ICYMI: US farmers rely on crop insurance

By: Rex Williamson
Published in The Columbus Dispatch
July 26, 2017

My family has been in agriculture in northwest Ohio for generations. My great-grandfather, grandfather, and dad farmed. I followed in their footsteps.

It was a great blessing. We were taught to love and appreciate hard work, and we learned to work as a family.

I carried this same work ethic into my own business 30 years ago, when I decided to leave the family farm and go into crop insurance full time. Today, my son runs the company and I help him. My wife is still involved, as is my daughter. It is a true family business and is rewarding for all of us.

I know firsthand that families devote vast amounts of financial resources, time and energy to growing the food that feeds the world. I also know firsthand that farming is extremely risky. The 1980s provided periods of challenging weather and prolonged low commodity prices.

Back then, farmers had to go to Congress and ask for ad-hoc relief bills. Taxpayers had to cover the cost and it often took years for farmers to get relief. It wasn’t a fair system so Congress asked the private insurance sector to help solve the problem.

Thankfully, we now have modern crop insurance that eliminates much of the stress that comes from competing with Mother Nature and volatile markets. Revenue coverage allows a farmer to market grain well before harvest and take advantage of profitable sales opportunities that are often not available at or after harvest. Revenue coverage would have been a great blessing for Ohio farmers during the 1980s, when ongoing low commodity prices took a huge toll on grain farms.

In my insurance business, I help farmers purchase policies that are uniquely tailored to their operations. When disaster strikes, a private-sector claims adjuster verifies the loss just like any other insurance product. Farmers pay their premiums, shoulder their deductibles and get checks in weeks, not years.

It is important for policymakers to understand the part about farmers paying for coverage. This is not a handout. Farmers across the country have collectively spent $50 billion out of their own pockets in the past 17 years for coverage. They also absorb the first 25 percent, on average, of any loss before their coverage kicks in.

Congress is starting its debate on the new Farm Bill, which sets out rules for crop insurance.

Our policymakers often agree that coverage for natural disasters like wind, hail and drought are critical and appropriate. But the debate often focuses on whether revenue coverage is really needed. I can assure you this product has become a critical tool that is equally as important as the amazing technological advancements that have made our farms the most efficient and productive in the world.

I urge Congress to keep in place the system of crop insurance we have today and allow it to expand to meet new demands.

Crop Insurance Takes Center Stage at Senate Farm Bill Hearing

Crop insurance industry leaders testified this week before the U.S. Senate, touting the benefits of the program to our nation’s farmers and ranchers.

But they were far from the only ones promoting crop insurance in what was the Committee on Agriculture, Nutrition and Forestry’s largest Farm Bill hearing to date.

Committee Chairman Pat Roberts (R-KS), an architect of the modern crop insurance system, sang the program’s praises in his opening statement.

“When producers put seeds in the ground, they do not expect a hail storm to hit right as they are ready to harvest their crops,” said Roberts. “They would much rather reap the benefits of their hard work in the marketplace than receive an indemnity. The last Farm Bill made significant changes, and unlike previous policies, today’s commodity programs — like crop insurance — are triggered only when there is a loss.”

Michigan Senator Debbie Stabenow, the ranking Democrat on the Committee, explained some of the improvements to crop insurance she’s championed and noted her continued support.

“I have fought to expand and strengthen crop insurance for all farmers, from expanding coverage to specialty crop growers, organic producers, and beginning farmers, to providing a whole-farm option for diversified farms,” she explained.

Their efforts were lauded by the witnesses who appeared during three panels to describe their priorities for the next Farm Bill.

Bruce Rohwer, National Corn Growers Association board member, told the Committee that crop insurance has been critical to helping farmers survive sustained low commodity prices, and should be maintained.

“Without crop insurance and commodity title payments, the financial wherewithal of [family] farms would likely face serious erosion in the current environment,” Rohwer said.

Soybean farmer Kevin Scott said the American Soybean Association also strongly supported crop insurance and called on lawmakers to curb any attempts to put caps on the program, pointing to recent research that demonstrates such caps would reduce participation and have a significant impact on family farms.

Rohwer agreed, explaining, “A shrunken risk pool in insurance is not good for anybody. That would make crop insurance less effective, which would … make access to credit more difficult.”

David Schemm, president of the National Association of Wheat Growers, likewise stressed the importance of keeping the crop insurance program intact, highlighting the program’s low improper payment rates, which is about half that of the government average.

“The federal crop insurance program has been and continues to be farmers’ most important risk management tool. A farmer might go many years paying premiums for a policy and rarely get an indemnity,” Schemm said. “And they would much rather get a return from the market than become eligible for an indemnity.”

During the final panel of the hearing, Roger Johnson, president of the National Farmers Union (NFU), and Mark Haney, president of the Kentucky Farm Bureau Federation, weighed in and explained the importance of maintaining a strong safety net in today’s difficult economic climate.

“We continue to witness pressure in the countryside as commodity prices remain low and farmers and ranchers struggle to adjust,” Johnson said. “Given this scenario, NFU believes that the Farm Bill safety net should provide meaningful assistance in two fundamental circumstances: when disaster strikes and when prices are low and remain below the cost of production for extended periods of time. These two scenarios have separate solutions, the first is crop insurance and the second is commodity programs.”

To view this hearing, “Commodities, Credit, and Crop Insurance: Perspectives on Risk Management Tools and Trends for the 2018 Farm Bill,” click here.

Industry Leaders Tout Crop Insurance Benefits at Senate Hearing

Crop insurance industry leaders testified today before U.S. Senators, stressing the vital role crop insurance plays in providing risk management to farmers across the country.

Their testimony was part of the Senate on Agriculture, Nutrition and Forestry hearing, “Commodities, Credit, and Crop Insurance: Perspectives on Risk Management Tools and Trends for the 2018 Farm Bill.”

Ron Rutledge, president and CEO of Farmers Mutual Hail Insurance Company of Iowa, emphasized the breadth of the protection that is provided by crop insurance in his testimony, noting that protection is available on more than 100 different crops in all 50 states, including rapid growth among specialty crops.

Rutledge reminded the Committee that crop insurance policies must be purchased by farmers and only pay an indemnity when producers face a verifiable loss above and beyond their deductible. Yet, despite the critical role crop insurance plays in providing fiscally responsible protection to farmers, crop insurance will face attacks during the 2018 Farm Bill process.

“I would like to point out, however, that on average over the last five years, 54 percent of Farmers Mutual Hail’s customers paid premiums out of their own pockets and received zero indemnity payments…That’s how insurance is supposed to work,” Rutledge told lawmakers.

Rutledge called on the Committee to continue their support for the private-sector delivery of crop insurance and for affordable and effective crop insurance for producers of all sizes, crops and regions.

Specifically, he asked that Congress oppose efforts to harm crop insurance in the 2018 Farm Bill, including cuts to the private-sector delivery of crop insurance, reductions to premium discounts, and arbitrary means testing participation.

William Cole, chairman of Crop Insurance Professionals Association, also testified before the Committee, applauding the work of the Committee Chairman Pat Roberts (R-KS), who authored the Agricultural Risk Protection Act of 2000. Since then, participation in crop insurance has doubled and costly, un-budgeted disaster bills have become a thing of the past.

“The Chairman’s work is largely responsible for the success story of federal crop insurance, which today insures 90 percent of all U.S. planted acres, 290 million acres in all, with $100 billion in liability protection in force today. Thank you, Mr. Chairman, for all you have done for America’s farmers and ranchers by ensuring that they have access to something as basic as insurance, which most Americans simply take for granted,” Cole testified.

Cole noted that in addition to benefitting farmers and taxpayers, crop insurance has consistently come in under budget. Since the 2008 Farm Bill, crop insurance has yielded $17 billion in savings and is on target to save taxpayers another $6.7 billion over the next 10 years, he said.

Cole asked lawmakers to consider three key principles while debating the 2018 Farm Bill: that the current Farm Bill is below budget; that crop insurance is critical and gives taxpayers a big bang for the buck; and that farmers have a strong “Title 1,” or non-insurance components of the safety net, for times of depressed markets.

In addition to Rutledge and Cole’s oral testimonies, The Independent Insurance Agents & Brokers of America (IIABA or the Big “I”), the nation’s oldest and largest national trade association of independent insurance agents, provided a written statement to the Committee.

IIABA urged Congress not only to reject any attempts to cut or cap the budget for crop insurance, but to expand the role of the federal crop insurance program, and to continue its commitment to farmers and ranchers across the country.

Record Yields, Fewer Claims in 2016

Favorable growing conditions and record yields for corn and soybean marked 2016 along with fewer losses, according to a report in the latest edition of Crop Insurance Today magazine.

Only seven states – all of which are in the Northeast – had loss ratios greater than 1.0, noted “2016: The Year in Review” authors Mechel Paggi, Frank Schnapp and Laurence Crane of National Crop Insurance Services. (Note: any number above 1.0 means that insurance claims paid out exceeded premiums received for policies.)

“This reflects a welcome change from recent years where drought and other extreme weather events drove up indemnities to historic highs,” the authors noted.  “The year-over-year variability of the returns is a reminder of the risk assumed by crop insurance providers in delivering this essential safety net for American farmers.”

It’s also a reminder of the risks and unpredictability farmers shoulder every day, which is exactly why so many purchase crop insurance to protect their businesses.

And the authors noted that farmers had plenty of skin in the game in 2016, paying $3.5 billion from their own pockets to purchase 1.2 million policies.  Of those policies, 218,000 had claims to cover losses, a lower amount than past years.

While the overall conditions improved in 2016, weather was varied across the nation and produced damaging events.

Fall was a record warm season with worsening drought in the Southeast that resulted in wildfires. Hurricane Matthew, and tropical rainfall, brought record flooding to the Atlantic region.

The 15-page report details precipitation for each state by season, crop yields and production, commodity prices since 2000, and more. Some highlights:

  • 2016 saw the most acres of soybeans planted in U.S. history
  • Peanut production continued to trend up
  • Rice acres were up 22 percent from 2015
  • Cotton rebounded to 10.1 million acres

“Looking to the future, the American public is assured that crop insurance will be in place to provide financial stability for the many small, family farms that comprise the core of U.S. production agriculture,” the authors concluded. “Crop insurance will ensure that when the repeated disasters of recent years strike again, as they most assuredly will, U.S. farmers will be able to bounce back to produce again at high levels the food, feed, fiber and energy crops on which the U.S. and world population have come to expect and depend.”

Insurance Caps Would Have Consequences for All Farmers

Means testing measures like adjusted gross income (AGI) limits would have unintended consequences for all farmers and be detrimental to the long–term viability of crop insurance, warns Rodney Weinzierl, executive director of the Illinois Corn Growers Association, in a recent Agri-Pulse audio interview.

Read more

Ag Secretary, Lawmakers Discuss Crop Insurance

Secretary of Agriculture Sonny Perdue recognized crop insurance as an important part of the farm safety net and said the program is critical to the country’s food security during recent Senate testimony about the proposed United States Department of Agriculture (USDA) budget.

Committee members from both sides of the aisle also voiced support.

Sen. John Hoeven (R-ND) described crop insurance as “the number-one risk management tool for our producers,” adding, “particularly as we look at a drought year and low commodity prices, it is vitally important.”

Sen. Jon Tester (D-MT) meanwhile made it clear that farmers don’t make money off crop insurance and would rather plant a successful crop than receive an indemnity payment.

Tester’s comment was aimed at a recent controversial statement Secretary Perdue made in the Senator’s home state, when the Secretary implied some farmers may buy insurance hoping it will pay out on a lost crop. The Secretary has since asked that these remarks not be misinterpreted as no farmer hopes to lose a crop.

The numbers bear that out, proving that crop insurance helps farmers pick up the pieces after disaster, not profit. Over the past five years, the cumulative nationwide loss ratio has averaged 0.91 (any number below 1.0 means that insurance premiums paid were greater than what farmers received in indemnities).

In fact, one of the reasons that crop insurance is so popular on Capitol Hill is its structure that promotes accountability and reduces waste. Crop insurance requires all losses to be verified by a trained, independent third party, and farmers have “skin in the game” by paying premiums and shouldering a portion of losses.

