm is located outside Woodston, Kansas, a place just 136 people call home; where “Main Street” is all of eight corners tucked away near Highway 24.

Like many American farms, it is a joint operation by the McReynolds family. He said his three children have always helped him and his wife, Diane, in running the farm.

“Our son is a part of the operation. Our married daughters return whenever possible for harvest or other times. One daughter owns some of the land we operate. Another daughter and [her] husband would like to return to the farm, if possible,” McReynolds said.

McReynolds has taken an active role in two decades of farming. He has held several leadership positions at the Kansas Association of Wheat Growers (KAWG) and, as its president, he helped start the Kansas Farm Bill Coalition. He was also involved in the process that culminated in Kansas Wheat, the cooperative agreement between KAWG and the Kansas Wheat Commission.

In 1998, he was elected to the Kansas Farm Bureau Board of Directors representing the sixth district in the area.

But for all his years in the business, McReynolds says he has never encountered a litany of problems quite like those in 2012.

“All spring planted crops really suffered. Germination was a problem. The weather was extremely hot for a very long period of time, without moisture. We encountered temps to 115 degrees,” he said.

“We cut half of our corn acres for silage. I chose not to plant soybeans this spring because of the extreme dryness. Our grain sorghum and forage sorghum really suffered. Yields will be less than half of last year,” he said, adding however, that “wheat yields were surprisingly good, considering the hot, dry weather.”

Crop insurance has been vital for the continued operation of the farm, especially in the midst of the worst drought this nation has seen in a quarter century.

“Crop insurance is critical to our operation. I had a 70 percent level of coverage. However, that only provides around 60 to 65 percent coverage,” he explained.

McReynolds said he has already turned in the papers for “losses on the corn that was cut for silage,” a process of fodder being compacted and stored without being dried so it can be used as animal feed in the winter.

Other losses will be determined after the fall harvest by the insurance companies, but there’s no doubt the impact of the drought on his farm has been severe.

The fallout will extend into 2013 as farmers approach the fall planting season for winter wheat.

“Moisture is critical to get wheat up this fall, as well as germination of any volunteer wheat that must be destroyed before wheat planting,” he said. “Recovery after a drought is very slow. It takes years to get things back to normal. Drought causes revenue losses, emotional issues, cowherd reductions and a lot of uncertainty.”

Without crop insurance it would have been tough to stay in business, the long-time Kansas wheat farmer said. The way the system works, crop insurance payments are paid close to the time frame when loss occurs — before harvest time in case of prevented planting and replant payments, or shortly after harvest in case of yield or revenue shortfall. Most crop insurance claims are paid within 30 days after settlement – a vast improvement from the days of big, ad hoc disaster bills.

Crop insurance is not a government handout that depends on the taxpayers to pay when disaster strikes. Farmers must contribute financially in order to receive crop insurance and will invest more than $4 billion in 1.2 million crop insurance policies this year. These contributions help hold down the cost to the taxpayer and encourage people taking part to exercise financial discipline going forward.

Still another outstanding feature of the U.S. crop insurance program is that it allows farmers to customize their plans and coverage to accurately reflect individual losses and unique yields or risk.

“The input costs are so great, and our margins are so close, that without crop insurance many growers would be out of business,” McReynolds said.

Like everyone else, he is hopeful 2013 will bring better conditions. “Hardship causes us to improve our management practices, but it is a lot more fun when we get rain,” he added.

Crop Insurance Helpful for Ohio Farmers

The National Climatic Data Center reported that as the 2012 drought deepened and expanded this summer, it became one of the six largest droughts in modern record keeping. Here in Ohio, you really didn’t need a weather expert to tell you just how bad it was. And before the rains finally came – which were too late for many of crop – the fields were so dry they had cracked, there was only stubble left for cattle to feed on, and creeks and wells were drying up. This has been one of those years that can be full of disappointment for a farmer like me.

Planting this spring the soil looked great, crop prices were high, and there was every indication that a bountiful harvest was a strong possibility. But the rains left and did not return for months, leaving 53 percent of the corn crop in poor or very poor condition, roughly one-third of the soybean crop in poor or very poor condition and almost 70 percent of our pastures the same.

