Rural America to U.S. Senate: Do No Harm to Crop Insurance

More than 600 trade organizations and companies throughout rural America sent U.S. Senators a clear message today about crop insurance as they prepare to debate the 2018 Farm Bill.

“As you consider the 2018 Farm Bill on the Senate floor, we urge you to oppose harmful amendments to crop insurance, including those that would 1) reduce or limit participation in crop insurance, 2) make insurance more expensive for farmers during a time of economic downturn in agriculture, or 3) harm private-sector delivery,” the groups wrote in a joint letter.

The signers, which range from farm groups to financial lenders, rural businesses and conservation organizations, explained their strong support for farmers’ primary risk management tool:

Without crop insurance most producers simply could not qualify for the operating loans they need to put a crop in the ground.  Due to extremely tight margins in agriculture, regulators examining agriculture lending portfolios typically insist borrowers have crop insurance.

Crop insurance is available to all types and sizes of producers in all regions.

Crop insurance provides for environmental benefits.  Crop insurance requires producers to meet wetlands protections and highly erodible lands protections to be eligible for a premium discount.

Crop insurance is a rapid response solution to disasters.  Private-sector delivery typically allows farmers who have losses and have met their deductible to receive indemnity payments in less than thirty days, while ad hoc disaster can take months or even years.

Crop insurance protects jobs, both on and off the farm.  Crop insurance enables farmers to rebound quickly after a disaster and allows producers to pay credit obligations and other input expenses, such as fertilizer and farm equipment. 

And, they noted that consumers and taxpayers benefit as well since crop insurance reduces the need for expensive, unbudgeted disaster aid packages.

“Crop insurance is food and fiber security insurance, and food and fiber security is national security,” the letter concluded.  “Given the importance of crop insurance, the undersigned organizations urge you to support America’s farmers, ranchers, rural economies and national security by opposing amendments that would harm crop insurance.”

The letter can be read in its entirety here.

NCIS Launches Website Highlighting Crop Insurance in All 50 States

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

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

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

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

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

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

New Study: ‘Efforts to Limit HPO Would Increase Risks to Farmers’

Just before the U.S. House of Representatives was set to vote on a Farm Bill amendment that would’ve crippled crop insurance, a Kansas State University economist sent key policymakers a note alerting them to a new study that shed light on the negative impact of reducing revenue insurance coverage.

The study he circulated was not produced by Kansas State, but its contents were so timely and so significant, that he felt compelled to help its authors at the University of Illinois spread the word.

That paper, by Illinois professors Gary Schnitkey and Jonathan Coppess, examined how farmers use revenue crop insurance tools like the Harvest Price Option (HPO) to help them forward contract their commodities.

“Recent criticism of crop insurance suggests that amendments could be placed in the Farm Bill to curtail HPO coverage,” the authors wrote.  “As a result, understanding farmers pre-harvest hedging activities is important.”

Very little information existed about how farmers use these kinds of techniques, so Schnitkey and Coppess began their work with a survey of Midwest growers.

“Survey results indicate that farmers use what can be termed prudent hedging strategies prior to harvest for marketing their crops,” the authors explained.  In fact, the survey found that 84% of Midwest farmers hedged a portion of their anticipated crop.

The study succinctly explained how it works:

Pursuant to a forward contract, a farmer agrees to deliver grain to a country elevator or processor at some point in the future, often near harvest time, but based on futures market prices at the time of the contract. This legally-binding contract locks in the price for the delivered grain as a hedge against lower prices at the time of delivery. While advantageous to the farmer in terms of protecting against lower prices, it also comes with risks that prices will increase, often as a result of lower yields for the crop nationally. In extreme situations, a farmer with significant yield losses may not have enough bushels to fulfill the contractual obligations and will need to purchase bushels to make delivery; bushels purchased in such a situation could well be at a higher price than the farmer contracted.

And that’s where HPO comes in.  Farmers pay more for the insurance option. It indemnifies losses at harvest-time prices rather than planting-time prices, enabling farmers to purchase enough commodity off the open market to fulfill their forward contract.

Without access to HPO, as some agricultural opponents are advocating, farmers would reduce pre-harvest hedging, the study found, and introduce even more risk into farming.  This is particularly troubling considering the survey also found that the farmers who most use these techniques also report to obtain the bulk of their families’ incomes from the farm.

“In other words, those impacted the most by this policy change (eliminating HPO) are those who most rely on farming for their family income,” the study concluded.  “Congressional efforts to limit HPO would increase risks to farmers.”

Lawmakers in the House overwhelmingly defeated the amendment designed to harm crop insurance, though it still needs to pass the Farm Bill.  The Senate is slated to begin its Farm Bill deliberations soon, where critics are again expected to attack HPO and other components of farmers’ primary risk management tool.

Farmers in Ohio, Kentucky Advocate for Crop Insurance

A pair of soybean farmers in America’s heartland are urging Congress to leave crop insurance alone as it debates the 2018 Farm Bill with columns published recently in newspapers in both states.

Scott Metzger, who farms with his family at Metzger Family Farms in Williamsport, Ohio, offered his story of decades of heartbreak that came from a single storm in a piece published in the Circleville Herald.

His family has been farming in south central Ohio for six generations, he said in the piece. He is proud of his heritage and knew from a young age he wanted to farm.

“When I was 5, on a July day in 1980, a storm tore through our community in Williamsport,” he wrote. “The things I remember about that day are the memories of a child: My toy tractor blown down the road. The roof ripped off the house. The shop flattened. All of that could be repaired. But in our fields was a disaster that I’ve been dealing with now for my entire adult life.”

The family ended up with crushing debt that year. They had to sell farm land to stay in business. It took 36 years to buy all of it back.

“While the story is sad enough, there’s a tragic piece of irony to add,” Metzger noted. “That year, back in 1980, a man came by the farm selling crop insurance. He was one of the first in our area to offer it. My family declined. We had never needed it before and didn’t see a reason to spend on it then.”

Today, crop insurance is part of the Metzger family farm’s business plan. He said modern and effective products like Harvest Price Option allow his farm to forward contract and not be as concerned if they have a short crop in the summer and need to buy back contracts.

Metzger is on the Ohio Soybean Association Board of Trustees and is a director with the American Soybean Association.

“As Congress debates the Farm Bill, I hope lawmakers will remember my family’s story and continue to support the modern crop insurance farmers have come to rely on,” he concluded.

In Kentucky, farmer Caleb Ragland penned an op-ed that was published in the News-Enterprise in Elizabethtown not far from where he farms.

His family has been farming in Kentucky for nine generations.

“At 31, I’m already a lifer,” he wrote in the piece. “There’s nothing I’d rather be doing than growing soybeans, corn and winter wheat and raising pigs in a pretty part of the world.”

But, Ragland explained that the business of farming has been tough in recent years.

Nationally, farm incomes are down 50 percent compared to what they were 5 years ago putting everyone in a financial pinch.

“Grain prices are down,” he said. “So are beef, pork, poultry and milk. Couple all of that with the fact that most of your farmland operations, on any scale, have substantial debt loads, and it’s easy to see how people are struggling in farm country.”

Ragland is optimistic, though. The growing population will mean a good future for farmers if smart policy decisions are made in Washington, he concluded.

And, leaving crop insurance unchanged in the 2018 Farm Bill, including Harvest Price Option, is a smart choice.

“HPO lets us forward market our crops,” he wrote. “It protects revenue, not just yields, offering the equivalent of ‘replacement value’ coverage on a car. And as farmers, we’re willing to pay extra for the protection HPO offers because it gives you the faith you need put your borrowed money in the ground and know you’ll be able to pay it back.”

Ragland’s request of Congress was simple: Don’t fix wasn’t isn’t broken.

USDA: Farmers Face Unrivaled Income Volatility

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

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

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

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

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

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

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

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

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

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

ICYMI: Crop Insurance Must be Protected in Upcoming Farm Bill

As the Farm Bill is being debated in Washington, one thing that I, as president of the Montana Grain Growers, am committed to emphasizing is the importance of crop insurance.

