Montana Farmers Need A Strong Crop Insurance Policy
There are those who say that the grass is always greener on the other side of the fence. But the opposite can be true as well. Sometimes, it’s not until you look on the other side of the fence that you realize just how green your own grass is.
That’s certainly true this year. After good precipitation in the spring, weather in eastern Montana has been on the dry side since July; but the drought is not yet as severe as that in the Midwest weather is top of mind every year, since I’m a farmer who worries every year when I plant 2,300 acres of durum wheat, peas, lentils, flax and canola.
Last year, it was so wet from spring rains that I couldn’t get all of my land seeded. This year, after a promising start, it has become too dry. Mother Nature can be unpredictable, and a few bad years in a row without a good risk management strategy in place could mean the end of your farming career. That’s why I’ve purchased crop insurance every year since I started farming in 2001.
Crop insurance is a public-private partnership that not only reduces taxpayer exposure to risk, but also saves them money. When disaster struck last year with floods in the Midwest, drought in the Southern Plains and hurricanes on the East Coast, farmers who lost everything didn’t send their representatives back to Washington asking for a big farm disaster bill.
How was that avoided, given the extent of last year’s damage? Farmers didn’t need a disaster bill because 84 percent of eligible crops were protected by crop insurance. Prior to the emergence of crop insurance as the top risk management tool for farmers, natural disasters regularly triggered very costly, unbudgeted ad hoc disaster bills from Congress, costing taxpayers $45 billion from FY1989 to FY2001. Those days are over.
Crop insurance is no small expense for those of us who purchase it, but generally is the best – and in some cases the only – risk management tool available to many farmers nowadays. Crop insurance forces farmers to “put some skin in the game” by purchasing the insurance and taking charge of their own risk management strategies. Here in Montana, more than 16,000 farmers paid more than $85 million to purchase policies to cover their potential losses in 2011.
In the tight financial times we live in, crop insurance is a smart and efficient farm policy. In fact, as crop insurance has grown, taxpayer spending for farm safety net programs as a whole has dropped from $19.2 billion in 2002 to an estimated $12.3 billion in 2011, a 36 percent decline.
While the government pays a portion of a farmer’s premium – which is a way to encourage as much participation in the program as possible – the government and private insurance companies share in the losses and gains of the program. The government has made more than $3.5 billion in underwriting gains over the last several years and that money goes right back into the U.S. Treasury.
With the large amounts of capital required to plant a crop every year, crop insurance is essential for farmers who have to go to banks for operating loans. That’s because the banks see a crop insurance policy as a form of collateral, making their loans to farmers less risky and thus helping to inject billions of dollars into rural America.
Because crop insurance is sold, managed and delivered by the public sector, the indemnity checks come in a much more timely manner. In fact, more than $1.4 billion has already been paid out nationally to farmers who suffered losses this year, with roughly $25 million of that coming to farmers with losses in Montana.
Of course there are those in Washington who seem to forget that they eat three meals a day and criticize every dollar spent on farm programs. They say that farmers in the drought-stricken areas are actually “praying for drought, not rain,” with the implication being that farmers would rather collect a crop insurance check than sell a bountiful harvest. That’s like saying that people purchase car insurance praying for an auto wreck. Not to mention the fact that in many years I purchase a crop insurance policy and don’t collect a dime. Period.
Yes, farming is a risky business, but for those of us who grow food, feed, fuel and fiber for consumers here and abroad, it’s a way of life. Some people might say that the grass is greener on the other side of fence, but because of crop insurance, the grass can be greener on both sides of the fence.
Chris Westergard is a fourth-generation farmer who lives near Plentywood, Montana.
This op-ed appeared in the Billings Gazette on September 30, 2012.