Thankfully, I purchase crop insurance for situations just like this. Crop insurance is a public-private partnership that limits taxpayer exposure to risk – and saving them billions of dollars – and helps farmers get back on our feet when disaster strikes. A crop insurance check does not make a farmer “whole” anymore than an insurance check replaces the home you lost in a fire, but it at least puts us on first base.

Crop insurance has become the key risk management tool for farmers, and the only risk management for some, that last year protected 84 percent of eligible farmland, or roughly 266 million acres. In years past, natural disasters like the drought we are enduring right now, regularly triggered very costly, un-budgeted ad hoc disaster bill from Congress, costing taxpayers $45 billion from FY1989 to FY2001. By comparison, the fact that most farmers purchase crop insurance has negated the need for large disaster bills for crops. Because of the way crop insurance works, when disaster does strike, the cost is partially shouldered by private sector insurance companies. This is a good, fiscally responsible move for farm policy. That’s because the move from ad hoc disaster bills to private crop insurance policies has saved billions of taxpayer dollars. In fact, taxpayer spending for farm safety net programs as a whole has dropped from $19.2 billion in 2002 to an estimated $12.3 billion in 2011, a 36 percent decline.

Many Ohio farmers who are collecting crop insurance checks this year have never filed a claim. Those profits, in addition to the $3.5 billion the federal government has made in underwriting gains, will help pay for these and similar big losses. Last year, there was a string of natural disasters, including drought, wildfires, floods, freezes, hurricanes and tropical storms, which allowed crop insurance to show its steel.

Despite farm disasters from coast to coast, there wasn’t a single call for a disaster bill from Washington. Why? Because farmers had spent $4.5 billion of their own money to purchase crop insurance. Insurance dollars are already flowing into the state to help farmers meet their cash flow demands. In fact, more than $16 million in indemnities have already landed in the hands of Ohio farmers, which will help them make it through an otherwise lean year. It took months, or years, for cash from government programs of the past to find their way to farmers.

But there are those who are making uninformed and uneducated criticisms about crop insurance – and America’s farmers – in the midst of this national tragedy. According to the Washington-based Environmental Working Group, farmers have been “praying for drought, not rain.” Really? I’ve seen a lot of looks on the faces of my fellow farmers this past summer, as their crops and have withered despite their best efforts and their hopes for a great harvest have been dashed. And for the record, none of those looks have been smiles of greed about a check for an insurance policy they bought. Nor have I heard much laughter. Tears of frustration, maybe. Laughter, not so much.

The rains have returned to the Buckeye state but for the most part, it’s too little, too late for the corn crop. Thankfully most of us have purchased crop insurance policies, and will bounce back and be planting again next year.

This op-ed, written by Custar, Ohio farmer, Mark Drewes, appeared in the Bowling Green Sentinel-Tribune on September 18, 2012.

Hurricane Isaac Brings Mixed Blessings to Central U.S.

The arrival of heavy rains from Hurricane Isaac made some farmers happy and others worried to death, depending on where they were located and what they were growing.

In Louisiana and Mississippi, most of the cotton crop was two to four weeks from harvest when Isaac made landfall. That was the same situation as 2008 when Hurricane Gustav ruined that crop. Louisiana corn harvest had been delayed as well, leaving much of that crop in the field and farmers scrambling when the winds and torrential rains came.

Kyle McCann with the Louisiana Farm Bureau said that some of the state’s soybeans were damaged by the heavy wind and rain but were still salvageable. “We hope to see the damage in some of the later soybean varieties dissipate overtime as they recover.” The cotton crop suffered some losses as well, particularly the varieties that had opened early and were ready to pick. “Unfortunately, the heavy winds did some of the picking for us and it’s scattered across the ground,” he said. “But luckily, I haven’t heard of any dramatic losses to far.”

As Tropical Storm Isaac reached the parched earth of the Midwest and the cracked soils finally dampened, farmers growing soybeans breathed a sigh of relief while corn farmers lamented the fact that it had arrived too late to help many of them. Despite helpful rains over the eastern portion of the Corn Belt – which saw exceptional improvements for three hard-hit states:

– In Missouri, the area experiencing “severe” or “exceptional” drought was reduced from 97 percent to 32 percent.