Put simply, crop insurance is cornerstone of our nation’s farm policy, with 90 percent of farmland today enrolled in the program. In Montana, that accounts for 19.8 million acres and $1.1 billion in insured liability on growing crops.

The numbers tell the story, but let me share another compelling one — my own.

I returned to my fourth-generation family farm in south central Montana in 2012 and my first wheat crop was harvested the following year. During that first growing season, we were in the middle of a significant drought — and ultimately went almost 24 months with little to no precipitation. Late rains helped a little, but for my winter wheat, much of the damage had already been done.

The crop was slow to emerge, slow to grow, and had several other issues that limited its potential. Then came the final devastating blow. In June, a powerful thunderstorm rolled through the area. By the time it was finished, three-quarters of my crop was pounded into the ground. What limited potential that the crop did have was erased in a matter of minutes.

For a fledging farm operation like mine, something like this would be impossible to come back from without some safety net in place. Because of crop insurance, I was able to farm again after that year, and continue, alongside my father and husband, to farm the land to this day.

No, crop insurance certainly didn’t make up for the crop I lost that first year, but it did keep me from having to tell the bank I could not pay back my operating loans, or that I could not make the payments on my new machinery loan. Having crop insurance kept me from failing before I even got started.

My story is not unique. Farmers across the nation must take out huge operating loans to keep their businesses afloat. This, combined with the unpredictability of Mother Nature, makes it having crop insurance crucial to the solvency of these operations.

A handful of farm policy critics in D.C, who have never stepped foot on a farm, are quick to call for cuts to crop insurance despite the fact it is more efficient and cost-effective than the alternative. I don’t think any of us would like to go back to the days before we had crop insurance, when natural disaster management was mostly accomplished in the form of costly emergency disaster legislation, with taxpayers footing the bill.

Farmers and rural communities know the importance of the crop insurance firsthand. We know it needs to remain a viable program for farmers and we know we need to protect it from having bits and pieces dismantled through budget resolutions, appropriations, and Farm Bill negotiations.

It is incumbent on all of us to share this message with lawmakers in Washington to and urge them to “do no harm” to the crop insurance program.

Michelle Erickson-Jones is president of the Montana Grain Growers Association. She operates a grain and forage operation with her father, Bart, and husband, Travis, near Broadview.

This op-ed was published in the Billings Gazette.

New Crop Insurance Study Provides Valuable Farm Bill Insight

U.S. taxpayers fare better when the government discounts farmers’ crop insurance premiums rather than relying on unbudgeted disaster aid packages.  That’s according to a recent peer-reviewed study that used a novel mathematical model to study an issue that has been difficult to analyze empirically.

The study, published in the Journal of Agricultural and Resource Economics (JARE), was recognized as the publication’s Outstanding Article of the Year for 2017.  It was authored by Dr. Harun Bulut, who holds a Ph.D. in economics from Iowa State University and currently serves as a senior economist with National Crop Insurance Services (NCIS).

Bulut’s work specifically focuses on the choice in government policy between crop insurance and ad hoc disaster relief as a way of addressing catastrophic risk in agriculture.  This is a choice lawmakers currently face as they debate the 2018 Farm Bill.

Federal crop insurance has become a pillar of U.S. farm policy in recent years and is being considered by policymakers around the world.  As it stands, farmers collectively spend $3.5 to $4 billion from their own pockets to purchase insurance protection a year.

Even though it has become the top choice for farmers in mitigating risks, some critics still pan the public’s cost in reducing insurance premiums and are targeting the policy for cuts.

Since crop insurance’s rise, annual disaster bills, which are fully funded by taxpayers and used to be the norm, have been largely reduced.  That’s been welcomed news for farmers since the disaster bills of the past were often politically motivated and were slow to deliver relief.

Prior research in this arena offered a variety of reasons for government support of crop insurance.  But the research did not take into account the underlying tradeoff between insurance use and ad hoc disaster aid in what economists refer to as an equilibrium model.  In particular, econometric evaluations of farmers’ demand response when premium rates rise and fall have been of limited value, as explained in the article.

With a unique approach using mathematical game theory, Bulut was able to demonstrate that policy proposals calling for reductions in premium support may be underestimating the resulting demand response for crop insurance and the increased pressure for disaster aid packages.

Bulut’s work offers a reason for underinsurance in the absence of premium support in that “both disaster aid expectations and overconfidence drive a wedge between the actuarially estimated price and the price that is ‘fair’ from the farmers’ point of view.”

In the mathematical model, the cost arising from insurance premium support is found to be much less than would-be cost from ad hoc disaster aid in the absence of a viable crop insurance option.  The findings also imply that disaster aid can be used at a much lower level in the future but may not be eliminated.

Bulut’s work suggests that it will be important for lawmakers to recognize the reduced insurance participation and increased likelihood for ad hoc assistance associated with the proposals being championed by farm policy critics during the ongoing Farm Bill debate.

Farmers Urge Congress to Back Crop Insurance in New Video

For more than a year, farmers from across the country have urged the U.S. House Agriculture Committee to maintain a strong crop insurance system in the 2018 Farm Bill.  And now, you can hear the farmers’ messages in their own words.

The Committee on Tuesday released a video testimony from its nationwide hearings that details the job-saving benefits of the public-private partnership of crop insurance to American farmers.

The one-minute clip takes viewers to testimony last year in Minnesota, New York, California, Florida, Texas and Illinois.

“Personally, I was involved in a hail storm this year where we lost the corn and the beans on one farm,” said one farmer. “We are not going to make any money at that this year, but we will be able to farm again next year because of those risk management tools.”

“Crop insurance is indispensable and all I am going to say here is, it is absolutely critical,” another added.

One farmer finished his testimony with a clear request to the Committee.

“I want to leave you with six easy words to remember,” he said.  “Crop Insurance. Safety net. No changes.”

Well said, farmers.  And thank you for your continued support.

Crop Insurers Send House Ag Committee a Letter of Support

One day prior to the House Agriculture Committee’s scheduled mark-up of the 2018 Farm Bill, crop insurers and agents sent Committee leaders a letter of support.  That letter can be read in its entirety below:

April 17, 2018

The Honorable Mike Conaway
The Honorable Collin Peterson
House Committee on Agriculture
1301 Longworth House Office Building
Washington, DC  20515

Dear Chairman Conaway and Ranking Member Peterson:

Over the past three years, Committee members have heard from hundreds of farmers spanning all corners of the country during field hearings and listening sessions.  One common refrain has reverberated throughout rural America: Crop insurance is a top Farm Bill priority.

Support has been widespread, from the Texas farmer who explained, “Crop insurance is indispensable,” to the Illinois grower who left a lasting impression by saying, “Crop insurance is working; don’t screw it up.”

H.R. 2, the Agriculture and Nutrition Act of 2018, took these recommendations to heart and maintained a strong crop insurance system.  We applaud the Committee’s continued support of crop insurance, and we look forward to working with you both to get a Farm Bill with a strong crop insurance title across the finish line this year.

Unfortunately, some farm policy critics are targeting crop insurance for harmful cuts and changes.  Legislative proposals to limit farmer participation and make private-sector delivery less viable would have devastating effects as rural America deals with a depressed economy and farmers cope with the aftermath of weather disasters.

As you continue to work to oppose these harmful crop insurance proposals on the House floor, rest assured that America’s crop insurers and agents will be there to assist in any way needed.

Sincerely,

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
National Crop Insurance Services

Republicans Tout Crop Insurance During D.C. Forum

Before Congress’ spring recess, several Republican members of the House Agriculture Committee participated in a Farm Bill discussion hosted by the Washington Examiner.

And one thing became very clear during the conversation: Members are united in keeping crop insurance strong during the upcoming debate.

This support is not surprising.  Crop insurance is delivered by the private sector, which helps maximize efficiency, and farmers pay for protection so taxpayers aren’t left holding the entire bag after disaster strikes.

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

Forum participants said that efforts to weaken the crop insurance system, like using a means test to exclude some farms from protection, will only make crop insurance more expensive for remaining farmers.