Even in the aftermath of the historic 2012 drought, America’s farmers did not make money off crop insurance, but used it to survive losses and plant again the following year.  In fact, farmers paid more than $4 billion in premiums and shouldered approximately $13 billion in losses before their policies kicked in.

Furthermore, since crop insurance providers have dollars at risk on every policy, they are financially incentivized to eliminate wrongful claims.  That is why companies have invested millions in new technology and training and education efforts.

The efforts have paid off, with instances of improper crop insurance payments in 2016 at just 2.02%, down from 2.2% in 2015, according to the Office of Management and Budget.  This is significantly lower than the government-wide improper payment rates of 4.67% in 2016 and 4.39% in 2015.

As budget discussions continue—one thing is very clear. Crop insurance is an excellent taxpayer investment and is working to constantly improve.

Farm Leaders Take to Newspaper Opinion Pages to Defend Crop Insurance

In the days surrounding the release of a proposed White House budget that includes cuts to crop insurance, farm leaders are taking to newspaper opinion pages across the country to defend the successful program.

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Crop Insurers Comment on President’s Proposed Budget

The White House today released details of its FY2018 proposed budget, which included steep cuts to crop insurance and other farm policies.

The American Association of Crop Insurers, Crop Insurance and Reinsurance Bureau, Crop Insurance Professionals Association, Independent Insurance Agents and Brokers of America, National Association of Professional Insurance Agents, and National Crop Insurance Services released the following joint statement in response:

“Weakening crop insurance and making it more difficult for farmers to bounce back during tough times will jeopardize rural jobs and will find little support in rural America or on Capitol Hill. The rural economy is already suffering through a period of low prices and a multitude of spring weather disasters. Yet, the Administration’s budget proposal targets the primary tool farmers use to handle these risks.

“Lawmakers favor crop insurance because it reduces taxpayer risk exposure and has come in under budget since the 2014 Farm Bill was passed. Farmers are willing to help fund their own safety nets – collectively spending $50 billion out of their own pockets on crop insurance since 2000 – because they know private-sector efficiency will speed aid when it is needed most.

“Destructive cuts to crop insurance have been proposed by past Administrations and soundly rejected by Congressional leaders, who recognize the importance of maintaining a strong farm safety net. We fully expect that to be the case again this year, and we are hopeful to engage in meaningful dialogue about how to support America’s hardworking farmers and ranchers in difficult times like these.”

Michiganders Tout Crop Insurance at Second Senate Farm Bill Hearing

Participants at the U.S. Senate Committee on Agriculture, Nutrition & Forestry’s second Farm Bill field hearing stressed that with tough times hitting farm country in the form of catastrophic weather events and falling prices, farmers need a strong farm safety net more than ever.

The field hearing was held at Michigan State University, Ranking Member Debbie Stabenow’s (D-MI) alma mater and where the last Farm Bill was signed into law.

“Agriculture is the riskiest business there is. Nobody else has to depend on the weather report for their success, but farmers also have grit and determination and passion for what they do and for that we all should be very grateful,” said Stabenow.

Committee Chairman Pat Roberts (R-KS) discussed the widespread damage he saw firsthand in his home state following one of the largest prairie fires in history. He also noted the importance of a strong and efficient agriculture sector to feeding our growing world.

“Agriculture production will need to double in the future to meet the increased demand over the next couple decades,” Roberts said. “Accomplishing this task requires efficiency, not just on the farm or on the ranch, but most certainly in our United States government. … It takes the government providing an adequate safety net and then getting out of producers’ way.”

The first panel of the hearing included testimony from producers across Michigan, who also stressed the importance of crop insurance as a key component of this safety net.

Chris Alpers of Redpath Orchards discussed the importance of crop insurance to his apple crop and the apple industry as a whole.

“No crop insurance program will make a grower devastated by a natural disaster financially ‘whole’ but it will allow them to survive a devastating loss and continue to support the economic engine of rural America,” Alpers told the Committee.

Alpers noted that crop insurance enables producers to invest back into their own business, creating good jobs in their local communities. Modern apple plantings cost upwards of $40,000 an acre before a single apple is harvested several years later. This enormous startup cost unfortunately scares many talented young entrepreneurs and lending institutions away from investing in apple production.

“I am thankful many producers (and lenders) recognize crop insurance as an important risk management tool. Without the ability to purchase a solid insurance policy and limit my exposure I would not be able to justify investing my future into the apple business,” he testified.

Rick Gerstenberger of Gerstenberger Farms, Inc., and Chairman of the Board of Michigan Sugar Company, said crop insurance is an essential risk management tool for beet growers as well.

“With a higher investment in growing sugarbeets than most other commodities, agricultural lenders are evaluating their lending risk and basing their loan approvals on the availability of an adequate safety net, which most crop insurance coverage provides,” Gerstenberger told the Committee.

Andy Snider, whose family farm raises turkeys, hogs, corn and soybeans, called on Congress to ensure adequate funding for all risk management programs and tools.

“Programs like crop insurance, livestock gross margin insurance, and FSA guarantees, are essential to maintain a stable and secure food system. Overall, net farm income was down nearly 50 percent from 2013 to 2016, and if net farm income continues to fall, the risk management programs may be the only remaining safeguard,” Snider said.

A press conference followed the hearing, during which Chairman Roberts also addressed the issue of protecting crop insurance.

“We are not going to see dramatic cuts in crop insurance,” Roberts said. “We’re just not.”

That’s good for farmers around the country and in Roberts’ home state, where a recent blizzard destroyed much of the wheat crop.

For more information on the hearing, click here.

Agriculture Remains a Great Return on Investment

Tax season is finally over, and naturally many of us are thinking about how our checks to Uncle Sam will be spent in the upcoming year. Here’s a hint: Not very much will be going to the farm.

In fact, for every $100 spent by the Federal government, less than 25 cents actually goes to underpin the country’s food and fiber system. That’s a tremendous return on investment, according to Dr. Mechel “Mickey” Paggi, an economist with National Crop Insurance Services.

“Everybody in America eats and I think we probably have the best deal out there in terms of our food,” said Paggi in a recent interview with the National Association of Farm Broadcasters.

He noted that overall spending on farm policy is about one quarter of one percent of the federal budget. And as America’s farm policies have evolved, taxpayers are saving more and more thanks, in part, to crop insurance’s unique cost-sharing structure, Paggi explained.

“Taxpayers benefit because farmers are active participants in (crop insurance). They have skin on the game. … Farmers have to pay a premium to get protection,” he said.

All told, farmers have spent nearly $50 billion out of their own pockets since 2000. Farmers also must shoulder at least 25% of any loss before they get an indemnity.

In addition, private sector crop insurers pay indemnities from their own coffers on most claims, thus minimizing taxpayer cost.

“It’s a far cry from the old days of the ad hoc disaster bills, where taxpayers were on the hook for 100% of the payout,” Paggi told farm radio listeners.

Since the 2014 Farm Bill took hold, crop insurance has come in more than $3 billion under budget.

“There’s no secret as to why we hear leaders in both the industry and in Congress saying that we need to keep a positive attitude and a strong crop insurance program going into the next Farm Bill,” Paggi concluded.

NCIS President Stresses Importance of Crop Insurance At Farm Bill Summit

Tom Zacharias, president of National Crop Insurance Services (NCIS), was among the speakers invited to address this week’s Farm Bill Summit in Washington, D.C. The well-attended event, organized by Agri-Pulse, included a diverse cross-section of agriculture stakeholders.

Read more

Crop Insurance Has America Covered

Don’t think crop insurance affects you? Check out this coverage map. The green areas represent counties where crops are covered by crop insurance.


(Click for a PDF version.)

About 90% of U.S. farmland is insured, providing $100 billion in protection to more than 125 different kinds of crops in all 50 states.

To see how crop insurance covers your state, just click here.

Hearing from the Heartland

The Farm Bill debate is officially underway—and crop insurance took center stage at the first Senate Agriculture Committee field hearing, held last week at Kansas State University.

Read more

Farm Credit Services Report Touts Crop Insurance

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

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

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

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

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

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

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

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

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

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

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

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

An Introduction to Crop Insurance

Welcome to “What’s Cropping Up.” If you’re reading us for the first time, chances are good that you’re either a new Congressional staffer or a reporter that’s joining the ag policy beat.

As such, we wanted to start with some of the basics. Of course, if you’re chomping at the bit to graduate from Crop Insurance 101, please checkout www.CropInsuranceInAmerica.org — the go-to source for crop insurance stats and information.

Crop insurance, simply put, protects the livelihoods of the farmers who grow the food we eat, the clothes we wear, and the fuel that moves us.

Farming is no easy task. It is one of the riskiest enterprises in the world, defined by uncontrollable conditions that are unlike any other profession. Bad weather, blight, insects, natural disasters, price fluctuations, and global subsidization all make it hard to make a living as a farmer.

That’s where crop insurance comes in. It’s basically no different than auto insurance or homeowner’s insurance. Banks require farmers to purchase it, just as they require insurance from homebuyers.

But because of the risks unique to agriculture, it can be cost prohibitive. Without a strong infrastructure and investment, crop insurance would be too costly for most farmers to afford or for most private-sector insurance companies to widely provide.

That’s where government steps in, acting as a middleman that encourages participation and ensures adequate coverage.

Without this middleman, crop insurance would flounder and work for just a few. And the responsibility of funding U.S. farm policy would again fall completely on taxpayers’ shoulders rather than the current cost-share system that is partially financed by farmers and insurers.

Crop insurance been around since the 1930s when the Great Depression and the Dust Bowl decimated family farms. And over the years, it’s been modernized to enable farmers to tailor individual protection for their own unique farms.

Today, it has supplanted costly, unbudgeted ad hoc disaster legislation and direct payments as the centerpiece of America’s farm policy. Here’s how it works:

  • Thanks to government investment, farmers receive a discount on coverage.
  • Private-sector agents help farmers pick the coverage that is just right for them, using historical farm data and other personalized information.
  • Farmers then spend between $3.5 billion and $4 billion a year to purchase crop insurance sold through private companies.
  • These companies service the policies and work closely with the U.S. Department of Agriculture, which acts as a reinsurer, oversees the system, and covers part of companies’ operating costs for administering it.
  • When disaster strikes, a claim is filed. A private-sector adjuster investigates, verifies the loss and an indemnity check is sent.
  • These checks usually arrive within 30 days to help the farmer rebuild – in sharp contrast to the months or years it took old-style disaster aid to show up.

Crop insurance is extremely popular, covering roughly 90 percent of farmland, or nearly 300 million acres. More than 1.2 million policies are sold nationwide, offering some $100 billion in liability protection.

Corn, cotton, soybeans, and wheat account for the largest percentage of U.S. farm acreage and crop insurance coverage. But, investments in designing new products means there’s now protection available for more than 120 crops.

What will tomorrow bring?

Those discussions will soon begin. When they do, it will be important to remember that crop insurance has proven to be a popular, efficient, lowest-cost safety net that underpins a secure domestic food, fiber, fuel and feed supply.

Insurance Basics: Skin in the Game

Crop insurance is arguably the first farm policy in history that is largely financed by the farmers who benefit from it.

Unlike policies of the past, which were 100 percent backed by taxpayers, modern-day farm policy requires growers to take an active role in its funding – a concept sometimes called “skin in the game.”

The concept may be new to farm policy, but it’s not new to insurance. From the earliest shipping insurance at Lloyds of London in the late 1600s to the modern auto policy acquired via a smartphone app, the principal is the same.

A customer pays a premium to an insurance company based on the value of property, and predicted risks, to insure its worth. If the property is damaged, the customer absorbs a portion of the loss, called a deductible, and the insurance company covers the remainder through an indemnity payment.

The deductible acts as a deterrent to risky behavior and keeps the insurance policy intact for true disasters. Meanwhile, premium dollars help customers pool resources to more cheaply buy protection and fund the system that provides peace of mind.

The larger the pool of customers, the more risk can be spread, and the cheaper coverage becomes for all.

