Keep Crop Insurance Affordable
Living through the drought of 2012 as an Illinois farmer gave me a whole new appreciation for risk management tools. There are things that farmers can do to try and deal with the curveballs served up by Mother Nature and with the ups and downs of market swings, but many things — like a massive drought or a heat wave — are completely out of our control.
If this drought would have happened a decade before, it would have left many farmers completely devastated and on the verge of bankruptcy, with nowhere to turn but to Congress for an expensive, taxpayer-funded bailout package. In fact, past disasters have cost taxpayers tens of billions of dollars since 1979.
What was different about the drought of 2012, which was the worst natural disaster to hit this state in my lifetime, is that the vast majority of the state’s farmers had purchased the best risk-management tool around: crop insurance. In fact, farmers spent well over $4 billion out of their own back pockets in 2012 purchasing the protection and peace of mind of crop insurance, which meant when disaster struck, they had a backup plan in hand.
The recent Farm Bill took three long years to pass and cut $23 billion out of farm programs. But for those who for whatever reason are always looking to criticize farm policy that still wasn’t enough. Now they have their sights set again on crop insurance, and are pushing forth ideas to make it more expensive for farmers to purchase.
What these misguided groups and members of Congress seem to miss is that the reason why crop insurance has become the best risk-management tool for farmers is that it’s affordable and reliable. In fact, 90 percent of planted cropland was protected by crop insurance in 2014. It’s this level of protection — made possible by crop insurance’s affordability — that keeps expensive disaster bills from hitting taxpayers when Mother Nature strikes.
Unlike direct payments in the past, crop insurance is not a handout. In fact, when farmers purchase crop insurance, they receive a bill, not a check, and only receive a payment if they incur a loss, and only after paying a deductible. Just like homeowners’ insurance, when farmers buy crop insurance, they do so hoping that they will never have to use it. And many of them rarely do. In fact, since 2000, farmers have paid out more than $38 billion purchasing the protection of crop insurance, and in most years, they don’t collect a dime.
If crop insurance becomes more costly, then farmers simply won’t be able to afford it, and they will have nowhere to turn but the federal government when disaster strikes. This is a lesson we learned over and over again before crop insurance became widely available and affordable.
Crop insurance works so well and has been embraced so readily by farmers across the country because it’s a public private partnership that combines the best of the public and private sectors. Crop insurance premiums are partially discounted by the government to ensure affordability and the policies are sold and serviced by the private sector. And when disaster strikes, an indemnity check arrives in weeks, not years.
Like any other public policy, crop insurance isn’t perfect, and I’m sure Congress will do some fine-tuning to the program in the next Farm Bill just like they did in this one. But the most important thing to keep in mind is that farmers are not only enormous producers, they are enormous consumers as well. And with crop insurance policies in hand, they can bounce back from natural disaster or huge market fluctuations and continue to be the engines that drive the economy of rural America.
Keith Mussman is president of the Kankakee County Farm Bureau.