“The backbone of the safety net is crop insurance. And it is a risk management tool. We don’t, we should not, means-test risk management,” said Committee Chairman Mike Conaway of Texas. “Doing things to…force premiums higher and higher make no sense whatsoever.”

Rep. Ted Yoho, a Committee member from Florida, agreed, noting that instead of weakening the system Congress should look to provide even more protection to more crops.

Weakening crop insurance “would create more uncertainty, especially at a time when our farm income is at a 12-year low,” he said.

Missouri Rep. Vicky Hartzler echoed Yoho’s support during the panel discussion and called preserving crop insurance her “number one priority” during the Farm Bill.

“Because it is a very, very important risk management tool for farms and it’s also important for creditors,” she said.

Hartzler, who owns and operates a farm, explained to the audience that farming is capital intensive and that farmers must borrow money each year to plant – sums that can total more than most Americans borrow to buy a home.

Insurance gives banks confidence to extend those loans, she said, because it helps farmers manage their business’ unique risks and avoid bankruptcy after floods and droughts.

Congressman Rodney Davis said keeping crop insurance is also about being fiscally responsible while providing some certainty for the Illinois farmers he represents.

“The old way we used to do things with disaster declarations, was not budgeted,” he said, using the 2012 drought as an example of how the new system works.

Damage predictions were close to $40 billion during that drought, he noted, but aid delivered to farmers was closer to $17 billion because of the public-private partnership and because farmers help fund the system by paying premiums and shouldering losses through deductibles.

“We have to have a crop insurance program,” Davis concluded.  “It’s saving money for American taxpayers.”

ICYMI: Crop Insurance Protects Farming for Future Generations

Wheat farmers in the heartland are facing tough times. Prices have bottomed out, Mother Nature has been unrelenting and this year’s wheat harvest was well below average.

On our five-generation family farm in Sentinel, the story is no different. Our wheat acres were down just like nearly everybody else who grows the crop. And unfortunately, some economists are predicting things might get worse before they get better.

It’s in years like these that we can really appreciate the importance of the farm safety net, with federally supported crop insurance as its cornerstone. To be blunt, it would virtually be impossible to farm in western Oklahoma without crop insurance. And certainly impossible to secure the farm for future generations.

Crop insurance helps us manage risk and we are happy to pay into this safety net that kicks in when the worst happens. More often than not, farmers pay into the crop insurance system and don’t get anything back at all. And that is how we prefer it.

We are in the farming business and we take pride in our crops. We set out from the get-go to raise a crop the best we can. We want to get our money out of the marketplace, if we can. I tell my crop insurance agent, “I hope you don’t pay me a penny. I don’t want your money — I want it in the marketplace where it belongs.”

But in farming, there are no guarantees. And that is where crop insurance comes in. It won’t make up for a bad year, but it helps us to keep farming for another year.

It hasn’t always been this way. I have been farming for more than five decades and I remember quite well the days before we had an effective crop insurance program. For many years, natural disaster management was mostly accomplished in the form of costly disaster bills. These bills were not only slow in arriving to the farm, but also fell flat on the laps of taxpayers.

With crop insurance, agents sell policies, insurance companies service them and the U.S. Department of Agriculture oversees the program, making it affordable and widely available to all growers through aspects such as premium discounts.

For beginning farmers, having this protection is especially important. Many young farmers rely on banks for operating loans. And banks won’t make these loans without assurance that farmers would have a way to pay it back if Mother Nature strikes.

Farm policy critics, many of whom are paid anti-farm lobbyists, can be quick to criticize crop insurance. But ask anyone in farm country and they will tell you that putting limits on our most successful farm safety net tool is the last thing we can afford right now, especially given the current downturn.

I want to see my sons and grandsons continue our family tradition of farming. For this reason, and many others, I encourage you to join me in calling on our lawmakers in Washington to preserve and protect this important program as they continue to debate budgets and the upcoming farm bill. The future of farm country may very well depend on it.

Jimmie Musick, of Sentinel, is president of the National Association of Wheat Growers.​

This op-ed was published in The Oklahoman.

Farm Bureau Compares Crop Insurance to Ad Hoc Disaster

As Congress continues preparation for the 2018 Farm Bill, rural America continues to voice its support for maintaining a strong crop insurance system.

One of the loudest voices in that chorus belongs to the country’s largest farm organization, the American Farm Bureau Federation.  An active member of the crop insurance coalition, Farm Bureau is working hard to dispel myths about farmers’ most important risk management tool.

And they are churning out useful analysis to help lawmakers make the best decisions possible.  Farm Bureau’s latest analysis compared crop insurance to disaster aid as a means to help farmers rebound after Mother Nature strikes.

Here’s an excerpt from that piece:

There are several benefits of crop insurance over ad-hoc disaster assistance. First, crop insurance provides certainty that in the event of a loss a farmer will be indemnified based on a portion of the value of the crop or livestock. Under crop insurance, farmers know what the losses are and indemnity payments are made directly to the farmer. With ad-hoc disaster packages, the compensation to an eligible farmer or rancher may not reflect the value of the loss….

Second, under crop insurance, when a farmer experiences a loss, an indemnity payment will be made within 30 days following the signing of the final loss paperwork. These claims are finalized through a private-sector delivery system. With ad-hoc disaster payments, the assistance payments may be delayed by several months or years following a loss. For farmers experiencing a revenue decline or a crop loss, timely indemnification provides an opportunity for growers to meet their financial obligations. Farmers do not have this same payment capacity with unanticipated emergency disaster payments. 

Third, under ad-hoc disaster payments, a farmer may not be required to prove a loss on the farm. Rather, farmers growing a specific crop or located in a specific part of the country may be eligible for ad-hoc disaster payments even if a loss was not experienced on the farm. Under crop insurance programs a farmer must suffer a financial loss, relative to the insurance guarantee, to qualify for indemnification  – commonly known in insurance principles as a deductible. This ensures that indemnity payments are targeted to areas impacted by a natural disaster such as a drought, hurricane or flood, and that payments are delivered directly to farmers and ranchers impacted by adverse weather….

At a time when net farm income is at a 12-year low, and after farm programs have already experienced substantial cuts in recent years, now is not the time to turn away from the reliability of the crop insurance program in favor of ad-hoc disaster payments. When Mother Nature is the farmers’ business partner, access to affordable and dependable insurance products remains a critically important component to the financial stability of farmers and the U.S. farm economy.

In other words, “Do no harm to crop insurance in the 2018 Farm Bill.”

Scholarships, Training Build Strong Communities

Mar’Kayla Bethea had to balance work with studies when she was an undergraduate student at Alabama A&M University.

Working at night and going to class during the day wasn’t easy. But she had no choice because she was paying for her education on her own.

That changed when National Crop Insurance Services awarded her with a scholarship.

“It allowed me to complete my undergraduate degree and I am now onto bigger and better things,” she said.

Today, she’s studying geographical information systems in graduate school at AAMU.

“This money was greatly appreciated,” she said.

NCIS has proudly provided scholarships to 18 students at 1890 Land Grant universities to help them complete their education since 2001. The universities have historically served African-American students.

It’s part of NCIS’ mission of helping under-served communities in rural America with access to top risk management and marketing training and education to develop the agriculture workforce.

Bethea’s story, and the stories of others who have benefited from scholarship program, are featured in the latest edition of Crop Insurance Today magazine.  Crop Insurance Today featured the risk management and marketing training offered through its partnership with 1890 Land Grant universities with a cover story last summer.

The scholarships are important to students who struggle with financial difficulties, said Dr. Mohammed Ibrahim, Associate Professor of Agricultural Economics at Fort Valley State University in Georgia, in the article.

“Sometimes, this struggle leads them to obtain a full or part-time job off campus and those jobs usually (due to lack of study time) cause their academic performance to fall,” he said

Dr. Albert E. Essel, Dean, Research Director & 1890 Administrator for the College of Agriculture at Lincoln University thanked NCIS for its continued support of students who will become the next generation of agricultural workers.

Essel is also involved in the community risk management and marketing training programs NCIS funds across the nation.