The same applies to crop insurance, which is why it would be a bad idea to arbitrarily exclude some farmers from participation.

Since crop insurance’s rise to prominence, famers collectively pay between $3.5 billion and $4 billion a year out of their own pockets in premiums. And they absorb hefty deductibles (on average, 25 percent of loss) when disaster strikes.

Famers love the set-up because it offers some predictability for marketing and for borrowing capital, and because it gives them the opportunity to tailor protection to their farms’ unique needs. Taxpayers reap the benefits, too.

Crop insurance means farmers aren’t running to Congress for one-time disaster relief bills every time drought ruins a corn crop in Iowa or frost kills apple trees in New York.

No wonder so many are singing crop insurance’s praises and calling it their “top priority” as we head into the next Farm Bill debate.

Sen. Grassley Sets Stage for New Farm Bill, Calls Crop Insurance His Top Priority

220px-sen_chuck_grassley_officialIowa Republican Senator Chuck Grassley says his top Farm Bill priority in the 115th Congress is to preserve a vigorous crop insurance program, noting there is no safety net more valuable to farmers and taxpayers.

“It not only saves the taxpayers money, because obviously if we didn’t have crop insurance and you had disasters in agriculture, the taxpayers would be 100 percent of it,” Sen. Grassley, a member of the Senate Agriculture Committee, noted in a press conference last week. “In addition to saving the taxpayers money, we also are encouraging farmers to plan ahead and to manage risk…95 percent of the farmers in Iowa do that.”

This is not the first time that Sen. Grassley has taken to the airwaves to tout crop insurance’s importance. In September, he was outspoken in an Iowa Agribusiness Radio Network interview about the importance of crop insurance as eastern Iowa began rebuilding in the wake of severe flooding.

And just two months later, he joined Committee Chairman Pat Roberts (R-Kan.) in an interview with KIOW News and, again, emphasized that the policy works well for both farmers and taxpayers.

Grassley added in his recent press conference that Farm Bill discussions are set to begin soon with hearings in the Agriculture Committee

Thank You, Chuck Conner!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ICYMI: Maine farmers know crop diversity is key to success. Our farm policies should reflect that

Bangor Daily News
December 13, 2016

“Diversify, diversify, diversify.” This is the mantra of most financial advisors—a popular approach to protect investors in the face of volatile market swings.

The same strategy also has served agriculture—another unpredictable market-quite well.

Here in Maine, we have established one of the most diverse agriculture “portfolios” in the nation. Growing everything from potatoes to apples and plenty of things in between, our farmers contribute more than $825 million to our state’s economy every year.

It’s exciting to see the potential that this diversified approach holds for the future of farming.

But those in agriculture face challenges that are simply incomparable to other industries. Farmers certainly can’t control the weather, which is often unforgiving, and they also have no sway over markets or the moves of foreign competitors. So it is essential that we have a safety net that protects the small percentage of individuals we enlist to feed and clothe our nation.

Unfortunately, the kind of crop diversification in Maine has not always been reflected in farm policy discussions. Farm policies of the past often focused primarily on a few crops commonly grown in the South and Midwest, while leaving others, such as specialty crops like blueberries, for example, with little support.

That’s no longer the case thanks to improvements to crop insurance. Now, crop insurance is available for more than 130 commodities and has more than 62,000 county-crop programs. Premium support discounts are the same across commodities for each plan of insurance.

This has translated into more farmers from outside the traditional farm country purchasing risk protection. Here in Maine, for example, there has been a more than 20 percent increase in acres insured over the past decade, providing the state’s farmers nearly $30 million in additional protection, according to U.S. Department of Agriculture data. Overall, almost 90 percent of farm acres in the U.S. are covered by crop insurance.

For many farmers, crop insurance offers peace of mind. A crop insurance check will never come close to what a farmer will reap from a good harvest, but it does help them keep farming year after year. And for our beginning farmers, crop insurance is even more critical. It would be almost impossible to receive the needed credit from financial institutions without some assurance that beginning farmers would be able to pay it back if a natural disaster struck.

Taxpayers have benefited as well. Prior to the emergence of crop insurance as the top risk management tool for farmers, natural disasters regularly resulted in very expensive, unbudgeted ad hoc disaster bills from Congress. Now, when disaster strikes, farmers receive an indemnity check.

But just to be clear, crop insurance is not a handout—it’s far from it. To gain coverage, farmers have to put skin in the game. In fact, since 2000, farmers have spent $48 billion out of their own pockets to purchase crop insurance protection. They only collect an indemnity after they have suffered a verifiable loss and fallen below their guarantee.

It’s a win-win for both farmers and taxpayers, yet some farm policy critics would like to send us back to the days of unbudgeted, taxpayer-funded and after-the-fact disaster aid. Legislative proposals like those presented during the last Farm Bill negotiations to limit participation and cap insurance benefits to some farmers would disproportionately affect specialty crop growers and organic farmers whose crops tend to have higher values and therefore are more likely to have higher premiums for coverage. That’s a really bad idea, especially when you consider how important crop insurance is to allowing our producers to stay competitive with the rest of the world.

Crop insurance treats all farmers equally, regardless of operation, size, region, or crop. For Maine farmers, in particular, it is crucial that we protect this safety net that does not discriminate.

E.J. Dorsey is a crop insurance agent with United Insurance in Fort Fairfield. He has more than 22 years experience in the crop insurance field.

Insurance Basics: Delivery Costs

Whenever a customer writes a premium check for an auto or home insurance product, part of that payment is allocated to servicing the policy.

That is, insurance companies include an expense load in the premium for each policy beyond anticipated losses to offset overhead costs, such as staff salaries, agent commissions, adjusting losses, employee training, computer systems, customer support, office space, marketing, etc. The expense piece also includes a profit component for the insurer.

Unlike other types of insurance, crop insurance policies are not loaded for expenses. Why? Because Congress wanted to make crop insurance policies more affordable so farmers would purchase protection with their own money and leave taxpayers less vulnerable to agricultural risk and ad hoc disaster payments.

Prior to crop insurance’s rise to prominence, Congress was routinely called upon to pass expensive, unbudgeted disaster legislation after extreme weather struck. In fact, from 1989 to 2012, 42 emergency agricultural bills cost taxpayers $70 billion, according to the Congressional Research Service – none of which was funded by farmers.

Congress’ plan to promote private-sector delivered crop insurance as a popular alternative worked. Today, farmers collectively spend almost $4 billion out of their own pockets annually to purchase 1.2 million policies, which cover 290 million acres – or 90 percent of America’s planted cropland.

Of course, private-sector insurance companies cannot afford to deliver and service 1.2 million policies for free. So, the government pays part of the delivery costs to insurance companies on farmers’ behalf.

This is known as an Administrative and Operating (A&O) payment. Unfortunately for crop insurers, A&O payments do not cover all of the costs they incur, which continue to climb as more and more Federal requirements and paperwork are piled on insurance providers.

In fact, A&O payments have fallen short of actual company delivery expenses, with an average shortfall of 6.4 percent from 1998 to 2014. The shortfall in 2014 alone totaled $782 million.

To offset such losses, providers of typical property and casualty insurance lines would simply increase expense loads in the premiums they set. But, crop insurers don’t set premiums – the Federal government does, and those premium rates have been on the decline.

This has made for a challenging business climate in recent years, where some insurance providers have exited the crop insurance business altogether or consolidated their operations. To stop this negative trend, it will be important to ensure that crop insurance remains affordable, widely available, and economically viable.

ICYMI: Crop Insurance: What a difference four decades make

Agri-Pulse

November 4, 2016

For nearly four decades I have worked with Connecticut River Valley farmers to help protect their livelihoods. Over that time, I’ve seen many changes, both in the make-up of farms and the tools farm families have to manage uncontrollable risk.

As our population has grown, the amount of available farmland has gotten smaller. This means our farmers have had to adapt to survive. More and more local farmers today also work jobs off the farm to help support themselves, meaning we have more part-time farms. We’ve also seen an increase in diversified farms here. Many of our dairy farmers, for example, are growing their own crops for feed to help improve their bottom lines.

Our farmers—those with a passion for the land often stretching back generations—have proven to be amazing innovators in the face of challenges. But even for the best agricultural innovators, there is one thing that always remains out of their control: Mother Nature.

Here in the Connecticut River Valley, we know this all too well. We’ve seen spring seasons that have been too dry or too wet for planting. We’ve seen hailstorms come through the Upper Valley like tornadoes, bringing destruction to one area, while miraculously sparing another area just a few miles down the road. We’ve even seen hurricanes, like Irene in 2011, and blizzards in recent years.

Thankfully, as a crop insurance agent, I have also witnessed positive changes to the crop insurance system, enabling many of our farmers to protect their operations against circumstances beyond their control.

During the 1980s, which marked the beginning of the public-private partnership between the U.S. government and private insurance companies, I was among the first crop insurance agents in the region. And the program experienced plenty of growing pains.

Participation was lacking due to high costs, spotty service and slim margins. Congress was spending considerably more each year cleaning up messes after disaster struck than beforehand on protection. Lawmakers also paid far more attention to traditional Midwest crops than those specialty products more prevalent in New England.

Even as late as the early 1990s, crop insurance participation rates nationwide hovered in the 30 percent range.

Things began to change in the mid 1990s, with the passage of the Federal Crop Insurance Reform Act of 1994, which dramatically restructured the program by strengthening the partnership between the federal government and private insurers. Through premium discounts we also started to see increased participation.

Then in May 2000, Congress approved another important piece of legislation: the Agricultural Risk Protection Act (ARPA). The provisions of ARPA made it easier for farmers to access different types of insurance products including revenue insurance and protection based on their own historical yields.

All of this has resulted in more crop insurance participants than ever before, but there was still work to be done. The Farm Bill of 2014 made crop insurance a cornerstone of U.S. farm policy and took steps to make it more affordable and available to specialty crop growers, organic producers and young farmers.

Today, crop insurance protects more than 90 percent of planted acres nationally. And it’s so popular that farmers are willing to collectively contribute about $4 billion a year from their own pockets to purchase protection and help remove some degree of risk from a very volatile business. That cost-sharing structure makes it a good investment for taxpayers as well, replacing expensive disaster bills of the past, while ensuring a safe and plentiful food supply.

No, a crop insurance check will never come close to what a farmer can get from a good harvest. Like homeowner’s insurance, farmers don’t collect a dime without a verifiable loss and paying a deductible. But crop insurance does offer farmers some peace of mind, which allows them to focus on producing higher-yielding, better-quality crops.

Connecticut River Valley farmers are inventive and hardworking businessmen and women and it has been an honor to work with them for the past 40 years. Given their ingenuity, and the important safety net crop insurance provides, the next 40 years should be exciting to watch.

Randy Odell is a Vermont crop insurance agent who has been in the industry for four decades.

Sens. Grassley and Roberts: Crop Insurance is the #1 Issue for Farmers

With discussions around the next Farm Bill right around the corner, Senators Chuck Grassley (R-Iowa), and Pat Roberts (R-Kan.) are passionately touting crop insurance as an essential risk management tool.

The two Senators recently addressed the issue in an interview with KIOW News Director A. J. Taylor.

“This is the Number One issue that farmers talk to (Sen. Grassley) and to myself about…all throughout farm country…all of us know…we have to protect crop insurance—it’s the Number One tool in the risk management toolbox that farmers must have,” said Sen. Roberts. “It’s a great program and it’s terribly important.”

Sen. Grassley, who has been outspoken about the importance of crop insurance to eastern Iowa in the wake of severe flooding, noted that with crop insurance, which is partially funded by farmers and delivered by the private sector, works for both farmers and taxpayers.

“If you have a hurricane, a flood, tornadoes—all the natural disasters you can have—when the federal government comes in…it’s 100% paid by taxpayers.  But with crop insurance, the farmers are paying into it, and you are buying ahead and you are trying to manage your risk,” said Sen. Grassley. “It’s such a smarter way to do it than going back to the old [ad hoc disaster] system.”

To listen to the interview in its entirety, click here.