– In Illinois, the reduction in these two categories dropped from roughly 70 percent to just under 7 percent.

– In Indiana, “severe” drought or worse is completely gone from the state for the first time since June 12.

Unfortunately, despite those localized gains, the overall drought numbers remained virtually unchanged from the previous week with 63 percent of the lower 48 states experiencing moderate to exceptional drought.

The September 4 crop progress reports bears that out. The portion of corn that is in poor or very poor condition remained at 52 percent, unchanged from the previous week. Soybean conditions remained roughly the same as well, with 58 percent of the crop in fair or good shape. Also, unfortunately for the livestock industry, nearly 60 percent of the country’s pastures remained in poor or very poor condition as well.

Without crop insurance in place, this unfolding natural calamity would surely have spurred a new ad hoc disaster bill in Congress. Thankfully, most farmers have crop insurance. They’ve invested more than $4 billion to purchase 1.2 million policies, thus far this year. For those who have suffered losses already, more than $1.3 billion in indemnity payments have been made.

The Risk Management Agency has provided a 2012 Drought “Frequently Asked Questions” factsheet for farmers or anyone else who has questions about crop insurance policies or how they should proceed if crops are damaged. Additionally, a statement was sent to the national media by National Crop Insurance Services detailing the steps farmers should take if crop damage is detected.

 

CROP INSURANCE IN ACTION: Mike Garavaglia, Vero Beach, Florida

Florida accounts for roughly 70 percent of the U.S. annual production of citrus, of which the vast majority goes into processing, mostly for orange juice. Citrus is big business in the Sunshine State, and Mike Garavaglia is one of Florida’s many citrus growers who make their living putting fresh citrus on the tables of America’s families.

Mike and his family own and operate 4,000 acres of citrus groves, which have been in the Rogers family for four generations. The family’s business, known as “The Packers of Indian River,” specializes primarily in fresh citrus for consumption – producing oranges, tangerines and grapefruit.

The family’s groves are geographically diverse, spanning three counties on both the east and west coasts of the state, but geographic diversity doesn’t always protect you from the whims of Mother Nature. “We have manageable and unmanageable risks,” says Garavaglia. “We try to eliminate as many of the preventable issues as possible, which include insect damage, bacterial and fungal diseases that attack the tree and crops.”

But what they can’t manage are large weather events like hard freezes, hurricanes and floods. Garavaglia has seen his share of natural disasters, with three hurricanes hitting the groves in 2004 and 2005 — at a time when the groves are especially vulnerable. “By the time August rolls around, you’ve invested about 90 percent of your care taking in the crop, and you are keeping your fingers crossed and hoping for a good harvest,” he said.

But nothing can really protect a grove, or the fruit on the trees, from a hurricane. “The fruit is too immature to harvest, and it’s very susceptible to high winds,” he adds. That’s where crop insurance comes into play. Garavaglia purchases the maximum buy-up of multi-peril insurance, “because over the years, that’s what has proven to work the best for us,” he says.

When a hurricane blows a good portion of the ripening crop onto the ground, “the fruit is shot,” he says. “And if the winds are high enough, it can take the trees years to recover from the damage.”

Another major threat to Florida’s premier citrus industry, and one that made its presence known in 2011, is a “hard freeze” – periods when temperatures go below 28 degrees for four or more hours. This can not only rob a grower of their harvest – which is their income for the year – but can kill the grove as well, if the freeze is long and hard enough.

 

“You can do everything humanly possible to mitigate the damage during a freeze, but you certainly can’t stop it,” he said. Garavaglia says that in the winter of 2010 and 2011, his groves endured three nights of temperatures that were as low as 22 degrees.

“When a freeze is on the way, growers spend a significant amount of money to prevent damage by flooding their groves and installing micro-jet irrigation to mist the trees,” he says. “But when it gets so cold for so long, as it did in 2011, you just know that there is going to be some major damage to the crop, or the trees, or both,” he said.

Unlike other weather events, it’s really impossible to assess the extent of the damage of a hard freeze for weeks, or even months. That’s because when those long, cold nights are finally over, it can take several weeks before the fruit starts to drop. “Initially, we lost about 20 percent of the crop on the ground,” he said. “Done.”