He spoke to a group in South Carolina last summer about marketing.

Farmers Tony and Belinda Jones of Morning Glory Homestead on Saint Helena Island, S.C., were among the participants. They said the NCIS training was very beneficial.

“If we did not attend the workshops and conferences like this we would have to research that on our own and might overlook it or skip it or not think it was important. But when you hear it from professionals who have a lot of knowledge in that field, it really hits home,” Belinda Jones said.

You can read more about the scholarship program in the Crop Insurance Today magazine and watch a video about the community training program at CropInsuranceInAmerica.org.

Crop Insurers Release Last Video in Three-Part Series

National Crop Insurance Services today released the third installment in the “Risk Management Minute” series. This final video is focused on the importance of maintaining a strong public-private partnership.

“Now, assistance arrives in weeks, not years, because the private sector is involved,” explained the video, which noted that there are 20,000 agents, adjusters and staff to help rural America pick up the pieces following droughts, floods and freezes.

“And insurers spend millions on training and new technology to constantly improve efficiency,” it continued. “It’s a system that saves farmers time and taxpayers money.”

Despite crop insurance’s benefits and popularity among farmers, some farm policy critics are proposing drastic cuts that would make crop insurance unaffordable and unavailable for many farmers. And if such proposals were adopted, it would be difficult for the private sector to remain in business.

“Such short-sightedness would only weaken farmers’ primary tool for managing risk and put more burden on America’s taxpayers,” the video concluded.

Other videos – about the cost-sharing and risk-pooling attributes of crop insurance – can be viewed at CropInsuranceInAmerica and on NCIS’ social media channels.

New Video Explains Importance of Widespread Crop Insurance Participation

As the Farm Bill debate heats up, some farm policy opponents are lobbying to exclude people from crop insurance, which would harm farmers and taxpayers alike. That’s according to a new video released today by National Crop Insurance Services – the second video in its “Risk Management Minute” series.

Legislative proposals to apply an income means test to crop insurance participation could remove many farmers who have large farms, grow high-valued crops or work off-farm jobs.

“Doing so would only increase insurance costs for smaller farmers,” the video explains. “It’s kind of like preventing the safest drivers from getting auto insurance. The result would be an expensive wreck for farmers and taxpayers.”

The idea of shared risk – where premiums rise and fall with participation levels – is not unique to agriculture.

“Crop insurance is like other kinds of insurance,” according to the video. “The more people it covers, the more people there are to shoulder risk. And the more people there are to shoulder risk, the cheaper coverage is for everyone.”

Things get riskier and more expensive when participants are removed – especially insureds who carry less risk like the farms that are being targeted by farm critics.

“Congress made crop insurance a cornerstone of U.S. farm policy for a reason. It works. It’s efficient. It saves money. And it’s popular,” the video concludes. “No wonder so many farmers are saying ‘do no harm’ to crop insurance in the Farm Bill.”

Chairman Conaway Vows to Defend Successful Crop Insurance System

The House Agriculture Committee is diligently working on a new Farm Bill, which Committee Chairman Mike Conaway (R-TX) hopes will receive a vote in the House of Representatives before the end of March.

Conaway, who addressed the crop insurance industry’s annual convention yesterday, said that would leave plenty of time to work out differences with the Senate version of the bill and ensure new legislation is finalized before the Farm Bill expires at the end of September.

“We will have difficult decisions to make,” he said, noting that there is “no reason to put it off just because [the debate] will be hard.”

Conaway said the bill leaving his committee will include a strong crop insurance component, and he will work to fight off attempts to weaken crop insurance.

“Our mantra is ‘don’t screw up crop insurance,’” he explained.

Conaway’s support was music to the ears of crop insurers, who believe their track record under the current Farm Bill is noteworthy.  Tom Zacharias, president of National Crop Insurance Services, outlined these successes during his opening remarks at the meeting.

“Farmers have spent nearly $15 billion in premiums since 2014,” Zacharias said.  “They’ve also shouldered more than $30 billion in deductibles.”

Because farmers help pay into the system, taxpayers aren’t left footing the whole bill after a disaster strikes.  That helps explain why crop insurance costs are below budget.

Congressional Budget Office projections for crop insurance are down nearly $10 billion since the 2014 Farm Bill was enacted.

Zacharias said the industry has also invested heavily in improving efficiency and stamping out waste under the current Farm Bill.

Former RMA Administrator Opines on Crop Insurance Critics

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

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

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

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

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

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

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

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

President Trump Wants an ‘On-Time’ Farm Bill with Crop Insurance

It’s been more than 25 years since a sitting U.S. President addressed the American Farm Bureau Federation.  But President Donald Trump made up for lost time with a rousing speech yesterday to the Farm Bureau convention in Nashville.

From tax and trade to immigration and infrastructure improvements, he touched on a myriad of important issues during a 35-minute speech.  Yet, it was his comments about farm policy and crop insurance that proved to be one of the afternoon’s biggest applause lines.

“I’m looking forward to working with Congress to pass the Farm Bill on time so that it delivers for all of you,” President Trump told the group of nearly 5,000. “And I support a bill that includes crop insurance.”

The President singled out Senator Roberts, a long-time champion for farm policy and for crop insurance, and praised his relentless efforts on behalf of agriculture.

“We are working hard on the Farm Bill, and I think it’s going to go well,” he noted.

President Trump’s support of a strong farm policy isn’t surprising, considering his opinion of America’s farm and ranch families.  The President opened his remarks with these observations:

We’ve been working every day to deliver for America’s farmers just as they work every single day to deliver for us.

 We know that our nation was founded by farmers.  Our independence was won by farmers.  Our continent was tamed by farmers, so true.  Our armies have been fed by farmers and made of farmers.  And, throughout our history, farmers have always, always, always led the way….

 The men and women in this room come from different backgrounds and from all across our land, but each of you carries the same title that’s been proudly borne by patriots and pioneers, inventers and entrepreneurs.  The title of, very proudly, American farmer.  Thank you very much.

He also explained, “Our farmers deserve a government that serves their interest and empowers them to do the hard work that they love to do so much.”

Assuming Congress agrees, rural America should expect a good Farm Bill sooner rather than later.

And that would provide lawmakers and President Trump the opportunity to take a victory lap next year.  He promised the group that he would be returning to help the Farm Bureau ring in their centennial convention next January.

Most Farmers Get a Bill, Not a Check, with Crop Insurance

We all carry insurance on something: Our homes, our cars, maybe even a special vacation or a treasured antique.

And, we all get bills in the mail to pay premiums on those insurance policies. When disaster strikes, and we have to use the policies we’ve paid for, we must first absorb part of the loss as a deductible before aid is received.

Farmers are no different, despite what farm policy critics might have you believe.

As with any line of insurance, farmers receive crop insurance payments only when there are verified losses and only after shouldering a chunk of those losses themselves through deductibles.

More often than not, farmers pay into the crop insurance system and don’t get indemnities at all. That’s why it’s often said with crop insurance, farmers get a bill not a check.

An examination of recent USDA figures shows farmers purchased 2,364,338 policies between 2015 and 2016. Of those, there were 563,506 claims, meaning 1,800,832 policies were not triggered.

In fact, if we look further, we find that farmers spent $7.2 billion out of their own pockets for insurance protection in 2015 and 2016. They also shouldered $13.6 billion in losses as part of deductibles. Indemnities totaled $10.2 billion, meaning farmers collectively put much more into the system than they got out.

This trend appears to have continued in 2017, too.

In other words, a bill, not a check.  Exactly like insurance is supposed to work.

But farmers are not complaining about helping fund their own farm policy. Crop insurance is not about making money. It’s about managing risk and paying into a safety net that kicks in when the worst happens so farmers can recover and continue to provide safe and affordable food for U.S. customers.

Farmers are happy to pay that bill.

‘Don’t Mess with Crop Insurance’

“Don’t mess with crop insurance.”

The phrase has become a battle cry among farmers in the Midwest, especially as legislators headed out for listening sessions and town halls ahead of the next farm bill.