Eliminating Farm Policy Punishes America and Rewards Foreign Competitors

 

The news has been full of foreign subsidy stories lately – whether it’s the trade case America filed against China for excessive corn, wheat and rice subsidies, complaints about Thailand’s sugar subsidy scheme, or the WTO reporting growth in trade restrictions around the globe.

It is under this backdrop that some of U.S. agriculture’s fiercest critics have begun lobbying for the complete elimination of America’s crop insurance system, which was made the centerpiece of U.S. farm policy during the 2014 Farm Bill.  In other words, getting rid of America’s farm safety net at a time when our foreign competitors are expanding their subsidies.

So what would such a scenario look like if it were to come to fruition?

Art Barnaby, an economist with Kansas State University, and Levi Russell, an economist with the University of Georgia, provided a pretty good snapshot in a peer-reviewed paper that they recently wrote for Choices Magazine.

Among their findings:

  • Land values would fall.
  • America would have fewer farmers as consolidation would be inevitable.
  • Beginning and young farmers would suffer the most due to limited equity.
  • America would be less competitive on a global scale as foreign nations would continue to subsidize and erect barriers to U.S. farm goods.
  • Regulatory burdens on U.S. producers, such as EPA regulations, would disadvantage American producers even more.

As for the critics’ hypothesis that a new private-market insurance system would be there to pick up the slack, the authors warn:

It’s unlikely that a free market crop insurance industry would form unless all government subsidies were eliminated. Few farmers would be willing to pay the higher premiums required by a fully-private market as long as the USDA infrastructure is in place for some future Congress to provide ad hoc disaster aid or other cash transfers to farmers. Congress would need to close all forms of support including commodity program payments, disaster payments, and conservation payments. If not, producers would be reluctant to pay unsubsidized premiums for fully-private insurance and would instead push for the reinstatement of disaster payments using the existing infrastructure.

Put another way: Be careful what you wish for.

Eliminating U.S. farm policy in isolation would have devastating consequences for the rural economy and America’s efficient agricultural sector, while rewarding bad actors on the global stage who are eager to seize U.S. market share with the aid of subsidies.

ICYMI: This much is certain: For farmers, crop insurance is essential

There are a number of certainties in life. I know, for example, that every morning on my farm, the sun will rise in the east, and that every evening it will dip beneath the west horizon. And we know Iowa summers will be warm, the winters will be harsh and when the soil has thawed, spring growth will begin anew.

But a life of farming is also full of uncertainties. We can’t control the markets, nor the role Mother Nature will play in bringing our crops to harvest. Let me tell you, farmers are always in a constant negotiation with Mother Nature. Some years, Mother Nature is a farmer’s best friend. In other years, it can be our worst enemy. And in those years, there is no substitute for the risk protection that crop insurance provides.

Crop insurance allows farmers to pay a premium to alleviate some degree some of the uncertainties involved in farming. A crop insurance check will never come close to what a farmer can get from a bountiful harvest, but it does provide some peace of mind.

I’ve been farming for almost four decades and have witnessed firsthand the difference crop insurance can make. In fact, in 1977, my first year full-time farming, we suffered a major drought that resulted in a pitiful 28-bushel corn yield. Crop insurance and other assistance is what kept me going after that first disastrous year.

As president of the Iowa Farm Bureau for the past five years, and a member for many years prior to that, I also have also had the opportunity learn why crop insurance works. It succeeds, in no small part, because of its diverse participation. By spreading the chance of loss among a wide and varied group of insured farmers, premiums become less expensive for everyone. It’s a concept known as a “risk pool” and it is what makes things like auto insurance and homeowners insurance work, too. None of these programs would work if only a few folks participated.

But it hasn’t always been this way. Farm leaders across the country have worked with legislators effectively in recent years to strengthen crop insurance by expanding the size of the “risk pool” through encouraging and incentivizing increased participation. If you need evidence that this approached worked, just look at the numbers.

Today, almost 90 percent of farm acres in the U.S. are covered by crop insurance. It has become the primary safety net for today’s farmer.  Because of this, it has also become one of the biggest targets for anti-farm policy critics.

Crop insurance’s detractors — many whom have never negotiated with Mother Nature — often weave a tale about farmers resting on our laurels and laughing all the way to the bank. But that’s all it is: a tall tale. These critics are especially prone to calling out a policy known as revenue protection, which shields farmers in periods of extreme market volatility. But crop insurance, no matter what type, is far from a handout. And having revenue protection doesn’t necessarily equal an indemnity payment, even in years with low crop prices. In 2015, for example, of total indemnities paid to growers, including revenue protection as well as coverage from weather events, only 3 percent were the result of low prices.

The safety net that crop insurance provides is essential and is more important now than ever before. Not only does the average American farm feed about 168 people worldwide, but one in five Iowans go to work because of agriculture. But our farm economy has seen better days, with farm income projected to decrease again.

Farming is a tough job and perils are many, especially in today’s environment. Crop insurance provides a measure of stability and is an investment in both today’s farm economy and our future.

Without it, we’d have a whole lot less American farmers growing affordable food for America and the world. That much is certain.

Craig Hill of Milo is the president of the Iowa Farm Bureau Federation. His family grows corn and soybeans and raises livestock.

Senator Grassley Touts Crop Insurance Amid Recent Flooding

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Farmer’s Daughter USA: Crop Insurance Vital to Keeping Family Farm Afloat This Year

In a blog post appearing in Ag Daily, Farmer’s Daughter USA founder Amanda Zaluckyj shines light on the critical role crop insurance has played in keeping her family’s southwest Michigan farm afloat in 2016— one of those years where “everything just seems to go wrong.”

Zaluckyj says the problems on her family’s farm started early on, with a wet spring and flooding that delayed planting. Then, when the growing season got underway, her family found themselves facing the opposite problem—bone-dry fields.

Because of the adverse weather conditions, their corn yields have taken a huge hit. While many folks are posting their impressive harvest pics to social media, there will be no proud pics from the Zaluckyj farm this year, nor a bumper crop.

“But thanks to crop insurance, one bad season doesn’t (necessarily) mean our farm is going to go under,” Zaluckyj writes.

Zaluckyj praises crop insurance as effective because of its unique mix of government and private enterprise and proper oversight, as well as wide availability and required conservation practices.

Zaluckyj notes that the success of the crop insurance program was recognized during passage of the 2014 Farm Bill.

“While other farm support programs, such as direct payments, were completely eliminated or reduced, the crop insurance program was expanded. The 2014 changes included providing new options for farmers that face prolonged years of drought or other severe weather conditions,” she writes.

Crop insurance is essential to farming, Zaluckyj says, because unlike other businesses, these are more than market principles at work.

“Crop insurance will in no way be the same as having a good year with favorable weather conditions and high corn yields. But it will keep our family farm afloat. It means that (most of) the bills will get paid, we will still have a roof over our heads, and our family will survive to farm another year. To me, supporting, protecting, and preserving family farms is the mark of a good program,” Zaluckyj concludes.

To view Zaluckyj’s blog post in its entirety, click here.

Amanda Zaluckyj is a Michigan farmer’s daughter and a practicing attorney. She is founder of The Farmer’s Daughter USA blog, which aims help consumers better understand where our food comes from.

What They are Saying About Crop Insurance

With 297 million acres of farmland covered by crop insurance, this risk management tool has become an integral part of the farm safety net for American producers. Policies are available for more than 120 crops for farmers of all operation sizes in all states. This is a fact that farmers, policymakers, lenders, and other agricultural leaders all recognize and appreciate. Below is a look at what people are saying about crop insurance and its importance in maintaining strong agricultural production in this country.

“One of the least understood points about crop insurance is that it’s not just for farmers. That’s how we as farmers talk about it, that it’s a way to keep us in business when we suffer a catastrophic loss. That it’s a way to protect our yearly investment when things go wrong. That is all true, of course, but we don’t explain that it is also insurance for every consumer.” – Zach Hunnicutt, Nebraska farmer

“The important message we can talk about is, keep crop insurance whole. It is worth the investment of the federal government in helping farmers manage the risk.” – Todd Van Hoose, CEO & President, Farm Credit Council

“The truth is that crop insurance is a highly successful public-private partnership between the federal government and private insurance companies. It functions as a risk management tool for farmers to mitigate the numerous risks – financial, meteorological or the like – that they take to produce the finest food and fiber in the world.” – Rep. Jim Costa (CA-16)

“The program keeps family farms in the family, even after a bad year, and provides a safety net that allows beginning farmers to pursue their dream of farming…. Federal crop insurance has become an essential part of the farm safety net due to its ability to provide dependable protection and grow with the needs of farmers and ranchers.” – Brandon Willis, Risk Management Agency Administrator

“Crop insurance and farm policy enables everyone – from the farmer to the banker to the taxpayer – to plan for those disasters and overcome them when they happen. If lawmakers continue to try and chip away at this safety net, farmers will not have the ability to survive. This is especially true for young, beginning farmers that have less access to credit and capital.” – Larry Kummer, Indiana farmer

“As farmers, we have no control over weather. We have no control over markets. We have no control over our foreign competitors. We cannot just turn our operations on or off. We have to take care of the land 365 days a year. We need a safety net when commodity prices fall. We need affordable and reliable crop insurance to protect our yearly investments.” – Jeremy Brown, Texas farmer

“We still have land and equipment payments to make regardless of whether we have a good or bad growing season, or whether a natural disaster wipes out our crops altogether. Crop insurance is something we purchase each year to manage this risk and we only receive an indemnity when we suffer a verifiable loss. Even then, it doesn’t make us whole, but it does soften the blow from a bad year.” – Lorraine Greco, California farmer

“This is why having a sufficient farm safety net — with crop insurance as the cornerstone — is more critical than ever. Crop insurance provides protection against the one thing that even the most resilient farmer cannot defeat — the wrath of Mother Nature.” – Scott VanderWal, Vice President of the American Farm Bureau Federation

Insurance Basics: Coverage Availability

Suppose that you have a fire in your home, or you total your car and have to file a major claim with your insurance provider.

On one hand, you’re thrilled that an indemnity is on its way to help pick up the pieces.  On the other, you’re dreading future increases in premiums and the likelihood of receiving a notice that your insurance company decided against renewing your coverage.

In the insurance world, you now pose a higher risk because of your history, which means higher rates and even the denial of coverage.

This treatment can also extend to people who have never had to file a claim.  For example, coverage may be hard to come by if you just bought a home in an area prone to disasters, or if you are a very young or very old driver.

Insurance companies have the right to do business with anyone they chose, and like any smart business, they choose to work with the people who pose the lowest risk.  This ability to pick their customers may explain why providers of everyday property and casualty (P&C) insurance have only lost money once over the past 50 years – in 2001, the year of the 9/11 attacks.

Crop insurance is different.

Under the crop insurance system that has become the centerpiece of America’s farm policy, private-sector insurance providers must offer insurance to growers who are eligible for coverage and want it.  They cannot choose to simply do business with well-established farmers from states that have fewer droughts or are less likely to have violent storms.

For the safety net to be truly effective – and to ensure that taxpayers aren’t left footing the whole bill after disaster strikes – farmers who are statistically more likely to suffer loss must receive high-quality protection, too.

By not excluding farms, the policies carry more risk.  In contrast to the profitability of other lines of insurance, crop insurers lost money in 2012, 2002, 1993, 1988, 1984 and 1983.

Additionally, crop insurers don’t have control over premium setting.  A farmers’ rates are calculated by the government and, unlike lines of P&C coverage, prices will not fluctuate between insurance providers.

In other words, crop insurers compete on customer service, not price.  Conversely, recouping loss from a bad year isn’t as easy as simply raising premiums as is the case with other insurance products.

In return for private companies shouldering more risk and having less control over premium setting, the government serves as a reinsurer on some policies.  As such, the government shares in the losses in bad years, and the gains in years where fewer indemnities are paid out.

It’s a system that has married the best of the private sector with the best of the public sector, and the result has been the most effective, popular farm safety net in the history of agriculture.

Praise in High Places for Crop Insurance

From South Dakota to Washington, D.C., crop insurance received praise in high places for its ability to help farmers and ranchers withstand the perils of growing food and fiber.