And then over the rest of the season, every box that is brought in has to be specially inspected with samples removed to ensure that parts of the fruit were not dried out from the freeze. ”Even if it stays on the tree, half of what’s remaining can be completely dried out and not marketable,” he notes.

Garavaglia explained that crop insurance is different with citrus than with row crops in the Midwest because it can take months to fully assess the damage.

“Within several weeks of a deep freeze, an adjuster will visit the grove, and he can spend weeks there going through the damage,” said Garavaglia.

“Fruit can continue to drop for two to three months, which means the adjusting can take months before it is complete,” he explains. But even then, the adjuster is often tasked with checking back after harvest to see if any more fruit was lost during inspection. “Because of the length of time it takes to assess the damage, claims can take months to finalize,” he said.

Garavaglia recounted a crop insurance vignette from a decade ago that demonstrated the critical role crop insurance plays in helping growers bounce back from adversity. The family had purchased another grove and had closed on the deal in August. In late December/early January, they were hit with a hard freeze and lost nearly 60 percent of the crop immediately. “You put your whole life savings into a crop every year, and to completely lose a return on an investment, it could wipe you out,” he said.

“If we didn’t have crop insurance, we would have lost the grove.”

Garavaglia says that while crop insurance doesn’t replace a harvest, it’s a critical tool for growers to mitigate some of their biggest risks. “Crop insurance pays for about 65 percent of what it takes to get a crop to market,” he says. “Nobody is making a profit on crop insurance, but it’s a great way to provide some risk mitigation on things we can’t control,” he added.

Crop Insurance Helps An Iowa Farmer Plant Another Day After 2011 Floods

There are few places in the country that personify the radical whims of Mother Nature as well as the state of Iowa. Last year, Iowa and much of the upper Midwest suffered under record flooding when major rivers left their banks. This year, Iowa farmers are facing one of the worst droughts in decades. The entire state is experiencing drought conditions that are considered either “severe or extreme.”

Leo Ettleman, an Iowa farmer who lost nearly everything last year to the flood waters of the Missouri, was back on his feet again this year planting his fields and hoping for better luck. “The house, the barn, all the buildings, all the fields, everything was swallowed by the great Missouri,” Ettleman said of last year.

Ettleman says that through it all, having crop insurance gave him a “great peace of mind” knowing that when the waters receded, he, his father and his son could return to farming. The Ettlemans are likely again drawing some comfort from the fact that they always purchase crop insurance to hedge the unpredictability of Mother Nature.

Leo Ettleman, Percival, Iowa

The Ettleman farm is located on some of the richest bottomland in the state; in the part of the country that many believe is one of the best locations on earth to farm corn and soybeans. Leo Ettleman has been farming his whole life, and in his 57 years on the fourth-generation family farm that is close to the Missouri river, he’s well aware of the ups and downs of farming on bottomland: “In the good years, it’s the best land around and your yields will be high,” said Ettleman. “But in the bad years, flooding is always a possibility.”

The Ettleman farm – which consists about 2,300 acres of corn and soybeans plus a cow-calf operation – has flooded before, in 2008 and 1993, but that was mostly due to the fact that high water in the river kept his land from draining and the water just sat on the saturated fields. But nothing in living memory could prepare the family for what they would be facing in 2011.

The year actually started off great, with adequate rainfall over the winter and into the early spring. By April, the corn and soybeans were doing well, and crop prices were steadily ticking up. “Yes, 2011 could definitely be a good year,” Ettleman thought to himself.

Then came the rain, both directly on his farm, but more importantly far upstream. Record snowfall during the winter in the Rockies, which carried more than double its average snowpack, began melting quickly. This, combined with heavy spring rains, which according to the National Weather Service dumped nearly a year’s worth of rain in a two-week period over the upper Missouri River basin, would spell inundation for those living downstream.

By Memorial Day weekend, the news came to families near the Missouri River that they would have to evacuate for two weeks. Ettleman explained that the task before them was enormous, as three generations of the Ettleman family, living in three different houses, and all of the livestock and machinery, were to be moved to higher ground. “But moving to higher ground and hoping for the best was the only option,” he said.