And so far, legislators are hearing the message.

That’s the opening of a recent Farm Futures article about crop insurance.

The piece points out that crop insurance has become the most popular safety net for farmers because it replaces the costly emergency disaster relief bills of the past. Back then, when a storm destroyed crops, farmers had to ask Congress for help. The system was expensive for taxpayers and inefficient for farmers because of slow government payments.

Today’s modern crop insurance – where farmers design their own policies, pay premiums, shoulder deductibles and only receive indemnities after losses are verified by trained adjusters – is easier to manage and more accountable. And, since farmers are paying into it, taxpayers aren’t left shouldering all of the cost when disaster strikes.

It’s no wonder, as the article notes, that 83 percent of farmers in a recent survey said crop insurance was a very important part of their risk management plans.

Unfortunately, 75 percent also said they were worried that the next farm bill won’t provide an adequate safety net, showing the angst in farm country over low commodity prices and increasing weather unpredictability.

Amazingly, some lawmakers are looking to weaken crop insurance and leave farmers even more vulnerable.  Art Barnaby of Kansas State University detailed why that would be such a mistake in a follow-up Farm Futures article.

Among the consequences, he found, of making crop insurance less affordable and less available:

  • Most farmers, including relatively small grain growers, would be affected if the Harvest Price Option were eliminated – a popular product similar to “replacement value” in other lines of insurance.
  • Proposed caps on premium assistance would be hit by numerous farms across the country, including specialty crop farms as small as 200 acres in some California counties.
  • Forcing farmers to pay more for insurance could affect coverage levels and weaken the system – an idea backed up by the Farm Futures survey, which found that 84 percent of farmers said they couldn’t afford adequate coverage without federal assistance.

Farm Futures also looked back at crop insurance data since the late ‘80s and found a system that is in balance and is providing high levels of protection.

“Since 1988, crop insurance policies have covered $15 trillion to guard against losses,” the publication noted.  “During the same period, total premiums paid were $136 billion and total indemnities paid to farmers came to $116 billion.”

In other words, crop insurance is working as designed and the consequences of weakening it could be dire.

“Don’t mess with crop insurance.”

Thank a Farmer, It’s Thanksgiving and They Helped Make It Possible

As your family sits down to a Thanksgiving meal this week, take a look around at all the wonderful food and consider where it came from.

The sweet potatoes, peas, corn, rice and the wheat in the bread. The cranberries in the sauce and the sugar and pumpkin in the pie. The onions and tomatoes in the salad. The almonds that might be on your green beans.

American farmers brought all this to your table. This week, we are thankful for their hard work and the great risk they took in spending their time and money growing the food we enjoy as our Thanksgiving Day meal.

Just as we give thanks to farmers, they are thankful for the crop insurance that allows them to bring us a Thanksgiving meal every year.

Crop insurance covers most every crop that goes into the food on your table today – not to mention the clothes on your back.

In fact, it covers more than 130 different crops grown on 290 million acres in the United States with an insured value of $100 billion.

For the food made with crops that are not covered, we can all be thankful that crop insurance is built so it can expand as needed. Any farmer, or farm group, or university researcher can design an insurance tool to cover an uncovered crop and take it to the U.S. Department of Agriculture for consideration.

And more and more growers want to make sure policies are tailored to their specific needs.  That’s because crop insurance is a cornerstone of America’s farm safety net that helps farmers pick up the pieces after a flood destroys their pumpkin fields or a storm knocks down all the corn stalks.

It’s not a handout. Just like with any other insurance, farmers pay premiums and must meet deductibles before policies cover losses. And those losses are investigated by trained adjusters.

Sure, the insurance doesn’t cover all of a farmer’s losses just like most car insurance won’t buy you a brand-new car after a wreck. But, crop insurance offers farmers a chance to stay in business year after year with unpredictable Mother Nature and volatile world prices.

For that, we should all be thankful.

Attacks on Revenue Insurance Harm America’s Farmers

Farm families across America are struggling.  Crop prices are down.  Farm incomes have fallen drastically in the past several years and weather disasters have hit farms in most parts of the country.  And the pain is trickling down to small businesses and communities throughout rural America.  Yet, some lawmakers are pushing proposals that will make it nearly impossible for farmers to rebound.

Senators Jeff Flake (R-AZ) and Jean Shaheen (D-NH) and Rep. John Duncan (R-TN) recently introduced bills to eliminate premium support for the harvest price protection component of the Revenue Protection (RP) crop insurance policy.  Revenue Protection protects against a loss of revenue caused by low prices or low yields or a combination of both.  Revenue Protection has become a valuable risk management tool for farmers across the United States and accounts for more than 75 percent of the Federal crop insurance policies sold today.

One of the key components of the revenue policy is the utilization of the fall harvest price, which allows a farmer to receive the greater of the fall harvest price or the projected harvest price to insure against revenue declines. The loss due to an increase in the harvest price occurs when a farmer suffers a yield loss.  Those lost bushels are worth more when the harvest price increases and therefore the loss of revenue is greater because the insured could not sell the bushels lost at the higher price. The farmer automatically has harvest price protection when buying an RP policy, but can choose to exclude it by selecting the Harvest Price Exclusion (HPE).  If the farmer opts to do so, he or she will pay a lower premium rate.

“This legislation specifically targets crop insurance policies that farmers pay more for out of their own pockets to provide some revenue stability amid price declines and low yields,” said Tom Zacharias, president of National Crop Insurance Services (NCIS).  “For example, corn farmers in the Midwest can pay more than 40 percent more in premiums for RP, depending on coverage level, than if they choose to exclude the harvest price protection. And because this is still an insurance policy, farmers face upwards of a 30 percent deductible before an indemnity is even paid.”

He continued: “Amazingly, supporters of this anti-farmer proposal tout taxpayer benefits as the justification for weakening the farm policies that are so important today. This is disingenuous considering farmers help pay for their own insurance protection and crop insurance represents less than one-third of one percent of federal spending.  It is also worth noting that crop insurance is operating below budget projections.”

Zacharias also noted that, despite critics’ accusations, revenue polices are not paying out frequently.  In its current form, RP has only been available since 2011.  However, according to an NCIS analysis of soybean and corn price movements, had RP been in effect since 1990, the price component would only have triggered in 11 out of 28 years for soybean farmers and even less for corn farmers – only eight out of the last 28 years.

NCIS analysis also shows a drastic increase in insurance costs for farmers if this proposal is enacted. A corn farmer in Illinois who selects the highest level of coverage for an RP policy – 85 percent – would see premiums climb by almost 30 percent.  Meanwhile, premiums at the 75 percent coverage level would increase by a staggering 98 percent.

Such increases in premium would likely result in dramatic declines in overall crop insurance participation.  Farmers would lose an essential risk management tool and be more inclined to turn to Congress to pass expensive, taxpayer-funded disaster packages when revenues plummet.

Farmers all across America have repeatedly asked Congress to protect crop insurance – to keep it available and affordable for all farmers.  Unfortunately, this proposal would do exactly the opposite, leaving many without the means to weather these tough economic times.

ICYMI: Crop Insurance Critical for Farmers and Consumers

The Farm Bill debate is heating up in Washington and that has me thinking back to 2015.

We received way too much rainfall in central Missouri that spring and my family’s farm in Boone County, like many across the state, suffered big losses. We were only able to plant 40 out of our normal 500 acres of soybeans. Statewide, more than a million acres of soybeans went unplanted.

Without crop insurance, an event like that would have financially broken our farm.

It would have been nearly impossible to stay in business for the following year because of overhead costs like equipment and land, not to mention the input costs required to raise a crop that were already applied.

That was a tough year for my dad, Nathan, and me. We farm 1,000 acres raising corn, soybeans and occasionally small grains. My dad also runs a cow-calf operation.

Crop insurance, which is part of the farm bill, helped us that year but it doesn’t cover all of the costs. Prevented-planting coverage, in the 2015 example, only covered 60 percent of our per-acre revenue, minus the premium we paid.