“Crop insurance provides protection against the one thing that even the most resilient farmer cannot defeat – the wrath of Mother Nature,” wrote Scott VanderWal, the president of the South Dakota Farm Bureau and the vice president of the American Farm Bureau Federation, in an editorial published this week in the Argus Leader.

Highlighting the importance of agriculture to both the nation’s economy and to South Dakota, VanderWal makes the case that crop insurance plays a vital role in ensuring a secure and affordable food supply by providing a safety net when the farm economy is hurting.

“It’s essential that we preserve S.D.’s farm economy, not just for our economic well-being, but for all Americans,” he explains.

Meanwhile, in another part of the country, Ken Ackerman, the former manager of the USDA’s Federal Crop Insurance Corporation, along with his partner at Washington D.C.’s OFW Law Firm, Marshall Matz, penned an opinion piece that examined the steady growth and improvements to crop insurance since it started nearly 80 years ago and the need to preserve the program going forward.

“Today’s modern crop insurance system is a vast improvement over what existed just a few decades ago,” they write. “Sheer numbers tell much of the story. Federal crop insurance today covers almost 300 million areas of American farmland, over 90 percent for major commodities and over 70 percent for specialty crops, representing over $100 billion in insurance guarantees.”

As Congress soon begins work to reauthorize a new farm bill it will be crucial to grow support for crop insurance and sound farm policy so we can maintain and build upon this success.

As VanderWal concludes, “Old-fashioned hard work, innovation, and smart farm policies like crop insurance…will secure a bright future for us all.”

New Video Spotlights Public Support for U.S. Farmers, Farm Policy

America’s farmers and farm policies, including crop insurance, receive overwhelming, bipartisan support from voters, according to a new video released today by National Crop Insurance Services (NCIS).

The video comes after the Republican and Democratic parties wrapped up their national conventions, moving America into the heart of the election season.

“As the first Tuesday in November approaches, voters will be busy examining candidates from the left, candidates from the right, and hoping they won’t be left behind,” the video states. “But there’s one thing almost everybody can agree on: America’s farmers and farm policies are moving the country forward.”

The educational piece is based on results from a recent public opinion poll showing that nearly 90 percent of U.S. voters have a favorable view of farmers, with 92 percent agreeing it is important to provide farmers with federal funding.

NCIS’ video also illustrates that the majority of voters prefer crop insurance, which is delivered by private companies instead of the federal government and partially funded by farmers.

“That’s a winning set-up in most voters’ minds,” it states. “Nearly 80 percent of whom said they approved of farmers getting discounts on crop insurance premiums, with nearly three-fourths applauding farm policy’s current cost-sharing structure.”

These results, the video continues, shouldn’t be a surprise as eight in 10 voters agree that a strong and thriving farming industry is critical to America’s national security.

“So while agriculture’s critics may continue their unrelenting, misguided fight on farmers and farm policy,” it concludes, “the numbers show that Farm Country will have a powerful ally in its corner this November and beyond…the American people.”

A Story You Won’t Hear About From the Critics

Agriculture’s opponents love to paint the picture of federal crop insurance as a program that just caters to big, conventional farming operations that only grow certain commodities. But, that narrative is simply not true. Crop insurance is widely available to farmers, regardless of their size or cropping choices.

And, now there is new data to demonstrate how crop insurance is helping farmers and ranchers all across the country manage the inherent risks of growing food and fiber.

“Year after year for 10 years in a row we are seeing growth,” explained Brandon Willis, the Administrator of the Risk Management Agency (RMA), to stakeholders during a recent meeting on the expansion of crop insurance. “It’s a tremendous success story.”

Much of this growth and success is due to efforts in the 2014 Farm Bill to improve existing products, as well as create new ones and expand them for all farmers growing in all regions of the country, especially beginning farmers, specialty crop and organic growers.

“We have made a concerted effort to make it work for all,” added Willis, who oversees the government agency that partners with private-sector insurance companies to deliver coverage.

The effort is paying off.

RMA estimates that the number of acres covered by crop insurance increased to 297 million in 2014 from 265 million in 2009. Roughly 85 percent of planted acreage for major commodity crops, 74 percent of all fruit and nut acreage, and 36 percent of vegetable acres are insured. Also, the number of organic acres insured increased by a staggering 110 percent during this same time.

Meanwhile, in 2015 alone, RMA and crop insurers helped 13,719 beginning farmers and ranchers who work more than 3.5 million acres start their operations and save more than $14 million through premium discounts and waived fees.

Investments in crop insurance have helped usher in new risk management tools like Whole Farm Insurance, which caters to diverse operations because it enables growers to insure all crops on the farm under one insurance policy. Whole Farm insurance is offered in all states with policies sold in 42 states this year covering an average of nearly 4 crops per policy.

Other new products like the Supplemental Coverage Option (SCO) and the APH Yield Exclusion have also helped farmers in all regions of the country secure better protection. RMA estimates that “nearly 1,000 fruit, vegetable, and other specialty crop policyholders are taking advantage of the APH Yield Exclusion for 2016.”

Additionally, while the program has expanded, the public-private partnership has made great strides in reducing mistakes, such as data entry errors or writing indemnity checks for incorrect amounts. Such actions are flagged by RMA as improper payments, and Willis said that such instances fell from a rate of 5.6 percent in 2014 to 2.2 percent in 2015. As a point of reference, the government-wide improper payment rate average is 4.39 percent.

Earlier in the year, Willis stated that cutting the rate in half demonstrated RMA’s “commitment to operating a well-run program that protects both taxpayers and farmers.”

Sadly, this success story is not one that you’ll hear about from the likes of the Environmental Working Group (EWG), the American Enterprise Institute (AEI), or the Heritage Foundation. These professional critics need something crow about in order to stay relevant and expand their own coffers even if it is at the expense of American agriculture.

But, as the old saying goes, they are entitled to their own opinions, but not their own facts. The facts are clearly on the side of crop insurance.

A Secure Nation Begins with a Secure Food Supply

“I firmly believe that America’s first line of defense is our ability to feed and clothe the people,” Major General Darren G. Owens warned the House Committee on Agriculture during a recent hearing that focused on testimony from military leaders to highlight the link between agricultural production and national security.

Maj. General Owens continued to explain, “we would all be dependent on other nations” that would put our food security and national security at risk without strong agricultural production in this country.

These sentiments echo the beliefs of most Americans according to a recent national poll that the National Crop Insurance Services (NCIS) commissioned. By an 81 to 15 percent margin, voters polled said that, “a strong and thriving American farm industry is critical to American national security” with 92 percent of voters supporting federal spending to help farms and farmers.

In particular, Americans support crop insurance because it is a shared investment with a shared return for both farmers and taxpayers. Farmers purchase policies to protect their crops from catastrophic events and only receive an indemnity when they suffer a loss. The federal government discounts policy premiums to make policies affordable. Farmers have the peace of mind to know they can make it another year if a single hailstorm, flood, or drought destroys their crops. Taxpayers have assurances that they are not on the hook for costly, unbudgeted disaster assistance when calamity strikes.

“From my perspective, food security is first of all about ensuring that the plentiful supply of high quality food and agricultural products that we enjoy continues to be available,” said Major General James R. Sholar who also testified at the hearing.

Crop insurance ensures everyone has an affordable and secure food supply, which ultimately makes us a more secure nation.

Farm Credit System Leaders Say ‘Keep Crop Insurance Whole’

In the midst of an economic downturn all across farm country, two leaders in the Farm Credit System (FCS) are speaking out about the importance of crop insurance for farmers during these times.

In an interview with Agri-Pulse, new CEO and President of the Farm Credit Council, Todd Van Hoose said, “crop insurance is absolutely essential and…is probably the backbone of the risk management strategy of most farmers in America today.”

While Scotty Elston, the Chief Credit Officer at AgTexas Farm Credit in Lubbock, Texas, recently wrote in a Southwest Farm Press editorial that crop insurance “can literally make the difference between farming another year or losing so much a farmer must call it quits.”

That’s because farming is a capital-intensive business and many farmers borrow in one year more than most Americans borrow in a lifetime. Crop insurance provides security for both the farmer and the lender.

“From a lending perspective, crop insurance provides a guarantee of a minimum income for a lender to rely on to repay loans should a farmer lose a crop,” stated Elston. “This insurance guarantee makes it much easier for producers to obtain the financing they need to farm.”

Considering that the FCS holds nearly 41 percent of the farm sector’s total debt and has the largest share of farm real estate loans, according to a Congressional Research Services report, the role of crop insurance helps enable sound lending practices and ensures farmers have a dependable source of credit. All of these factors are crucial as producers struggle with depressed commodity prices, high input costs, and falling farmland values.

“The important message we can talk about is, keep crop insurance whole,” said Van Hoose. “It is worth the investment of the federal government in helping farmers manage the risk.”

ICYMI: Trust the ag lender, crop insurance cuts would most harm family farms

This is the time of year when farmers are meeting with their lenders to renew farm operating loans for 2016. The past few years have been challenging for producers as commodity prices have fallen, input costs have risen, and severe weather has damaged or destroyed entire crops.  With the downturn in the ag economy, multiple years of lost revenue and less than favorable forecasts for 2016, many producers are facing the tough question: can I afford to continue farming?

Without access to capital, the answer to this question is a resounding no.

I’ve worked in the ag finance business in Texas for more than 30 years and have seen highs and lows in the farm sector. Though those in agriculture have always faced risks, those risks have escalated over the past two decades. Volatility has become the norm rather than an infrequent event. In the last five years farmers have experienced a multi-year drought, hail storms in October, late spring freezes, and too much rain literally drowning their crops. Prices for farm commodities have dropped drastically to below the costs of production as foreign subsidies and market-manipulating policies have drastically risen.

As a way to mitigate these risks and make access to capital possible, Congress selected crop insurance as the primary risk management tool for farmers in the last farm bill. The modern crop insurance system in place today replaced ad hoc disaster relief programs ensuring farmers would have some protection against natural disasters. Congress designed crop insurance to be affordable to the farmer, yet accountable, requiring producers to pay premiums for the insurance coverage on their crops and shoulder a portion of losses through deductibles.

In the cotton industry, a major crop in the 43 counties served by AgTexas, crop insurance is basically the only risk management tool available to producers. It can literally make the difference between farming another year or losing so much a farmer must call it quits.

From the lending perspective, crop insurance provides a guarantee of a minimum income for a lender to rely on to repay loans should a farmer lose a crop. This insurance guarantee makes it much easier for producers to obtain the financing they need to farm. This is similar to the guarantee any car owner would have on their car loan if they got into an accident. Crop insurance is a safety net for some of the events that cannot be controlled.

For perspective, an average family farm in the panhandle of Texas farms between 1500 to 2500 acres and must borrow $500,000 to $1 million each year to produce a cotton crop. Because of the low price of cotton and the high input costs in 2015, many had farm losses exceeding $150,000.   On top of the loss, they still have loan payments, living expenses, and the same farming costs to keep operating another year.

As producers and ag lenders work together to prepare cash flows for 2016, it is extremely difficult to forecast enough income to cover operating loans, meet debt payments, and pay living costs. Especially vulnerable are the young and beginning farmers who face these challenges with limited financial resources. These young producers and multi-generation family farms are the most affected by the volatile prices, increased production costs, and weather uncertainty in their operations.

Some in our country wish to do away with farm programs and any support of a crop insurance system that supports farmers and ranchers who produce the food and fiber that not only feeds and clothes our nation, but also serves other nations around the world. The reality is, without a viable, affordable crop insurance program most of these producers’ businesses will not survive. And if farmers go under, the Main Street businesses they support are not far behind.

Scotty Elston is the Chief Credit Officer at AgTexas Farm Credit in Lubbock, TX. This op-ed appeared in the Southeast Farm Press on June 20, 2016.

ICYMI: Farm policy, crop insurance wise investments for all Americans

Although I was born and raised on a farm, the standing rule in our house was I had to spend two years after college pursuing other things. This was not to discourage me from continuing the family farming tradition. Rather, my father wanted to make certain I knew what kind of life I was signing up for. Perhaps another job elsewhere would provide me with greater financial security and stability than one that was beholden to the weather, markets, foreign subsidies, and even lawmakers in Congress.