On June 13, the first breach occurred in the long flood control system, roughly 10 miles south of their farm, near Hamburg, Iowa. On June 30, the crisis hit much closer to home as the levee failed near his parents’ home in Fremont. That signaled the beginning of a massive inundation that would leave nearly every farm in every direction under five feet of water. It would last four months.

By the time the levees failed, the Missouri River, which is normally a few hundred feet wide in this part of Iowa, was six miles across where the Ettlemans live.

“The house, the barn, all the buildings, all the fields, everything was swallowed by the great Missouri,” Ettleman said. June, July, August, and even into September, the water was still there. “We could get on a levee and drive down to where we could keep an eye on our property with binoculars and so we knew we had 3 to 5 feet of water against our house but the structure was not destroyed,” he said.

Ettleman and the other farmers in the area attended disaster meetings at the local high school and were apprised of the status of the flood and what to expect once the water left.

Thankfully for Ettleman, he had purchased 80 percent multi-peril coverage on his crops, along with rain and hail damage. Ettleman says that through it all, having crop insurance gave him a “great peace of mind” knowing that when the waters receded, he, his father and his son could return to farming.

Ettleman worked directly with his crop insurance agent and the local claims adjuster to ensure that everyone had everything they needed to get his claim filed. “We got the paperwork started early to get the ball rolling so that when it was time to file my claim, I’d be ready,” he said.

When the Missouri finally receded it left a strange, almost lunar landscape in its path. “Everything was a mess,” he said. “There was three feet of sand in my parent’s house.” The fields were full of trees, debris, trash, and scour holes that could swallow your car. “There were 3 to 5 foot sand drifts in the middle of some of my best fields,” he added. “In some places, I had lost 2 to 3 feet of topsoil from some of my most productive fields.”

With his claim filed and the promise of an indemnity check on its way, Ettleman and his family worked the fields diligently over the winter, testing the soil to see if it could support a crop the following spring and filling the large holes left by the river with the copious amounts of sand that it had also deposited on their farm. And what a difference a year – and an indemnity – can make.

“Right now,” he said, “we’re looking a whole lot better than we thought we would, with 99 percent of our farm planted for the 2012 crop.”

“There’s only about 3 acres that have so much sand on them that we couldn’t plant them,” he noted, “and that will give us something to do this winter.”

 

A Drought Isn’t A Disaster if the Right Tools Are in Place

A drought specialist with the national weather service recently compared the drought and heat wave here in the Midwest with the catastrophic dry period of 1988 that at the time cost agriculture $78 billion. This year’s weather pattern, which settled into the Great Plains and the Southwest last year and has spread into the Corn Belt, resembles those of a quarter century ago, he noted.

USDA Chief Economist Joe Glauber recently said that “49 percent of the corn crop, 50 percent of the soybean crop, and 45 percent of the hay crop are all in areas that are experiencing drought,” adding that a lot of that area is actually in the “severe drought” category. For consumers, this drought could spell higher food prices as food and feed supplies tighten further and global demand continues to rise.

For farmers and ranchers ­ who in 2011 experienced one of the most disastrous weather years in history ­ this could mean yet another year of dismal harvests and dashed hopes. Thankfully, the vast majority of U.S. farmers purchase crop insurance policies, which last year covered 84 percent of eligible lands, protecting 266 million acres of crops.

But the agricultural destruction experienced in 2011 — which ranged from drought in the plains to flooding in the Midwest and Delta regions to freezes in Florida and Hurricane Irene on the East Cost — differed from previous years. In the past, large natural disasters would have triggered nearly immediate and always expensive ad hoc farm disaster bills in Congress. Last year, there were none.

Why? Because crop insurance, the public-private partnership designed to encourage the private sector to sell and service policies, was in place and working to help America¹s farmers pick themselves up when Mother Nature struck. Crop insurance is the most widely used and popular risk management tool available to farmers today.

This past year, as Congress began writing the 2012 Farm Bill, farmers and ranchers from each corner of the country and nearly every major commodity group came to Washington to testify about what that Farm Bill needed to do. There was one main theme that threaded through their testimony: “Do no harm to crop insurance.”