But it’s certainly better than going out of business. And that’s something I hope Congress considers in the 2018 farm bill.

I grew up on a farm. I studied agricultural systems management at the University of Missouri and worked as a field test engineer for three years after college. I enjoyed it and was able to travel all over the United States and across parts of South America.

But you can only travel like that for so long, and I love farming. So, when an opportunity opened up back home I gladly returned to the family farm.

It’s an honor to grow food for America and the world. But it’s also much riskier than a paycheck from an employer, like when I worked as an engineer. Crop insurance for me, as a young producer, is a critical risk management tool.

Row crops especially are very capital intensive. The equipment, machinery, buildings and structures on the farm and the land all have costs. Then you add in costs like seed, fertilizer, pest protection and fuel, and it equals a significant investment per acre every year.

All of those dollars invested each year are subject to risk that farmers cannot control based upon the weather and the markets.

Crop insurance is a way we can mitigate risk and hopefully be able to continue to farm the following season if we do have a weather disaster that prevents us from being solvent.

Crop insurance is not unlike other forms of insurance. Whether it’s your automobile or health insurance, you don’t intend to ever have a claim or use the policy, but it’s a safety net when something goes wrong. It’s there as risk protection, and it’s something that is necessary to be successful in today’s farming operations.

That’s why it has become a cornerstone of the American farm safety net. It’s a public-private partnership that protects the investments farmers make in each crop and it protects taxpayers from costly disaster-relief bills.

It means when weather strikes in central Missouri, the insurance companies help cover the losses, not Congress. That’s why it is so strange that some lawmakers are angling to make crop insurance more expensive and less available.

I hope Congress remembers in the next farm bill that crop insurance is not only necessary for rural America, but that ultimately it protects the consumer. Without it, we would not be able to provide a safe, reliable and affordable food supply for America and the rest of the world.

Brian Martin raises corn, soybeans, and small grains with his father, Nathan, in Boone County, Missouri.

This op-ed was published in The Kansas City Star.

Farm Bureau President Urges Farmers to Speak Up for Crop Insurance

Zippy Duvall, president of the American Farm Bureau Federation (AFBF), is urging farmers to make their voices heard as the next Farm Bill is being considered.

“Constantly communicate with (legislators) week in and week out,” he said during a recent visit to Indiana, where he met with members of the media.

“And then when these congressmen and senators and other representatives come to their community and have town hall meetings, our farmers need to get off their tractors and out of their barns and then need to be present,” Duvall added.

He also encouraged farmers to share their own stories.

“Farmers can be involved on social media and bring the truth to the surface,” Duvall said. “Invite people to come to the farm. Let them see for themselves. It’s so valuable to a mother, to a congressman, to see and ask questions about farms.”

Duvall said that if there is a fight over crop insurance funding, that kind of grassroots engagement is critical.

“We’ve got to make sure that we have congressmen and senators who understand the importance of crop insurance. Crop insurance is a requirement of most lending institutions today, and it is important to have that risk management tool there for our farmers,” Duvall said.

Maintaining a strong crop insurance program in the upcoming Farm Bill is a top priority of the Farm Bureau, the nation’s largest farm organization.

“The cornerstone of the 2014 farm bill was crop insurance,” Duvall said. “Our first need and want [in the next Farm Bill] is to maintain that support of our crop insurance program, to make sure our farmers have that risk management tool.”

Duvall’s visit to the Hoosier State was part of his commitment to visit farmers in every state during his first two years.

Wheat Growers Voice Support for Crop Insurance

Opponents of agriculture recently gathered in Washington, D.C., to strategize for ways to dismantle farm policies in the upcoming Farm Bill.

Crop insurance was among their targets – specifically making insurance protection less affordable and available to farmers, and less economically viable for the private sector to deliver.

Many agriculture groups, including the National Association of Wheat Growers (NAWG), cried foul, calling the farm policy critic summit short-sighted and ultimately harmful the farming community and a struggling rural economy.

David Schemm, NAWG’s president and Kansas farmer, said that critics fail to consider challenges unique to agriculture, including lower rates of return and weather-related risks.

In addition, American farmers also compete with foreign countries that use trade-distorting support programs that violate their World Trade Organization (WTO) commitments.

“Rural America and farming families are experiencing some of the worst economic hardships in decades. Now isn’t the time to implement policies that harm these families and stump economic growth,” Schemm said.

Ben Adams, a farmer and president of the Washington Association of Wheat Growers (WAWG), also weighed in. He explained that farmers pay premiums into the program each year with the hope of not collecting an indemnity.

“It is very misleading to consider federal crop insurance a hand-out when its purpose is to provide a risk management tool when unforeseeable conditions arise,” Adams said.

Adams noted that recently eastern Washington farmers have experienced weather conditions that have greatly harmed their bottom lines.

“Crop insurance does not generate excess income, but rather it aids in recovering some of the loss so that we might be able to farm another year,” Adams said.

The wheat groups called on Congress to “ignore the rhetoric” of farm critics during the 2018 Farm Bill debate and to continue working with farmers during the process.

“In order to provide a safe, abundant and affordable food supply, farmers across the country need a strong safety net. And that includes federal crop insurance,” the groups concluded.

University Researchers: Limiting Crop Insurance Cuts Deep

Crop insurance has been hailed by lawmakers and farmers alike as an essential risk management tool during recent House and Senate Agriculture Committee hearings. Despite the praise, there are still critics who hope to weaken farmers’ protection against natural disaster and wild swings in the market.

Farm policy opponents are specifically aiming to cap the discounts farmers receive on insurance premiums, eliminate a key revenue insurance product pegged to commodity prices, and exclude some growers from the system altogether based on their income.

Such proposals are meant to target America’s biggest farms, but recent work out of the University of Illinois and Kansas State University shows that the effects would be far wider, hitting many family farms, too.

To get a better idea of the impact of a proposal to limit premium discounts, Dr. Gary Schnitkey of the University of Illinois looked at the heart of corn belt in McLean County, Illinois. The area has prime growing conditions with deep and fertile soils.

There, he found, farmers with insurance coverage on 85 percent of their crops, the highest amount offered, would hit the proposed $40,000 premium discount limit after 2,944 acres – a large farm, but by no means a giant operation.

Meanwhile Illinois counties where land isn’t as fertile, like Saline County, would hit the cap at the same coverage level on just 884 acres – a mid-sized farm similar to most family farming operations. This cap would be hit even sooner by growers considered riskier because of past losses or bad yields.

It’s not just Illinois either. Drs. Art Barnaby and Mykel Taylor from Kansas State found similar results in other Midwest states. For example, nearly 15 percent of Kansas farms would hit the cap, they noted.

The pain grows exponentially, Barnaby and Taylor explained, if farm policy critics are successful in eliminating harvest price tools available for revenue coverage. These tools enable a grower to insure a crop at its harvest price rather than its price at the time planting in order to take advantage of forward contracting opportunities.

Eliminating it, the researchers found, would “reduce crop insurance protection for nearly 95% of Iowa’s crop farmers…[and] about 80% to 90% of the crop acres in many other states, including Kansas.”

Another anti-agriculture proposal to exclude farmers with incomes over $250,000 from crop insurance benefits would also hit ag country, and it may not just hit large farms.

“Such a policy would likely impact farms that had high levels of off-farm income from a spouse and or other business activities,” according to Barnaby and Taylor. Furthermore, because most farmers’ incomes are tied to crop prices, some growers could be ineligible in some years and eligible in others, creating a compliance nightmare for the USDA and farmers alike.

Guest Editorials Stress Importance of Crop Insurance to Nation’s Farmers

As Farm Bill discussions continue, so do the misguided attacks on America’s farm policy. But the ag community is making its voice heard, taking to newspaper opinion pages across the country to stress the indispensable role crop insurance plays in helping American farmers provide affordable food for America and the world.

Dorian Culver, a soybean farmer and crop insurance agent from from Harrisonville, Missouri, said that crop insurance is more important than ever in a guest column appearing in The Columbia Daily Tribune.