I recognized the wisdom in my father’s counsel, but after a couple of years, I knew I wanted to get back to the farm. By then I was married and the thought of raising my family in a small, rural town, combined with returning to the family farm, appealed to me. I have been farming on my own for the past nine years.

What I have learned during this time is this: farming is an enormous game of risk management. It’s not if something bad is going to happen, it’s when. I was aware of this reality growing up, but I fully appreciate it now that I am working to sustain my own farm and support my own family.

Droughts, floods, hailstorms, high input prices, unpredictable commodity prices, the uncertainty of what will come out of Washington whether it is talk of cutting the farm safety net during the life of a farm bill or applying a new regulation that increases the cost of doing business; in addition to competing with foreign governments that cheat on their commitments to free trade and fair markets. These are the challenges that farmers face every year. It is a life that is rife with risk and uncertainty.

Today’s depressed farm economy is a prime example. Commodity prices are half what they were a few years ago while the cost of doing business has not followed the same trend. The financial situation for many farming operations all across the country has deteriorated fast and many lenders are nervous about providing financing.

This is why we need strong farm policy and crop insurance to help us manage things beyond our control like a natural disaster or a collapse in commodity prices.

One of the least understood points about crop insurance is that it’s not just for farmers. That’s how we as farmers talk about it, that it’s a way to keep us in business when we suffer a catastrophic loss. That it’s a way to protect our yearly investment when things go wrong.

That is all true, of course, but we don’t explain that it is also insurance for every consumer.

Just look at the drought of 2012 – one of the worst droughts on record – that devastated most of the country. There were times in our nation’s history when that kind of devastation would have put thousands of farmers out of business, especially beginning farmers like me, because farm policy and crop insurance wasn’t what it is today. But, that didn’t happen in 2012. Those risk management tools gave us the ability to stay in business, to make it another year. It provided banks with assurance that operating loans would be repaid despite large losses, and in the process it enabled us to keep a stable and affordable food supply for all American consumers because we were able to begin again.

What affects the farmer will affect the consumer. The tools that help farmers stay viable from year to year and decade to decade, allows consumers to get what they need and want in the grocery stores.

We’re all in this together. We have to remember that fact when Congress begins reauthorizing the next farm bill or some lawmaker in D.C. proposes an arbitrary and irresponsible cut to farm policy and crop insurance. These risk management tools serve us all, especially the next generation of farmers. They are a sound and wise investment for America.

Zach Hunnicutt is a fifth-generation farmer from Giltner who raises corn, soybeans, popcorn, seed corn and milo.  This op-ed appeared in the Grand Island Independent on June 17, 2016. 

Guaranteeing Peace of Mind, Not Profits

Critics of America’s farmers and the risk management tools they depend on would have you believe that U.S. farm policy somehow guarantees growers a plush profit.

Amid current falling crop prices, shrinking farm incomes, and rising debt loads, we’re sure most farmers would welcome such a guarantee. Too bad it doesn’t exist.

To make their case, farm policy opponents often misrepresent a form of crop insurance known as revenue protection. This kind of protection, which farmers help pay for out of their own pockets through premiums and deductibles, doesn’t guarantee profit. Rather, it helps smooth out big dips in income during volatile times.

And it doesn’t necessarily equal an indemnity payment in years with low crop prices like 2015.

Now that the insurance numbers for the 2015 crop year have been finalized, we know that total indemnities paid to growers, including revenue protection as well as coverage from weather events, were at the lowest level since 2010.

When you factor in the $3.7 billion farmers paid in premiums and the $7 billion they shouldered in deductibles, you see that it wasn’t even a break-even year for farmers from an insurance perspective.

And of all the insurance claims paid out in 2015, only 3 percent were the result of price, meaning those “profit-guaranteeing” revenue plans were rarely used. By contrast, nearly 70 percent of losses resulted from drought, rain, and excessive moisture – disasters that even the most hardened critics believe deserve coverage.

And where did farmers most experience the biggest price-related losses?

It wasn’t in the traditional Midwest operations that agriculture’s detractors like to demonize. No, it was in Rhode Island, and California, and Washington State, and Oregon, and other places where fruit and vegetable production dominate.

Farm policy antagonists once complained about these same specialty crop operations not having and adequate farm safety net. Now, ironically, they want to tear down the safety net recently put in place.

Looking at the numbers, 2015 also turned out to be noteworthy for other reasons, as National Crop Insurance Services recently examined in its TODAY Magazine.

For example, insurers wrote 1.2 million policies, covering more than $100 billion in crops on a record 299 million acres last year. That represents about 90 percent of America’s total planted farmland. Check out these facts and more in The Year in Review article.

Hopefully our critics take a few minutes to read. They might learn something.

Diversity Makes Crop Insurance Special

Congress made crop insurance a cornerstone of U.S. farm policy for numerous reasons.

It is efficiently delivered by the private sector. Farmers and insurers help fund the system so taxpayers aren’t on the hook for the entirety of disaster aid. Payments get into the hands of farmers after disaster strikes within days, not years, but only after the claim is verified. And it’s easily tailored to the farmer’s needs no matter where they grow or what they put in the ground.

This kind of regional and crop diversification is often overlooked during farm policy debates, but it is a big part of crop insurance’s popularity in the countryside. For years, U.S. farm policy was criticized for primarily focusing on a few crops in the South and Midwest while leaving others – namely specialty crops and livestock – with little support.

That’s no longer the case thanks to smart investments in crop insurance. Now farmers and ranchers have a safety net whether they raise cattle, corn, cotton, canola, cranberries, citrus, cucumbers, cabbage, or hundreds of other crop combinations.

The chart below shows the improved availability of crop insurance products over the years, including coverage for lots of fruits and vegetables and protection for pasture, rangeland, and forage.

Over 100 Product Introductions Since 2000

And that has translated into more farmers from outside the traditional farming belt purchasing risk protection, which has decreased taxpayers’ exposure to agricultural disasters.

 

 

 

Check out the participation growth in these states – the 20 fastest growing in the country – over the past 15 years.

State 2001 Insured Acres 2015 Insured Acres* % Increase
1. Nevada 8,792 1,834,421 20,765%
2. New Hampshire 9,885 302,772 2,963%
3. Vermont 53,771 1,293,322 2,305%
4. New York 598,110 12,258,266 1,950%
5. Connecticut 27,200 233,589 759%
6. Wyoming 357,930 1,894,014 429%
7. Maine 100,866 499,704 395%
8. Utah 100,807 489,213 385%
9. New Mexico 620,312 2,720,537 339%
10. Pennsylvania 978,759 3,919,801 300%
11. Arizona 388,190 1,216,915 213%
12. Texas 16,124,120 45,988,387 185%
13. Kentucky 1,864,327 4,050,009 117%
14. Colorado 3,580,621 7,178,023 100%
15. Maryland 638,568 1,147,376 80%
16. California 4,010,128 6,759,327 69%
17. Florida 1,523,472 2,526,249 66%
18. Ohio 4,390,250 6,981,914 59%
19. Virginia 933,335 1,451,435 56%
20. Wisconsin 3,547,633 5,337,156 50%

*Includes livestock gross margin protection insurance

Amazingly, some farm policy critics want to unravel this success, which would send us back to the days of unbudgeted, taxpayer-funded, and after-the-fact disaster aid. Their legislative proposals to limit participation and cap insurance benefits to some farmers would even disproportionately harm specialty crop growers in areas outside the nation’s breadbasket.

It doesn’t make much sense. Then again, neither does attacking the tiny sliver of the federal budget dedicated to underpinning America’s food and fiber supply.

ICYMI: Farming needs strong policy and crop insurance

Lubbock Avalanche-Journal
May 28, 2016

If I don’t take care of the land, then it won’t take care of me, so I consider myself one of the stewards of the earth. I know I’m not alone. My brethren in farming are also caretakers of the land, water and air. We want to be productive and profitable, and pass on our farming operations to the next generation better, more fertile, and more sustainable than we received it.

Given this reality, I naturally become concerned and even a bit cross when I see special interest groups in Washington, D.C., trying to paint farmers in negative light as it relates to taking care of the land and our environment. They attack farm policy and crop insurance, but in critiquing these important tools, with little or no empathy for the risks we take, they are really going after me and farmers like me.

One myth these groups perpetuate is that crop insurance encourages farmers to grow on fragile, uncultivated lands. This is simply not reality, as the number of crop acres in the country has remained stable for more than three decades at roughly 328 million. Meanwhile, the number of those acres that are insured by crop insurance is approximately 298 million.

The 2014 Farm Bill layered additional red tape to ensure conservation compliance on all acres where crop insurance is purchased, and fragile lands are protected by eliminating all crop insurance premium support for farmers if they damage wetlands or plow up native sod.

Another myth they spread is that crop insurance only helps big conventional farming operations when in fact it is a risk management tool that is available to all farmers regardless of operation, size, region or crop. I am a young farmer. I grow both conventional and organic cotton. Crop insurance is arguably more critical for me than it is for the long-established farmers, and I purchase a specialized and exceptionally valuable insurance policy for my organic crop.

It’s a big concern of mine that there is a constant need to defend crop insurance against the myths and outright lies that these special interest groups spread in Washington and beyond. And, frankly, sometimes, I’m amazed that there is so much debate in Congress about the small investment in crop insurance and farm policy, considering the return for every American.

Federal spending on these items is well below one percent of the nation’s entire budget, but the benefit to every American consumer is a safe, secure, diverse and affordable food and fiber supply. Moreover, agriculture is the backbone of a strong economy and a strong society, and from a national security standpoint, it is crucial. We don’t want to be held hostage by another country when it comes to feeding our own people. And right now we are competing with foreign countries that are investing far more in their own agriculture sectors than we are and are cheating on their commitments to free trade in the process.

This constant attacking of farm policy and crop insurance undermines those who work hard to grow the food and fiber we all rely upon.

As farmers, we have no control over weather. We have no control over markets. We have no control over our foreign competitors. We cannot just turn our operations on or off. We have to take care of the land 365 days a year. We need a safety net when commodity prices fall. We need affordable and reliable crop insurance to protect our yearly investments.

Today in my part of the country, I know plenty of farmers who are struggling to make it another year because of the current depressed farm economy while others are making the tough decision to get out of the business altogether. Meanwhile, young people are nervous about jumping into a line of work that is mired in risk and is constantly under attack by special interest groups and some lawmakers in Congress. This is an alarming trend.

Sometimes it takes something drastic to happen for people to realize what they have. I certainly hope it is not the loss of agricultural production in this country as a result of Congress chipping away at the farm safety net for us all to fully appreciate how important it is.

JEREMY BROWN is a multi-generational Lubbock farmer who grows both conventional and organic cotton in west Texas. He is on the executive committee of Plains Cotton Growers and also grows wheat, rye and peanuts.

In Contrast to the Critics, Crop Insurance Does Not Discriminate

Perennial critics of farm policy have taken aim at one of the key risk management tools for farmers – crop insurance – and are ramping up efforts to spread misinformation about the program. Specifically, they are trying to distort how the premium discount works to leave some farmers with fewer risk management options.
Their claims include that this discount only goes to large farming operations, not small and beginning farmers, and that the discount should be capped for certain farmers.

These claims demonstrate a fundamental lack of knowledge on how insurance works and are out of step with the views of most Americans.

First, farmers purchase policies to protect their crops and operation from a loss. Crop insurance treats all farmers equally, regardless of operation, size, region, or crop. There is a discount for premiums so farmers – most of whom borrow more money each year than the rest of us borrow in a lifetime – can afford to purchase protection.

The crop insurance premium discount is not a cash payment to farmers, but rather a credit to farmers.  The only way producers actually receive money from their crop insurance policies is if they suffer a verifiable loss. This is an indemnity payment to help them recover. Further, the farmer must shoulder a deductible before receiving an indemnity.

A few years ago, Politico, a Washington, D.C.-based paper, described the premium discount this way:

“The premium discount is really an inside-the-government book transaction, involving no cash payment to the farmer, who must still make a hefty contribution as well.