Unfortunately, an amendment in the recently passed Senate Farm Bill could harm the crop insurance system by mandating means testing to farmers who seek to purchase crop insurance. This might sound like a common-sense amendment at first glance, but what is important to remember is that crop insurance is purchased by the farmers themselves, so trying to make crop insurance sound like some government handout is very misleading.

Means testing could potentially disrupt the whole system because crop insurance, like other forms of insurance, relies on large pools of policy holders, who are all interconnected, meaning that less risky producers make policies more affordable for the riskier producers. In laymen¹s terms, that means that the well-financed, established farmers make policies more affordable for the less established, heavily-leveraged farmers or new farmers seeking to enter agriculture for the first time.

For those of you who don¹t farm, think of it this way. If a car insurance plan removed all of the most experienced and safest drivers from the pool of the insured, the cost for the remaining participants would increase because the low cost members were no longer there to balance out the high cost members. The same is true with crop insurance.

Without an adequate pool of insured participants, the whole system could collapse, making it much more difficult to secure insurance policies or to quickly collect indemnities when disaster strikes.

It’s important that this idea gets stopped in its tracks in the House Farm Bill, which will soon be written and then debated later this summer. An effective insurance program requires more acres in the program, not less. Means testing and arbitrary caps on crop insurance will reduce participation and hurt everyone in the system, including consumers.

The crop insurance system has helped American farmers survive the mishaps of Mother Nature last year, and it will do it again if it’s not undermined. Last year, farmers received nearly $11 billion in indemnities for the damages and losses they incurred over the course of the year. And hopefully, we can maintain crop insurance in its current form, because the current system works for both farmers and consumers.

 

Mike Pfantz is a crop insurance agent from Omaha, Nebraska. This op-ed appeared in the Lincoln Journal-Star on July 13, 2012.

 

Thankfully, There Are Ways to Deal With Droughts Like This

As a cotton farmer in West Texas, last year I felt that I had about as much of a chance of seeing a good soaking rain as I did of running into the Tooth Fairy when I stopped by my local dentist.

Unfortunately for the area farmers, much of the cotton in this part of Texas that was planted never even sprouted, leaving farmers hoping for a miracle but expecting the worst.  Luckily, for the vast majority of them, they had purchased a risk management tool that would serve as a backstop when a disaster like this strikes, ensuring that they would survive to farm yet another day.  That tool was crop insurance.

Crop insurance is the risk management tool preferred by most farmers across the country – about 80 percent of eligible U.S. lands are covered by a policy – because it combines the efficiency of the private sector with the universality of the public sector.

One of the most popular efficiencies of this public/private partnership afforded to those who purchase crop insurance policies is its speed of delivery when crops fail or markets crash.   Typically, when a farmer files a claim, the crop insurance company that holds that policy will have the indemnity to the farmer within thirty days of the finalization of the paperwork.  This is real money coming to the farmer in real time, allowing him to plant again or plan to plant the next year.

Government programs, on the other hand, while very well intentioned, just aren’t realistic, at least not from a business point of view.  For example, the SURE program, which many farmers depended on, is just now – in early 2012 –  providing benefits to farmers who suffered losses in 2009.  That’s just too long to wait for assistance if it’s really going to be helpful or effective.

Crop insurance, on the other hand, gets to the growers quickly, allowing them to bounce back from loss and prepare for the next season.  Many of the cotton farmers in Texas who lost nearly everything last summer, for example, had their indemnity payments in hand before Labor Day.  That makes a world of difference for somebody who has suddenly lost their livelihood and won’t be able to farm again if help doesn’t arrive soon.

Another reason why crop insurance has become the most preferred tool in almost every farmer’s risk management tool belt is because the individualized nature of each policy.  Instead of a big government plan allotting a specified amount of help based on an average amount of loss, crop insurance policies are tailored to the farmer, his or her tolerance for risk, and the strengths and weaknesses of their farm.

Each spring, a crop insurance agent meets with the individual farmer and together, they come up with a plan to manage that specific farm’s risk.  It’s not the federal government’s plan; nor is it the state’s plan or the county’s plan.