He pointed out that in addition to the typical weather rollercoaster, farmers are facing another year of low prices. Meanwhile, input costs (farm equipment, fertilizer, land rent, etc.) remain the same.

“It doesn’t take a math whiz to see that the numbers just aren’t adding up for our nation’s farmers,” Culver wrote.

Culver, a lifelong farmer, said that he hasn’t seen this kind of downturn since the farm crisis of the 1980s. But thankfully, a few things have changed since then that puts us in a better position to weather this latest storm.

“One of the most important developments is the emergence of a strong crop insurance program,” Culver wrote.

According to Culver, a strong crop insurance program protects not only farmers, but everyone who eats. He said that farm policy critics would do well to remember that every American consumer relies on agriculture.

“Access to affordable crop insurance allows American farmers to continue to provide affordable food for America and the world. Without it, I can guarantee you it wouldn’t take long for it to hit everyone’s pocketbook at the grocery store,” Culver wrote.

Culver called on lawmakers in Washington to also keep this in mind as they develop the next Farm Bill and to work together preserve a strong crop insurance program.

“After all, as the famous saying goes, those who do not learn from history are doomed to repeat it. And that’s something none of us can afford,” Culver concluded.

G. Bradford Reeves, a longtime crop insurance agent from Leonardtown, Maryland, also discussed the importance of the crop insurance program in a letter to the editor that appeared in The Enterprise recently.

Reeves’ letter, “Keep crop insurance affordable in Southern Maryland,” recalls a time when crop insurance wasn’t as widely available and affordable as it is today.

“When bad weather hit, farmers had to ask Congress for help through ad-hoc disaster legislation. Taxpayers had to cover the cost and famers waited years for much-needed relief arrive,” Reeves wrote.

Reeves noted that public-private partnership of modern crop insurance eliminates some of the stress that comes from working in agriculture. But even with the modern crop insurance we have today, many farmers are still struggling to break even.

Reeves called on lawmakers to “remember this program is the only thing standing between bankruptcy and the ability to plant again for many Maryland growers. And they should appreciate that crop insurance is not a handout.”

Reeves noted farmers across the country have collectively spent $50 billion out of their own pockets in the last 17 years for coverage. They also absorb the first 25 percent of any loss before their coverage kicks in.

“Our farmers want to be out in the field planting the crops and harvesting them to sell at market for a reasonable price. The best way to give them the chance to do that is to keep crop insurance affordable and widely available in the next Farm Bill,” Reeves concluded.

Misleading Crop Insurance Attacks Hurt America’s Farmers

Agriculture’s opponents use terms like “guaranteed profits” to disparage the crop insurers that protect America’s food and fiber supply, help farmers pick up the pieces after disasters, and shield taxpayers from footing the whole bill through unbudgeted ad hoc disaster packages.

These criticisms unfairly confuse basic business concepts like gross returns and net income. The National Corn Growers Association (NCGA) asked economists from the University of Illinois and Cornell University to study this issue in depth, and noted:

“What we discovered is that the returns private crop insurance companies receive are much smaller than opponents claim, and they are well within the standards set by [the USDA].”

It’s easy to see how this conclusion was reached once you compare the expected versus actual returns under the current Standard Reinsurance Agreement (SRA) – the business agreement between the government and crop insurers.

The 2011 SRA set a target gross return of 14.5%. This measure of revenue does not include business expenses or reflect profit. But the target has not been met, according to the Government Accountability Office, which calculated returns of 13.7% from 2011-2016.

After subtracting expenses like technology and compliance costs for government regulations, the net income realized by insurers is even lower, as the chart below from the NCGA study shows.

Year Net Income
2011 11.3%
2012 -20.2%
2013 -0.7%
2014 3.0%
2015 13.9
Average 1.5%

*2016 data not yet available

In other words, there are no guaranteed profits in crop insurance. In fact, crop insurers had underwriting losses in 2012, 2002, 1993, 1988, 1984 and 1983 – a far cry from other lines of insurance, which are historically more profitable than crop insurance.

As a result, the crop insurance industry has witnessed consolidation and the exit of major agribusinesses since the implementation of the 2011 SRA. If farm policy critics are successful in their efforts to reduce returns by another 33%, other providers will follow suit, and farmers could be left without the tools necessary to manage falling crop prices and extreme weather events.

Then, the burden of providing billions in disaster assistance will again fall squarely to U.S. taxpayers.

GAO Forgets Its Own Lesson in Proposing Crop Insurance Cuts

In the wake of weather disasters in 1983, 1984 and 1988, U.S. agriculture was struggling, and an unparalleled farm debt crisis was only compounding the problem.

Back then, the federal government responded differently to agricultural crises. There was no overall strategy to deal with recurring farming disasters, and responses were generally reactive and after-the-fact.

So, in 1989, the U.S. Government Accountability Office (whose name has since changed from the General Accounting Office) published a report that examined the role of USDA’s three main disaster programs: Ad hoc direct payments, disaster emergency loans, and crop insurance.

GAO compared the effectiveness of these three programs, using eight different criteria that weighed the ability of the programs to deliver at the lowest possible cost, provide a disincentive to risky operations and pay farmers for actual losses, among other points.

The report concluded that “crop insurance is a more equitable and efficient way to provide disaster assistance,” than both taxpayer-funded disaster payments and emergency loans.

GAO recommended strengthening crop insurance to ultimately serve as the primary program for providing farm disaster assistance. And in 1994, President Clinton signed the Federal Crop Insurance Reform Act, which restructured crop insurance to increase farmer participation, increase the private sector’s role, and enhance provisions of the crop insurance program for farmers.

The GAO’s report and the 1994 Act set the stage for the affordable and widely available crop insurance system we have today, with modern products like revenue coverage that help farmers plan for not only weather-related disasters but the massive price fluctuations in the global market.

And, instead of ad hoc disaster relief bills, farmers now help cost-share their own farm policy, paying $50 billion out of their own pockets in the last 17 years for insurance coverage. Farmers also absorb the first 25 percent, on average, of any loss before their coverage kicks in.

The system is also much more efficient and accountable than direct government payments because private insurance companies sell policies and pay indemnities only after verifiable losses.

Fast forward 28 years and it seems the GAO has forgotten its own lesson. The GAO, in a July report, recommended effectively dismantling the same crop insurance system that has become a cornerstone of America’s modern-day farm policy. Specifically, GAO proposes changes that would weaken the very private-sector delivery system that provides aid efficiently and reduces taxpayers’ risk exposure – a plan that would ultimately lead to more government dependence.

The recent GAO report, in essence, advocates a return to a prior era, back when farmers, lawmakers and taxpayers were equally frustrated with the way rural America received needed support.

Luckily, most lawmakers aren’t giving the recent GAO report the same warm reception its counterpart received decades ago.  It’s already been criticized by Senate Agriculture Committee Chairman Pat Roberts (KS), who said, “Now is not the time for additional cuts to a program that producers rely on.”

He’s exactly right.  A financially stable agricultural sector is fundamental to the well-being of our economy and society, and crop insurance is fundamental to agriculture’s success.

ICYMI: Insurance Vital for Farmers

By: Luke Sandrock
Published in the Herald & Review
August 25, 2017

Even the best-laid plans sometimes go wrong. No one knows this more than a farmer. They can plan out the entire year for how they will harvest a crop, but a single storm or a drop in the market can change everything. It can leave a farmer in financial ruin, and in the worst of cases, it can leave them without the ability to start again the following year.

This is why most farmers purchase crop insurance. It is the one part of the plan that holds together in a crisis. It is a tool that farmers rely upon when things go awry.

This hasn’t always been the case. When crop insurance got its start in the 1930s, it was a poorly run government program and rarely used. The premiums were too high and the coverage area was too limited, which resulted in low participation. Farmers mainly relied on costly ad hoc disaster assistance when natural disasters wiped out their crops, but that required Congress to not only act to authorize this assistance, but to act quickly. It was a clumsy system that didn’t provide any peace of mind to farmers or their bankers, and it was a costly way to operate since Congress was never budgeting for this disaster assistance.

