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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

Crop insurers call on farmers to demonstrate severity of drought in online photo contest

OVERLAND PARK. KANSAS (August 20, 2012)—National Crop Insurance Services (NCIS) announced that it will host a 90-day photo contest, beginning today and featuring farm photos taken during the 2012 drought—on track to be one of the driest years the nation has ever seen.

The group is reaching out to all farmers suffering from these near-record drought conditions throughout the Midwest and Southwest and asking them to submit photos portraying the severity of the consequences these unpredictable weather conditions can impose on our nation’s farm families.

Uploading will begin on August 20, and submissions will be accepted through 12:00 AM EST, on Friday, September 21.

Once the submissions are in, visitors will be able to vote on the photos from September 22 through November 21. At the close of the contest, the top three photos will be ranked and awarded prizes, the first of which will be a new iPad.

Interested parties should follow Crop Insurance Keeps America Growing on Twitter and Facebook to stay up-to-date with the contest’s progress. To view the official contest rules, please click here.

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Crop insurance will cover massive losses

In spite of the depth and far-reaching impact of the drought that has gripped more than half of the nation’s agricultural production area this summer, farmers should have no worries regarding their crop insurance policy’s ability to pay.

“The crop insurance industry is on the ground in the drought-stricken areas, mobilizing loss-adjuster teams,” says Thomas P. Zacharias, president, National Crop Insurance Services in a statement released today.

“Farmers can be assured their claims will be paid, and that the companies will move as quickly and as efficiently as possible, given the expected volume of claims, to assess damages and get indemnity checks into the hands of farmers,” Zacharias says.

Claim volume will be huge. Recent USDA crop report estimates indicated significant losses for corn and soybeans, result of the heat stress and extreme drought that covers much of the Corn Belt.

“Although this was the largest corn crop planted since 1937, production is projected to be down 13 percent, the lowest output since 2006,” Zacharias says. “Corn yields are expected to average 123.4 bushels per acre, down nearly 24 bushels from last year, which would be the lowest average yield since 1995. Soybean production is forecast to be down by 12 percent from last year, and if realized, would have the lowest average yield since 2003.”

Zacharias says most farmers in drought-stressed areas are covered by crop insurance.

“Some farmers in these affected areas have purchased crop insurance policies for years and have never collected an indemnity. This year, their decision to purchase crop insurance confirms their practice of sound risk management.”

Crop insurance will cover massive losses

In spite of the depth and far-reaching impact of the drought that has gripped more than half of the nation’s agricultural production area this summer, farmers should have no worries regarding their crop insurance policy’s ability to pay.

“The crop insurance industry is on the ground in the drought-stricken areas, mobilizing loss-adjuster teams,” says Thomas P. Zacharias, president, National Crop Insurance Services in a statement released today.

“Farmers can be assured their claims will be paid, and that the companies will move as quickly and as efficiently as possible, given the expected volume of claims, to assess damages and get indemnity checks into the hands of farmers,” Zacharias says.

Claim volume will be huge. Recent USDA crop report estimates indicated significant losses for corn and soybeans, result of the heat stress and extreme drought that covers much of the Corn Belt.

“Although this was the largest corn crop planted since 1937, production is projected to be down 13 percent, the lowest output since 2006,” Zacharias says. “Corn yields are expected to average 123.4 bushels per acre, down nearly 24 bushels from last year, which would be the lowest average yield since 1995. Soybean production is forecast to be down by 12 percent from last year, and if realized, would have the lowest average yield since 2003.”

Zacharias says most farmers in drought-stressed areas are covered by crop insurance.

“Some farmers in these affected areas have purchased crop insurance policies for years and have never collected an indemnity. This year, their decision to purchase crop insurance confirms their practice of sound risk management.”

Crop insurance adjusters making rounds before fall harvest

In this drought, crop insurance has turned into a lifeline for many farmers in the Tri-States.

The U.S. Department of Ag says it expects corn growers to average 123 bushels per acre, which is down 24 bushels from last year. The federal government says corn growers could end up with their lowest average yield in 17 years as the drought continues to take its toll.

The USDA has started sending letters to farmers, explaining what things farmers need to know before having an insurance adjuster on site to evaluate their crops.

“There would be an awful lot of people out here today that would be extremely concerned with this drought if we didn’t have crop insurance,” farmer Dan Hugenberg said.

Hugenberg says insurance is his life line this year as he watches the drought destroy his corn crop.