It’s the farmer’s plan.   And who would know better than the individual farmer about what their piece of land can handle, what kinds of stress it can tolerate, and how much loss they can withstand as an individual.

While farmers are charged with raising the food, feed and fiber to feed and clothe our great nation, the nation realizes that we are merely individuals who can easily be stomped on by an angry and unforgiving Mother Nature.  That’s why it’s in the nation’s best interest – as well as the best interest of farmers – to ensure that moving forward, a robust and effective crop insurance policy is part of any Farm Bill discussion.

I didn’t see the Tooth Fairy the last time I went to the dentist, but thankfully I have seen some rain.  Some, but not enough.  And according to most experts, this drought is supposed to continue.  But regardless, for those of us who farm for a living, with the purchase of a crop insurance policy, we have purchased our chance to farm yet another year to feed, clothe and fuel the nation we love.

Shawn L. Holladay, chairman of the American Cotton Producers Farm Policy Task Force, lives in Lubbock, Texas.

This op-ed appeared in the Amarillo Globe-News on March 23, 2012.

When Mother Nature Gives You A Jolt, Crop Insurance is There

By Quentin Bowen

Sitting on a combine for 12 hours a day harvesting corn and soybeans gives a person a certain degree of clarity combined with long blocks of time to think and analyze. Looking at the corn I’m harvesting, I marvel at the fact that somehow, my family farm managed to dodge the many bullets Mother Nature shot at farmers this year. I’m referring to massive droughts in the Southern plains, record flooding in the upper Midwest, wildfires in Texas, a devastating freeze in Florida, and hurricanes and tropical storms that are still on their way.

Unlike me, a lot of farmers in the U.S. were not so lucky. Thankfully, farmers are able to purchase crop insurance, a private-public partnership that is protecting about 80 percent of the eligible crops across the country. And one of the greatest features of crop insurance—and an aspect that has made it a hands-down favorite among farmers of all types—is the speed of delivery of payments, that puts funds quickly into the hands of farmers who have lost everything in a natural disaster. This is possible due to large investments by private companies that have built the infrastructure that makes this delivery possible.

Crop insurance is a critical component of my risk management tool kit, and one that most farmers like me rely on to face the unknown every year. Because I’m a young farmer getting started, should disaster strike and the crops are wiped out, we, like all other small businesses, are in need of capital.

That’s where the speed of delivery component of crop insurance comes in to play. The industry has dramatically invested to make the speed of delivery possible. So while any farmer who has found himself in need of help from the government is thankful when the payment finally arrives, the payment can take a year or two to get into the hands of the farmer. If I had to wait a year or two to recoup the loss of an entire crop from a natural disaster, I’d be in bankruptcy court when the check finally came.

The speed of delivery of crop insurance —because it’s administered by private sector companies—makes it a different kind of animal. In fact, if a natural disaster strikes and I’m covered by a crop insurance policy, typically the payment comes to me in one or two weeks, not in one or two years. Because of that speed of delivery, I can quickly recover from the loss and replant the field, garnering myself some needed income for the year and putting some food on the tables for consumers.

Crop insurance is a key part of my farming operation because my agent and I evaluate in detail, prior to planting, the optimal coverage for what I’m planting. Once I’ve made that evaluation, crop insurance becomes the underpinning for financing from the bank.

Contrast that with some of the other government safety net programs that are conceived in a university laboratory, planned by a government bureaucrat who has never seen a cornfield, and administered by somebody behind a desk whose only connection to corn is his breakfast cereal. Need I say more?

There is another feature of crop insurance that makes this a terrific risk management tool stand out: We as farmers have to write a significant personal check to secure a crop insurance policy; it’s not a handout. Could it be that this public-private collaboration, with the recipient – the farmers – having “skin in the game,” could be the shining example to the Federal Government of the best way to use tax dollars? I think so.

I’m the third generation of my family to farm this piece of land and I strongly believe that a stable, viable, privately delivered crop insurance program holds the key to my future. It provides me the opportunity to efficiently and profitably produce the safest and highest quality food in the world. It doesn’t keep Mother Nature from jolting me with a disaster, but it does give me some protection and piece of mind should my farm take a hit.