“For example, a Washington state apple and cherry operation is credited with having received a $1.3 million premium subsidy on a policy covering more than 5,000 acres of orchards and $33.7 million liability. But the same farmer paid $627,409 in premiums for the coverage and got nothing back since no losses were reported.”

Most Americans support the mechanics of modern-day crop insurance because farmers are helping to fund their own safety net and taxpayers are not left paying for the entire cost of assistance when a natural disaster strikes.

A new national poll reveals that more than 80 percent of Americans believe that a thriving farming industry is critical for national security. Further, 79 percent of Americans support providing a premium discount to farmers so that crop insurance is affordable.

Yet, the affordability of crop insurance will be greatly diminished if critics have their way in preventing certain farmers from receiving discounted premiums. This is because the purpose of any insurance program is to diversify the risk pool. Insurance functions more efficiently when the pool is large and diverse, which only happens when insurance is widely available. This keeps insurance affordable, especially for beginning farmers, who typically have reduced access to credit and capital.

In the same vein, automobile insurers want older, more experienced drivers to balance losses from younger and possibly more accident-prone drivers. If there is a cap on who receives the discount it will shrink the risk pool and undermine the effectiveness of crop insurance.

Also, placing a cap on premium discounts would disproportionately affect certain growers, especially specialty crop growers and organic growers whose crops tend to have higher values and therefore more likely to have higher premiums for coverage.

In short, crop insurance does not discriminate against certain types of farmers in this country by making risk management tools affordable for some, but not to others. Rather, it is widely available and affordable for all producers. Americans support and appreciate this approach to public policy.

Political Pundit Takes to the Airwaves to Discuss Agriculture

This week was a first for John McHenry, the well-known political pollster for North Star Opinion Research, who is in high demand during election season.

McHenry has worked with countless national campaigns and has appeared on Fox News, CNN, NBC Nightly News, BBC, NPR and many others to share research analysis and commentary. But he’s never been on farm radio…until Thursday.

North Star Opinion Research conducted a national public opinion poll to determine voters’ views of farmers, farm policy and crop insurance, and the results have been of great interest to rural America. So the National Association of Farm Broadcasting interviewed McHenry and distributed his remarks to every farm radio broadcaster in the country yesterday.

And McHenry didn’t disappoint, adding valuable context to the survey’s findings.

For example, the fact that farmers’ favorability ratings are higher than what is usually seen for the military, and the fact that there was no deviation from this popularity between political parties, was significant in McHenry’s eyes.

Since voters are generally unhappy with the country’s direction and are inundated with polarizing political rhetoric, agriculture’s bipartisan public support becomes all the more remarkable, according to McHenry.

“This is one of the rare highlights where you can say that Congress found a solution here that voters are happy with,” he concluded.

If you’re interested in hearing the interview in its entirety, click here.

More information about the poll can he found here.

New Poll: Americans Overwhelmingly Support Farmers, Farm Policy, Crop Insurance

 

(OVERLAND PARK, Kan.)- Nearly 90 percent of Americans have a favorable view of farmers, and 92 percent said it was important to provide them with federal funding, according to a new national poll released today. Furthermore, positive marks cut across party lines, showing that a strong farm policy is a bipartisan issue.

“Americans overwhelmingly like farmers and support the programs that protect them,” explained Jon McHenry, vice president of North Star Opinion Research, the polling firm that explored the general public’s views on farmers, farm policy and crop insurance. “This response is not surprising when you consider that eight in 10 voters believe a vibrant agricultural industry was critical to the country’s national security.”

More than 70 percent of voters also said they believed that farmers should help fund part of their own safety net. This cost-sharing structure is at the heart of America’s crop insurance policy, with farmers paying a portion of their insurance premiums and shouldering, on average, 25 percent of crop losses through deductibles.

Those polled were impressed. Nearly 80 percent said they supported giving farmers discounts on insurance premiums and the vast majority agreed that the current premium and deductible amounts absorbed by farmers were appropriate.

Americans also weighed in on the delivery of crop insurance. When asked who should implement the system, voters agreed by a 20-point margin that farmers and taxpayers were better served by private companies delivering crop insurance instead of the government.

Support for farm policy and crop insurance even remained high when poll respondents were read a misleading statement often used by farm policy’s critics.

“In a question providing both sides, the security argument in favor of protecting farms wins by a two-to-one margin over the argument used by farm policy opponents,” McHenry said.

The public opinion poll, which was commissioned by the National Crop Insurance Services, is available at www.ncis.staging.wpengine.com. The phone survey of 1,000 registered voters was conducted April 3-7 and has a margin of error of 3.1 percent.

Professional Critics Are Never Happy

Critics of farm policy are impossible to please and are adept at arguing out of both sides of their mouths.

For example, when crop prices around the world are low, they often blame U.S. farm policy for the falling prices and criticize it for harming farmers in poor developing countries. Then, when crop prices rebound, they often blame farm policy for higher prices and criticize it for harming poor consumers.

In other words, U.S. farmers are in a lose-lose proposition – blamed when prices are up and blamed when prices are down. The same is true when it comes to critics’ views of crop insurance.

When crop prices are up, the cost of crop insurance is usually higher and other components of the Farm Bill are lower. That’s because insurance premiums are pegged to the value of the insured crop, while other Farm Bill policies are specifically designed to kick in if prices fall.

So, critics complain about the cost of crop insurance when crop prices are up and conveniently ignore the fact that other Farm Bill costs are lower and balance out the equation.

Then, when crop prices fall, farm policy critics do an abrupt about-face. They refuse to acknowledge that crop insurance costs are down because of lower premiums and instead focus their criticisms on the rest of the Farm Bill, which kicked in as designed.

This same yo-yo style of debating is seen when we have agricultural disasters in this country, too. When farmers are lucky enough to avoid widespread loss due to drought, floods, or freezing, insurance companies write fewer indemnity checks to cover losses.

That means lower taxpayer costs, which critics overlook. It also means that insurers and the federal government, which helps reinsure the program, see underwriting gains. To agriculture’s opponents, private-sector companies seeing profit is a point of criticism.

When farmers are unlucky and meet Mother Nature’s wrath, there are more insurance indemnity checks written. That means that crop insurers and the federal government see losses. To agriculture’s opponents, the added costs associated with losses is a point of criticism.

Of course, there’s not even a mention of the fact that private companies helped cover part of the losses with private assets so that taxpayer weren’t on the hook for the whole bill.

In this impossible “head I win, tails you lose” set-up, it’s probably best for everyone to just tune out the professional critics. Instead, let’s focus on what really matters: Protecting farmers and the country’s food, feed and fiber supply with a cost effective, common-sense policy.

And that’s exactly what crop insurance is.

Insurance Basics: Value Matters

Here’s a hypothetical situation to ponder:

In 2010, you purchased a brand-new car for $30,000. Since then, you’ve driven 100,000 miles, worn out a couple of sets of tires, and accumulated an impressive collection of dents, scrapes, and pings. Now, that five-year-old vehicle is worth $10,000. Unfortunately, you’re in a wreck and total the car. Does your insurance provider send you a check for $30,000 or $10,000?

Obviously, your auto insurance covers the value of the property at the time of the accident, not the time of purchase. Otherwise, there would be a whole lot of folks wrecking old cars to recoup the value of a depreciating asset.

Of course, the flip side is true, too. Here’s another hypothetical:

In 1975 you purchase a nice home for $50,000. Throughout the years, the surrounding area is developed. You remodel your kitchen and bathrooms and even finish out the basement with an extra bedroom, an entertainment area, and a full bath. Today, the building alone is worth $300,000. Unfortunately, it burns to the ground. Does your homeowner’s policy just cover the original purchase price of $50,000 or the full market value of $300,000?

Luckily for the homeowner, it’s the latter. And it makes sense. You will have to replace the appreciating asset at today’s market value.

Not to mention, the insurance premiums you paid throughout the years reflected the changing value of the home – premiums for a home worth $300,000 are more expensive than premiums on a $50,000 home.

These same common-sense principles apply to crop insurance, and are too often overlooked when discussing the Harvest Price Option available to farmers. Let’s consider one more hypothetical:

A farmer plants a corn crop in May that is valued at $250,000. The farmer forward contracts to sell his crop at that amount – in other words, he agrees to sell it at a locked-in price to a buyer after harvest in October. But a drought strikes that summer and most of the corn withers, leaving the farmer with little to harvest. Since this farmer isn’t the only one experiencing drought, overall corn supplies fall driving up prices nationally. Now, the value of the crop that the farmer lost is worth $350,000. What does the insurance pay?

In the hypothetical above, if the farmer paid an extra premium for Harvest Price Option coverage, the insurance would pay the value of the crop at the time of loss, or $350,000, minus the farmer’s deductible.

The farmer paid more to get that extra protection because under the forward contract, the farmer is obligated to deliver corn to the buyer at the set price, even if the farmer’s crop fails. That means the farmer must purchase enough corn on the open market at the current market rate, to satisfy the contractual obligation. In other words, the farmer must pay $350,000 to buy corn that will then be resold for $250,000.

That’s not a great deal for the farmer. Yet, agriculture’s political opponents try to spin the Harvest Price Option as some free giveaway. Such critics are being intentionally misleading.

Harvest Price Option is a policy that farmers pay more for out of their own pockets, while still absorbing the deductible. And, it’s the only meaningful risk management tool farmers have to replace the lost bushels needed to fulfill their forward marketing obligations or to feed their livestock in the event of wide-spread crop failure.

ICYMI: Farm policy is essential to maintaining ag production in the U.S.

Agri-Pulse
March 23, 2016

If there is one place that, in recent years, overwhelmingly demonstrates the need and importance of U.S. farm policy, it is California. For the past four years, this top agricultural producing state has experienced record drought conditions and for farmers like my husband and me, it has taken a toll on our operation.

We have been growing rice in the Sacramento Valley for 30 years and we have never seen a weather event this relentless. Although the arrival of El Nino has provided much needed rain, the effects are marginal because of the intensity of the drought.

Operating loans are essential for every farmer because of the cost of producing crops, but for my family they have enabled us to keep going to the next year despite depressed yields and prices, and in some cases the inability to plant a crop at all.

We would not be able to receive this crucial financing without crop insurance and farm policy in place. Farming is an inherently risky business and bankers want assurances that we will be able to pay back the loan if disaster strikes. We were not born into farming – we built our operation from the ground up – so we still have land and equipment payments to make regardless of whether we have a good or bad growing season, or whether a natural disaster wipes out our crops altogether.

Crop insurance is something we purchase each year to manage this risk and we only receive an indemnity when we suffer a verifiable loss. Even then, it doesn’t make us whole, but it does soften the blow from a bad year.

It’s important to have this kind of safety net in place for all farmers, all across the country. And, I am always alarmed by the calls in Washington to cut what remains of the farm safety net, especially from those who have no idea what it takes to grow food and fiber. We need risk management tools now more than ever to help us overcome unpredictable weather events.

Additionally, we need policy in place to combat unfair practices with our foreign competitors like China and Thailand whose support for their rice growers far exceeds that of the United States and actually violates agreements under the World Trade Organization (WTO). While the U.S. was reforming its policy in the 2014 Farm Bill, other countries were ramping up support for their farmers, in some cases by more than a 100 percent. Their policies are trade distorting and leave American growers at a competitive disadvantage.

American farmers can and do manage extraordinary risks, year in and year out, but we cannot manage the challenges associated with unpredictable and sustained natural disasters, volatile markets, and trade distorting policies of our foreign counterparts without risk management tools like crop insurance and farm policy.

Lawmakers in Washington should consider this reality. If they want to continue to have agricultural production in this country, and in California in particular, they need to invest in it.

Lorraine Greco serves on the California Board for the U.S. Rice Producers Association. She grows organic rice with her husband in northern California.

Crop Insurance is a ‘Well-Run’ Public-Private Partnership

The role of federal crop insurance has grown significantly through the years and it is now the key risk management tool for farmers all across the country. With this greater role comes a greater responsibility to ensure the program is working as efficiently and effectively as possible.