“I’ve got $400,000-500,000 invested in this crop and if I come out with a 30 bushel yield or 20 bushel yield, and if I only come out with $160,000, it takes a long time to recover,” Hugenberg said.

NCIS Responds to August 10, 2012, USDA Crop Progress Report

The following statement is in response to the August 10 USDA Crop Report. The statement should be attributed to Thomas P. Zacharias, president, National Crop Insurance Services.

“As expected, the Agriculture Department lowered the corn and soybean production forecast in its August 10 crop production report released today, due to heat stress and extreme drought throughout much of the Corn Belt.

“Although this was the largest corn crop planted since 1937, production is projected to be down 13 percent, the lowest output since 2006. Corn yields are expected to average 123.4 bushels per acre, down nearly 24 bushels from last year, which would be the lowest average yield since 1995. Soybeans tell a similar story. Soybean production is forecast to be down by 12 percent from last year, and if realized, would have the lowest average yield since 2003.

“Thankfully, the vast majority of the farms in these drought-ravaged areas are protected by crop insurance. Farmers purchase crop insurance polices to protect themselves against situations just like this. Some of the farmers in these affected areas have purchased crop insurance policies for years and have never collected an indemnity. This year, their decision to purchase crop insurance confirms their practice of sound risk management.

“Obviously, there will be continued speculation about the ultimate cost of the 2012 drought. Even with today’s report, it is still too early to provide precise estimates of the losses. We are analyzing the August 10 report and will compare that with reports from the field along with the crop insurance policy data that is still being processed and reported to RMA. Again, we do not yet have a complete picture of the situation and final outcomes will vary by state, crop and types of policies purchased.

“What is certain is that the crop insurance industry is on the ground in the drought-stricken areas, mobilizing loss-adjuster teams. Farmers can be assured their claims will be paid, and that the companies will move as quickly and as efficiently as possible, given the expected volume of claims, to assess damages and get indemnity checks into the hands of farmers.

“In order to be approved to sell federal crop insurance, companies must have adequate surplus and reinsurance at their disposal so that even if a catastrophe of this magnitude strikes, and then one strikes again the next year, the company is still capable of paying indemnities on the policies they sell.

“In addition to company surplus and reinsurance, the federal government, serves as the backstop reinsurer for all companies that sell crop insurance. As such, the federal government shares in the gains and the losses of the program. Gains in prior years can and will be used to offset losses in years like this one.

“In terms of the industry’s ability to handle the claims load that will be generated over the next several months, the industry has 5,000 claims adjusters and 15,000 agents working tirelessly right now to help growers cope. These adjusters are working hard to get money to farmers who have suffered losses, already paying out $822 million in indemnities to date. Companies are also mobilizing adjusters away from other parts of the country that have not been affected by drought and sending those adjusters to the hard-hit states.

“With their crop insurance policies in hand, farmers will not only survive this drought but plant again next year, ensuring a continuity of the food, feed, fiber and fuel supply for this nation and an increasingly hungry world.”

 

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Crop Failed? There’s Insurance for That

Tess Vigeland: Congress left for its summer vacation without coming up with a drought relief package for farmers and ranchers.

But that doesn’t mean they’re all left high and dry. A lot of farmers are going to get help from crop insurance. And that could put a crimp in the bottom line of insurance companies — and taxpayers. Marketplace’s Adriene Hill explains.

Adriene Hill: Corn is supposed to be green and tall this time of year.

It’s not.

Doug Yoder: It’s brown.

Doug Yoder is with the Illinois Farm Bureau. He says it’s brown and/or short, depending on where you are.

But scrawny plants don’t always add up to scrawny paychecks. Most corn and soybean farmers — and we’re talking big-scale farmers here — have crop insurance. The feds pick up a big part of the tab, farmers pay the rest.

Yoder: Anybody that drops a seed in the ground and hopes to make a living on that, you’re accustomed to taking risks. But there are also limits to those risks that you can take, and we’ll be testing those limits this year. There’s no doubt about it.

Crop Failed? There’s Insurance for That

Tess Vigeland: Congress left for its summer vacation without coming up with a drought relief package for farmers and ranchers.

But that doesn’t mean they’re all left high and dry. A lot of farmers are going to get help from crop insurance. And that could put a crimp in the bottom line of insurance companies — and taxpayers. Marketplace’s Adriene Hill explains.

Adriene Hill: Corn is supposed to be green and tall this time of year.

It’s not.

Doug Yoder: It’s brown.

Doug Yoder is with the Illinois Farm Bureau. He says it’s brown and/or short, depending on where you are.

