Crop Insurance: A Life-Saver for Kansas Wheat Farmers
By Rene Pastor
On land where wheat stalks, heavy with grain, would normally wave on a breeze in the late summer, the searing drought of 2012 has zapped nearly every inch of land across the Kansas plain, leaving it burnt and lifeless.
There was no way to hide from the drought in the Grain Belt. Just one year after the worst dry spell in a century devastated farmers in Texas, it spread like a virulent disease into the Midwest—the breadbasket for much of the world’s corn, soybeans and of course, wheat.
The United States is a major wheat-producing country, with output typically exceeded only by China, the European Union and India, according to the U.S. Department of Agriculture (USDA) Economic Research Service.
Wheat ranks third among U.S. field crops in both planted acreage and gross farm receipts, behind corn and soybeans. U.S. wheat’s harvested area has dropped off nearly 30 million acres, or one-third, from its peak in 1981 because of declining returns compared with other crops, and changes in government programs that allow farmers more planting flexibility.
About half of the U.S. wheat crop is exported, the USDA said, but despite rising global wheat trade, the U.S. share of the world wheat market has eroded in the past two decades.
The drought struck especially hard in Kansas, one of the biggest wheat producing states in the country. Jerry McReynolds, a well-known wheat producer in the northern part of the state said in an interview the dry spell is “one of the most serious droughts we have ever encountered in my farming career.”
Each year, McReynolds plants 2,300 acres of winter wheat, 400 acres of corn, 250 of soybean, 800 to 1,000 of grain sorghum, and 150 acres of forage sorghum. He also runs his own cattle operation. His farm is located outside Woodston, Kansas, a place just 136 people call home. Where “Main Street” is all of eight corners tucked away near Interstate 24.
Like many American farms, it is a joint operation by the McReynolds family. He said his three children have always helped him and his wife, Diane, in running the farm.
“Our son is a part of the operation. Our married daughters return whenever possible for harvest or other times. One daughter owns some of the land we operate. Another daughter and [her] husband would like to return to the farm, if possible,” McReynolds said.
McReynolds has taken an active role in two decades of farming. He has held down several leadership positions in the Kansas Association of Wheat Growers (KAWG) and, as its president, he helped start the Kansas Farm Bill Coalition. He was also involved in the process that culminated in Kansas Wheat, the cooperative agreement between KAWG and the Kansas Wheat Commission.
In 1998, he was elected to the Kansas Farm Bureau Board of Directors representing the sixth district in the area.
But for all his years in the business, McReynolds says he has never encountered a litany of problems quite like those in 2012.
“All spring planted crops really suffered. Germination was a problem. The weather was extremely hot for a very long period of time, without moisture. We encountered temps to 115 degrees,” he said.
“We cut half of our corn acres for silage. I chose not to plant soybeans this spring because of the extreme dryness. Our grain sorghum and forage sorghum really suffered. Yields will be less than half of last year,” he said, adding however, that “wheat yields were surprisingly good, considering the hot, dry weather.”
Crop insurance has been vital for the continued operation of the farm, especially in the midst of the worst drought this nation has seen in a quarter century.
“Crop insurance is critical to our operation. I had a 70 percent level of coverage. However, that only provides around 60 to 65 percent coverage,” he explained.
McReynolds said he has already turned in the papers for “losses on the corn that was cut for silage,” a process of fodder being compacted and stored without being dried so it can be used as animal feed in the winter.
Other losses will be determined after the fall harvest by the insurance companies, but there’s no doubt the impact of the drought on his farm has been severe.
The fallout will extend into 2013 as farmers approach the fall planting season for winter wheat.
“Moisture is critical to get wheat up this fall, as well as germination of any volunteer wheat that must be destroyed before wheat planting,” he said. “Recovery after a drought is very slow. It takes years to get things back to normal. Drought causes revenue losses, emotional issues, cowherd reductions, and a lot of uncertainty.”
Without crop insurance it would have been tough to stay in business, the long-time Kansas wheat farmer said. The way the system works, crop insurance payments are paid close to the time frame when loss occurs — before harvest time in case of prevented planting and replant payments, or shortly after harvest in case of yield or revenue shortfall. Most crop insurance claims are paid within 30 days after settlement–a vast improvement from the days of big, ad hoc disaster bills.
Crop insurance is not a government handout that depends on the taxpayers to pay when disaster strikes. Farmers must contribute financially in order to receive crop insurance, and have already invested more than $4 billion in 1.2 million crop insurance policies this year. These contributions help hold down the cost to the taxpayer and encourage people taking part to exercise financial discipline going forward.
Still another outstanding feature of the U.S. crop insurance program is that it allows farmers to customize their plans and coverage to accurately reflect individual losses and unique yields or risk.
“The input costs are so great, and our margins are so close, that without crop insurance many growers would be out of business,” McReynolds said.
Like everyone else, he is hopeful 2013 will bring better conditions. “Hardship causes us to improve our management practices, but it is a lot more fun when we get rain,” he quipped.