Quentin G. Bowen is a farmer who raises corn and soybeans and resides in Humboldt, Nebraska.

This op-ed appeared in the Lincoln Star-Journal on October 31, 2011.

The Lone Star State Is Unfortunately Exceptional

By Dee Vaughan

Texas is an exceptional state, and most Texans will be happy to explain why that’s so. Unfortunately, for this year, that term also applies to the bone-dry conditions that we’ve seen unfold over the last 12 months. Texas, it seems, is locked in what weather experts call “an exceptional drought,” something many parts of the state haven’t experienced since the dustbowl era.

Here in the Panhandle, it’s barely rained since October. And it’s been over 100 degrees for more days than most of us can count. I’ve heard there’s even a sign in Texas that says “Satan called, he wants his weather back.”

At times like this, with droughts here in Texas and historic flooding elsewhere, it’s not difficult to comprehend the inherent risks we face in agriculture. Luckily, Congress recognized long ago that in order to ensure a stable and safe food supply for the country, there needed to be farm policies in place to serve as a safeguard against damaging weather or wild market fluctuations.

Agriculture groups from throughout the state, representing banks, farm input providers, wheat, corn, cotton, rice and sorghum growers gathered in Lubbock recently to discuss the future of farm policies. The consensus of those of us in the room was that one of the most important of those policies — and the one that most farmers believe serves agriculture the best — is crop insurance.

Crop insurance is a great example of a public-private partnership that combines the strengths of both sectors and greatly amplifies the amount of good done by a modest government investment. For skeptics who thought that the flexibility and efficiency of the free market could never be combined with the universality and affordability of the public sector, this policy proves them wrong. In 2010, crop insurance was purchased for more than 80 percent of U.S. principal crop acreage, with 256 million acres under policies worth $80 billion in total coverage.

The government’s main role is to underwrite a portion of the individual premiums, making coverage more affordable and practical for farmers who greatly need tools to hedge their risks. The actual insurance policy agreement, however, is between the farmer and a private insurance company, ensuring that if disasters caused by Mother Nature or wildly fluctuating markets strikes, it is the private insurance company that is verifying the loss and paying the claim.

The program also contains the flexibility of private-sector solutions, because it allows farmers to tailor policies that fit their specific crops, location, and land conditions. This is a hands-on risk management tool tailored to the needs of the guardian of the land – the farmer – insured by private companies and delivered by private-sector agents.

But perhaps most importantly for those of us who farm, the crop insurance program has the efficiency and speed of the private sector when it comes to getting payments into the hands of those who have suffered economic loss. The crop insurance policy recognizes that farmers are often over-extended after planting and will be very short of cash in hand if a crisis hits until the harvest season comes.

We heard at the meeting this week from bankers that crop insurance not only hedges risk, but makes agriculture a more attractive investment for banks. In fact, banks love the crop insurance program, because it makes loans to farmers – a group who share a very high-risk occupation – much less risky. If it was not for the availability of crop insurance, many banks would be less inclined to offer farm loan programs, which could put many food and feed producers out of business.

One cotton grower in attendance noted that without the confidence crop insurance and other farm policies provide his lender, he would be unable to pursue his life’s dream: farming. And he’s glad those policies are in place right now. “This is a crop insurance year for Texas,” he told the group.

While it’s important for agriculture to shoulder its fair part of the pain, we need to recognize that it’s not only in farmer’s best interest, but in the best interest of consumers and the nation as a whole that farm policies remain adequately funded, and viable.

Hopefully, this exceptional drought will end exceptionally soon. If not, it’s good to know that most of us are covered by crop insurance and that food security programs will ensure that the harshness of nature that might steal our state’s harvest won’t also steal our farms.

Dee Vaughan is the current president of the Southwest Council of Agribusiness and the former president of the National Corn Growers Association. Vaughan farms corn, cotton, sorghum, soybeans, and wheat in the Texas Panhandle near Dumas, Texas.

This op-ed appeared in the Southwest Farm Press on August 29, 2011 and in the Lubbock Avalanche-Journal on September 11, 2011.

To listen to Vaughan’s interview discussing the need for crop insurance with the National Association of Farm Broadcasters, click here.