Tropical Storm Irene Proved the Value of Crop Insurance
One side benefit of the popular “eating local” movement is a growing recognition by urbanites and suburbanites alike to the importance of agriculture and the need to ensure that farmers are able to withstand the many challenges presented by Mother Nature. While farmers manage their many risks using a wide variety of tactics, there is one tool in most farmers’ risk management portfolio, which they consider indispensible. That tool is crop insurance.
The value of crop insurance to New England’s farmers was made crystal clear last year with the arrival of Hurricane Irene, who brought heavy winds and even heavier rains just as crops were nearing harvest. While 2011 saw record losses across the U.S. with freezes in Florida, drought in the Southwest and floods in the Midwest, it was farmers in Vermont who sustained the highest loss ratios in the country. As a crop insurance agent, I can attest that many of our farmers saw their entire crops devoured in one day as floodwaters, sometimes six feet high, swallowed their fields.
After the waters finally receded and the extent of the damage to their farms was assessed, it quickly became clear that Hurricane Irene’s wallop had the potential of being a “game changer” for many New England farmers. And the only thing that allowed many of them to return to their fields this spring and plant was crop insurance, instead of losing their farms in bankruptcy.
Crop insurance is a public private-partnership whereby a farmer buys a policy that protects his crops from adversity. Just like homeowner’s insurance or car insurance, crop insurance is personalized to match each farmer’s degree of exposure to losses, and comfort level with risk. It’s sold, monitored and delivered by the private sector, so farmers receive their indemnities quickly after catastrophe strikes.
But it wasn’t always like this. When I first became an agent in New England in 1984, probably only about ten percent of our farmers purchased crop insurance. One reason was that it was a relatively new risk management tool for farmers in New England, but the biggest reason was its cost. So every time a disaster hit, since crop insurance wasn’t in play, farmers would rely on federal disaster bills, which were expensive for taxpayers and painfully slow to deliver help – taking up to one or two years at times – for the farmers who lost everything.
In the mid 90s, the federal government, weary of disaster payments and looking for a better risk management tool, put forward funds to help partially underwrite crop insurance premiums. Today, most farmers in New England and elsewhere have purchased crop insurance policies, which last year covered 80 percent of eligible crops covering 263 million acres.
Crop insurance is also great for consumers because it makes purchasing locally produced food possible. Consumers nowadays are concerned about the origin of their food, the cultural practices used to produce it and its overall safety. Many of us believe that the best food in the world is local, because we know that the farmer down the road has produced a product that is not only delicious but also secure. Without some kind of policy protection in place for those farmers, “buying local” could be a thing of the past.
And in the tight credit markets we live in, crop insurance has proven to be an indispensible tool for farmers seeking lines of credit from banks. When I first started in the business, it was rare to see a lender who would ask about crop insurance. Nowadays it’s almost ubiquitous, particularly for farmers who raise expensive specialty crops, like potatoes and apples.
Crop insurance has already shouldered $12 billion in federal funding cuts in the name of balancing the budget. But if the government continues to bleed crop insurance, it will become either unaffordable for farmers to participate, incapable of meeting the challenges when a disaster strikes, or both.
When the next Farm Bill is written, Congress needs to remember that it should “do no harm” to crop insurance. From those of us who weathered Hurricane Irene and lived to plant another day, we can attest to the fact that a robust crop insurance policy is in the best interest of not only farmers, but consumers as well. The farmers down the road that grow the food for your family and mine need some common-sense protection against Mother Nature. Crop insurance fits the bill.
About the Author: Art Carroll owns the Arthur Carroll Crop Insurance Agency in Limerick, Maine, which insures farmers in all New England states and New York.
This guest column appeared in Valley News, a daily newspaper of the Upper Valley in New Hampshire and Vermont.