But scrawny plants don’t always add up to scrawny paychecks. Most corn and soybean farmers — and we’re talking big-scale farmers here — have crop insurance. The feds pick up a big part of the tab, farmers pay the rest.

Yoder: Anybody that drops a seed in the ground and hopes to make a living on that, you’re accustomed to taking risks. But there are also limits to those risks that you can take, and we’ll be testing those limits this year. There’s no doubt about it.

Drought May Cost $20 Billion in Crop Insurance

WASHINGTON (CNNMoney) — As the drought continues to ravage the nation’s corn, wheat and soybean fields, crop insurance losses are expected to break records.

With nearly half of the continental United States under severe drought conditions, crop insurance losses are mounting daily, according to a report from the National Drought Mitigation Center at the University of Nebraska-Lincoln released on Thursday.

“It will be a major loss situation,” said Thomas Zacharias, president of the National Crop Insurance Services, a lobbying group representing private crop insurers. “The companies are in the field adjusting claims as we speak.”

An economist with the group roughly estimated that losses could top $20 billion.

And taxpayers will ultimately shoulder most of the cost the nation’s scorched fields.

While there are no official estimates available yet, National Crop Insurance Services Economist Keith Collins said crop losses this year look as bad or worse than other terrible drought years.

 

Drought May Cost $20 Billion in Crop Insurance

WASHINGTON (CNNMoney) — As the drought continues to ravage the nation’s corn, wheat and soybean fields, crop insurance losses are expected to break records.

With nearly half of the continental United States under severe drought conditions, crop insurance losses are mounting daily, according to a report from the National Drought Mitigation Center at the University of Nebraska-Lincoln released on Thursday.

“It will be a major loss situation,” said Thomas Zacharias, president of the National Crop Insurance Services, a lobbying group representing private crop insurers. “The companies are in the field adjusting claims as we speak.”

An economist with the group roughly estimated that losses could top $20 billion.

And taxpayers will ultimately shoulder most of the cost the nation’s scorched fields.

While there are no official estimates available yet, National Crop Insurance Services Economist Keith Collins said crop losses this year look as bad or worse than other terrible drought years.

 

Crop Insurers Reassure Farmers as Drought Worsens

OVERLAND PARK, KANSAS, July 18, 2012 – As the drought spreads and attention turns to worsening crop conditions in farm country, the nation’s crop insurers today reassured farmers that companies will have the money necessary to quickly pay out claims in 2012, even amid record payouts last year.

For every dollar of premium that insurance companies write, they have a regulatory requirement to have the private financial backing to cover catastrophic losses. Each year, the Federal Crop Insurance Corporation reviews and approves every company’s plan of operations to ensure that adequate capital is available, explained Tom Zacharias, president of National Crop Insurance Services (NCIS), the industry’s trade association.

“We’ve always been there for our farmer customers when they’ve faced tough times in the past and we’ll continue to be there,” he said.

Zacharias said 2011, which was marked by widespread weather-related loss and a record $11 billion in indemnity payments, should serve as a good model for what farmers can expect this year.

In 2011, most payments to farmers on the policies they purchased were processed within 30 days of claims being finalized. Such efficiency required a highly trained and skilled force of agents and claims adjusters, Zacharias pointed out.

There are about 5,000 certified crop insurance adjusters in the country who are already visiting farms and assessing damage. More than 2,000 of these adjusters are expected to attend NCIS sponsored training sessions this summer where part of the focus will be on this year’s droughts.

Although indemnity payments on the 2012 crop are already being made, NCIS is unable to predict the extent of likely damages this year because reliable information about the number of policies sold in 2012 and the acres covered by those policies will not be available until mid-August. Final indemnity estimates will take even longer to filter in.

In the meantime, Zacharias offered advice for farmers who are facing weather disaster. If producers think they have a loss on an insured crop, they must:

1. notify their crop insurance agent within 72 hours of the initial discovery of damage;

2. continue to care for the crop and protect it against further damage, if possible; and,

3. obtain consent from the insurance company prior to destroying any of the insured crop.

“Crop insurance is working well, and it will prove to be instrumental to agriculture’s ability to rebound this year,” Zacharias concluded. “As Congress debates a new Farm Bill and as the administration considers future changes, we hope they will see our impressive track record and do no harm to crop insurance.”

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

By Quentin Bowen

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

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

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

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

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

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

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

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

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

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

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

The Lone Star State Is Unfortunately Exceptional

By Dee Vaughan

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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