Part of this responsibility includes making certain that when a farmer does suffer a verifiable loss and files a claim, the indemnity payment is processed quickly and sent to the right recipient with the correct amount. In other words, making certain that there are no improper payments. This is important for the farmer who is counting on timely assistance after a catastrophic event and it’s important for taxpayers who demand program integrity.

And, new data from the U.S. Department of Agriculture’s (USDA) Risk Management Agency (RMA) reveals that crop insurance stands as an example of a successful, properly-managed public-private partnership.

During the recent annual meeting of crop insurers, RMA administrator Brandon Willis announced that the error payment rate has improved by more than 50 percent from 5.5 percent in 2014 to 2.2 percent in 2015. By way of comparison, the average error rate government-wide was 4 percent.

“This demonstrates that the crop insurance program can withstand the scrutiny,” Willis said. “It’s a good story. It tells the story that crop insurance is a well-run program with an error rate far below the government average.”

An improper payment occurs when funds go to the wrong recipient, the right recipient receives the incorrect amount of funds, including being paid too much or too little, or the recipient uses funds in an improper manner. And, as Willis noted, many errors are simply rooted in data entry and reporting mistakes.

Perennial critics of farm policy have often cast crop insurance in a negative light pointing to any error payment rate as an excuse to cut, or even, gut the program. As a result, RMA, crop insurers, and even Congress have worked together to improve the error payment rate through the years.

In fact, as former RMA administrator, Kenneth D. Ackerman recently wrote in a blog post, “RMA’s eye-catching new 2.2 percent ‘improper payment’ rate for 2015 was no fluke. Rather, it was the product of a long-term commitment and years of work by a wide range of people who deserve credit for sticking to it.”

Going forward, the crop insurance industry will continue to work with stakeholders to ensure the accountability and integrity of this critical risk management tool that farmers and consumers rely upon to maintain a steady and affordable food and fiber supply.

Insurance Basics: The Risk Pool

All insurance, from auto to life, health, and crop insurance, works best when it expands the number of people it covers. That’s because the broader the participation, the more widely risk can be spread. And by spreading the chance of loss among a diverse group of insureds, premiums become more affordable for everyone involved.

This concept is known as the “risk pool.”

Think of it like this: Car insurance would not work if only a handful of drivers participated – especially if those drivers were accident-prone or heavily ticketed. Insurance companies would be hesitant to offer coverage and premiums would be astronomically high. A deep bench of experienced drivers with safe driving records is needed in the risk pool to balance out the equation and help offset losses.

The same can be said for health insurance. Why else do you think there was so much discussion on enrolling young, healthy people during the Affordable Care Act debate?

Crop insurance is no different, except crop insurance is about acres covered, not the number of farmers participating. If 1,000 acres is farmed by one farmer or three smaller operations is of little to no consequence. Getting the 1,000 acres covered is the key to expanding the size of the risk pool.

Widening the risk pool is so important that many forms of insurance encourage participation through incentives or mandates. If you have a mortgage, for example, you are obligated to carry insurance. State laws require auto coverage. Health insurance is aided when employers and the government help cover a portion of the premium.

In the case of crop insurance, these incentives didn’t always exist. As a result, coverage was expensive, policies were unavailable for many crops, and few people were insured. And when disaster struck, farmers looked to Congress to help them rebound through expensive, unbudgeted disaster legislation.

In fact, in the early 1990s, less than 30% of farm acreage was insured and farmers were vulnerable to risk. Having been stung by $70 billion worth of disaster bills since 1989, lawmakers needed to find a way to boost crop insurance participation.

Congress expanded the size of the risk pool through a three-pronged strategy.

First, it said crop insurance must be available to all – farmers couldn’t be excluded because they grew canola instead of corn or because they farmed in California instead of Connecticut. Then, the government invested in the development of new policies for crops, regions, and farmers that were traditionally underserved. Finally, it incentivized participation by discounting farmers’ premiums.

And the results speak for themselves. Today, 90% of acres are covered, taxpayer-funded bailout packages are a thing of the past, and farmers get assistance quickly when they need it thanks to private-sector efficiency.

Yet, despite these advances in modern risk management, some of agriculture’s political opponents have demanded that these investments be unraveled and that we return to the old inefficient and expensive model.

These farm policy critics want to exclude farmers with large operations from the system and cap benefits for all growers. Doing so would remove large swaths of acres from the risk pool, alienate experienced farmers with lower risk profiles, and ultimately make it harder for smaller, beginning farmers to get insurance coverage.

Just like removing all the safe drivers from auto insurance, that would be a wreck for everyone involved – including taxpayers.

NFU Concludes Convention Season in Style

The first quarter of the year is always busy in agricultural circles, with most farming organizations – including the National Crop Insurance Services – holding annual conventions to discuss the issues likely to face farmers in the upcoming year. The National Farmers Union’s show usually completes the pre-Spring meeting circuit, and this year they are doing it with a packed program that kicked off over the weekend. President Barack Obama addressed the group via video. Agriculture Secretary Tom Vilsack is there in person. And attendees will also hear from Minnesota Gov. Mark Dayton (D), U.S. Senators Al Franken (D-Minn.) and Amy Klobuchar (D-Minn.), and retired U.S. Army General Wesley Clark.

Amid these headliners will be one of crop insurance’s own, Jim Korin, the president of QBE NAU, who will tell the group why crop insurance must remain affordable, available, and economically viable to succeed in the future.

Crop insurers appreciate NFU’s invitation to address its members, and we certainly appreciate NFU’s support of a strong crop insurance system throughout the years. The organization was an essential component of the coalition that beat back legislative attempts last year to reopen the Farm Bill and weaken farmers’ primary risk management tool.

To say thanks, we wanted to spotlight a couple of great quotes from Farmers Union leaders:

“The evolution to crop insurance has effectively moved risk management away from the public sector, funded exclusively by taxpayer dollars, and toward the private sector, where farmers and crop insurance companies help shoulder part of the cost of natural disasters. This is good for taxpayers because it takes them off the hook for the entire bill when disaster strikes, good for farmers who must always keep their risk management plan in mind, and good for rural America because farmers are the engines that generate economic activity.”

Kent Wright, President Northwest Farmers Union
Capital Press, June 18, 2015

“With three consecutive negative farm income forecasts, we simply cannot afford to undercut the farm safety net. NFU urges Congress to reject…crop insurance cuts, as it has in years’ past.”

Roger Johnson, President, National Farmers Union
NFU Press Release, February 9, 2016

Thanks again for your continued support, NFU members. And have a great show as you close out the farm convention season in style.

Thank You, Commodity Classic Participants

This week kicks off the Commodity Classic, a huge trade show sponsored by the corn, soybean, wheat and sorghum industries.  As agricultural leaders gather to discuss current issues and set policy priorities for the coming year, we wanted to take a moment to thank farmers from each sector for their continued support of crop insurance.

These farmers told Congress that crop insurance was their top priority in the 2014 Farm Bill and urged lawmakers to “do no harm” during the debate.  They stood up for their top risk management tool and fought hard to beat back attempts late last year to cut crop insurance funding.  And their trade organizations recently sent a letter to lawmakers (link to PDF) asking that the system not be weakened this year.

Some leaders from these industries have even taken to the nation’s newspapers to pledge their support.  Here are just a few examples from the past year:

“Mother Nature is the toughest, most unpredictable boss.  Farmers are resilient and they adapt, but a safety net is crucial to their survival.  And it’s not a safety net if it’s not affordable.  That’s what today’s crop insurance offers farmers.  A safety net that is both affordable and widely available.”

Wade Cowan, American Soybean Association

High Plains Journal, April 6, 2015

“The food security we enjoy in this country is made possible in no small part through United Stated farm policy.  With the 2014 Farm Bill, Congress…made crop insurance the centerpiece, and quite rightly….  [I]f it weren’t for crop insurance I would not be in business.  And crop insurance is good for consumers and taxpayers, too.”

Brett Blankenship, National Association of Wheat Growers

The Spokesman-Review, May 24, 2015

“There have been a lot of changes to farm policy through the years to reflect the changing times, but given the diversity of agriculture in our country – and the way crop insurance can be uniquely tailored to address disastrous conditions in an efficient and effective way – it should only be strengthened in years to come.”

Bruce Peterson, Minnesota Corn Growers Association

The Hill, June 3, 2015

“Crop insurance enables farmers to rebound quickly after a disaster and it prevents dramatic farm loss, which in turn allows them to pay credit obligations and fixed expenses.  This system is hugely important for not only farmers, but also to rural communities and the national economy as a whole.”

Tim Lust, National Sorghum Producers

Agri-Pulse, August 21, 2015

Thank you, farm leaders for what you do for this country.  And thank you for what you do to defend crop insurance.

Video:

https://www.youtube.com/watch?v=9UuRiIsofJ8

Just the Facts:

http://www.ncis.staging.wpengine.com/just-the-facts/is-crop-insurance-tar¬geted-to-promote-the-production-of-a-few-favored-commodity-crops-and-biased-against-diversity-in-production-which-lowers-risks-and-may-enhance-sustainability/ 

 

CROP INSURANCE IN ACTION: Greg Wegis, Bakersfield, California

Greg Wegis’ great-grandfather established their multi-generational farm in the early 1900s and the have been farming in Bakersfield, California ever since. Wegis grows almonds, pistachios, tomatoes, corn, wheat, alfalfa and cherries and he plans to start growing table grapes in the near future.

“I have a passion for what I do,” Wegis said. “Being raised around my grandfather and my dad, just talking about it. It’s a lifestyle; producing food for people to eat and nourish their bodies. It’s a good feeling and an occupation I think that’s very noble.”

Today Wegis’ farm employs 80 people full-time to keep everything running smoothly. Wegis said he prides himself on being a family-oriented business, knowing each one of his employees and their family.

“We take care of our people, because they take care of us,” Wegis said. “They take care of our land and we treat them as an extension of our family. I think that is unique in the multi-generational family farming business; you don’t find that in a lot of other industries.”

Not only does Wegis feel his employees deserve credit for the hard work they provide, but he further recognized that his farming operation wouldn’t be possible without all of the supporting companies that aid them in their day-to-day operations. This includes companies that help with tractor and machinery parts, processing and manufacturing, sales, bankers, insurance agents, fuel, transportation companies and “the list goes on and on.”

According to Wegis, farm income in California is a $47 billion industry. The county he resides in, Kern County, is responsible for providing a little over $6 billion. Translating that into the amount of jobs agriculture provides within Kern County, Wegis said it’s “somewhere around 70,000 jobs.”

“Just the almond industry alone, employs about 110,000 individuals in the Central Valley,” Wegis explained. “And we’re connected. So whatever happens to us, in turn affects them, either in food prices or food availability.”

Minus a great winter in 2002 and 2011, the area Wegis resides in has been in a drought for over four years. To combat this issue, Wegis said their farming operations rely on two separate solutions to stay sustainable and in business.

“With our farm, we have around 10,000 acre-feet of water that we’ve contracted for. My grandfather and his generation helped build the Central Valley Project and the State Water Project, (bringing) us water from Northern California to help us be more sustainable south of the Delta Area.”

In order to take part in the Central Valley Project and the State Water Project, farmers in the California region must pay a set amount of money regardless if they receive the designated amount of water or not (water supply levels rely on what is available each year in the area’s designated reservoir, which could lead to the possible shortages). By doing this, Wegis said it has helped “replenish the aquifers” that were once depleted and helps keep farms in the region sustainable.

“We’re the breadbasket of the world here in Central Valley, as far as fruits, vegetables, nuts and milk,” Wegis concluded. “The United States relies heavily on us to produce that food. If we have to reduce our footprint, we cannot farm the acres we used to, and that’s definitely going to affect everyone. And that’s the message we’re trying to [get] everybody [to] understand.”

Wegis said he insures their crops to protect them against natural disasters, diseases or insects that they have little control over. “Without crop insurance it would not allow us to farm.” In the end, Wegis attributes crop insurance as a vital tool in agricultural risk management. “It’s just a crucial tool to circumvent the ups and downs of Mother Nature and agriculture,” Wegis expressed.