This led lawmakers to rethink the mechanics of the program. In 1980, Congress passed the Federal Crop Insurance Act, which created the successful public-private partnership that remains today where risk is shared among farmers, the Federal government, and private insurance providers.

Premiums are more affordable for farmers through a government discount. Insurance products have expanded to include more crops across the country. Both of these factors have increased participation and broadened the risk pool, which makes the program more actuarially sound. Private companies are servicing the policies and making sure any claims are processed in an efficient and timely manner.

Another part of this success story is that Congress no longer has to worry about authorizing unbudgeted disaster assistance. Further, the current cost of crop insurance is under budget.

With Congress gearing up to write a new farm bill, a central concern for farmers all across the country is that lawmakers will fail to recognize this success story and will create new policy that undermines a farmer’s ability to manage risk.

The farm economy is struggling with net farm income half of what it was four years ago. Planning for the future is challenging enough given these circumstances, let’s not make it harder by eliminating a farmer’s ultimate backup plan when everything else fails.

Luke Sandrock is a junior partner and crop insurance agent at The Cornerstone Agency, Inc. in northern Illinois.

Crop Insurers Respond to GAO Calls for Additional Budget Cuts

The farm economy is struggling, with depressed prices and falling farm incomes reminiscent of the farm crisis in the 1980s. Back then, the Government Accountability Office (GAO) studied the best way to help farmers through tough times and noted, “crop insurance is a more equitable and efficient way to provide disaster assistance” than both taxpayer funded disaster payments and emergency loans.

GAO then recommended strengthening the country’s crop insurance program, which Congress did. Now, crop insurance is a cornerstone of America’s farm policy, farmers call it their top Farm Bill priority, and taxpayers are saving money because farmers and private-sector crop insurers help fund farm policy.

Given crop insurance’s success and popularity, it is disheartening that GAO recently recommended weakening farmers’ primary risk management tool. It’s even more troubling that GAO would gloss over important facts about the returns crop insurance providers receive for delivering America’s farm safety net. For example:

  • Insurance providers are not even achieving the returns targeted in the Standard Reinsurance Agreement with the USDA – GAO buried deep within its report the fact that actual returns have been 5 percentage points lower than USDA’s target from 2011-2015.
  • GAO’s data do not take insurers’ full business expenses into account – essentially, they are confusing gross and net returns.
  • 2017 study by economists from the University of Illinois and Cornell University noted that net returns for crop insurance providers were just 1.5% from 2011-2015.

Farmers all across the country are depending on crop insurance to help them weather the current economic crisis. And private-sector crop insurers are delivering that assistance in an efficient manner that has come in billions under budget.

Clearly the system is working and does not need to be weakened when it is needed most. Luckily, most lawmakers recognize crop insurance’s value and are dedicated to keeping it affordable, widely available, and economically viable in the next Farm Bill.

First Video in Agri-Pulse Farm Bill Series Highlights Importance of Crop Insurance

The importance of crop insurance and other risk management tools to our nation’s farmers is the main message of the first segment in a new Agri-Pulse Farm Bill video series.

“We all rely on farmers and ranchers, but farming is riskier than other businesses out there,” the video begins. “Crop insurance helps farmers manage their risk.”

The video notes that with crop insurance, farmers put skin in the game, paying premiums and shouldering deductibles. This protects taxpayers from expensive ad hoc disaster bills.

The video features a number of interviews with farmers and ranchers, including Craig Hill, Iowa Farm Bureau president, who discussed the unique challenges farmers face.

“We have to negotiate with Mother Nature each and every year to grow a crop and that risk is fairly significant for most growers and so the crop insurance program is essential,” Hill said.

But it’s not just the weather that the modern farmer has to worry about. It’s the price of the crops they grow, which can respond quickly to a weather disaster or change of demand in the U.S. or around the world.

Kevin Paap, president of the Minnesota Farm Bureau, says that this uncertainty makes crop insurance “his bankers’ best friend.”

“Not only is it the drought and the things that you think about typically with crop insurance as far as yield loss, but also it’s the revenue side,” Paap said. “Having that ability to make sure that you can manage your risk, you can use your crop as collateral, by far is the #1 thing.”

And crop insurance isn’t just critical for traditional row crops. When it comes to specialty crops, crop insurance is a vital tool.

Kay Rentzel, executive director, National Peach Council, noted that when a farmer puts a tree or a bush in the ground it takes at least three years before they actually produce a harvest. So one catastrophic freeze potentially could wipe out an industry.

“We desperately want to be able to feed America, we want to be able to feed the world and we want to provide them with healthy, good-for-you food products and crop insurance is one of the roles and one of the tools they have to do that,” Rentzel said.

Blake Hurst, Missouri Farm Bureau president, stressed the importance of crop insurance to beginning farmers.

“For my sons-in-law who are just beginning farming, it is very important to them that they have some stability, some ability to plan, some ability to secure financing,” said Hurst. “If they don’t have a guarantee that that program is going to be there over the next several years as they make long-term plans, it becomes difficult for them to grow, for them to expand, for them to be successful in their farming careers.”

The segment concludes by stressing the importance of passing a strong Farm Bill in the near future.

“Uncertainty is never good,” said Russell Boening, Texas Farm Bureau president. “If you don’t know what your risk management tools are going to be or how they are going to work – yes it can be nerve wracking; it can cause sleepless nights.”

Texas and Minnesota Farmers Praise Crop Insurance During Listening Sessions

The House Agriculture Committee has been crisscrossing the country this summer to visit with farmers and ranchers about their priorities in the upcoming Farm Bill. These listening sessions have been extensive, and Committee members have touted their usefulness.

Following the most recent forum in California this week, Chairman Mike Conaway (R-TX) addressed the sugar industry’s annual meeting in San Diego.

“One of the common themes on the listening sessions has been the importance of crop insurance,” he told the sugar producers. “Over and over and over we’ve had that conversation with folks.”

What’s Cropping Up was interested in what Agriculture Committee members have been hearing, so we watched nearly five hours of footage of sessions in San Angelo, Texas, and Morgan, Minnesota.

The Chairman’s assessment was correct. Crop insurance has been front and center. Below is a sampling of what was said about farmers’ primary risk management tool.

“Crop insurance is so vital to this state; so vital to every crop in (Texas). Whether it be corn, wheat, or cotton – all of the crops come very much into play when it comes to crop insurance.”
Russell Boening, president, Texas Farm Bureau

“Farmers, ag leaders, equipment dealers – everyone involved in agriculture – agrees that crop insurance should remain a viable and affordable tool for managing risk.”
Richard Gaona, president, Rolling Plains Cotton Growers

“How can I and my fellow farmers stay in business? Number 1 (priority) is crop insurance. … Crop insurance is indispensable.”
Ben Scholz, National Association of Wheat Growers

“With more frequent and intense weather patterns, rising interest rates and production costs and lower commodity prices, our risk has gone up while our balance sheets have gone down. We simply have to have affordable crop insurance to manage those risks.”
Kyle Peterson, chairman, Southern Minnesota Beet Sugar Cooperative

“Farmers borrow more in one year to produce a crop than most Americans do in a lifetime. Our growers, and our bankers, need strong risk management tools like crop insurance that are essential in order to secure operating loans to grow our crop.”
Kyle Peterson, chairman, Southern Minnesota Beet Sugar Cooperative

“When there’s a crop loss, there’s going to be a loss of income on the farm but with a good crop insurance program, and working capital, we may help them farm another year.”
Howard Olsen, AgCountry Farm Credit Services

“I was involved in a hailstorm this year where we lost the corn and the bean crop on one farm. With crop insurance, we’re not going to make any money at that this year, but I am going to be able to farm again next year because of risk management tools.”
Kevin Paap, president, Minnesota Farm Bureau

“Crop insurance – please protect it. Crop insurance is so vitally important. … It is a key component to obtaining credit.”
Bruce Peterson, Minnesota Corn Growers

“Crop insurance is so important to me. We have three families directly that drive income from our farm and if we did not have crop insurance we would not be able to survive.”
Noah Hultgren, Minnesota Corn Growers

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