Recent Guest Columns Stress Importance of Crop Insurance as Risk Management Tool

November 17, 2014
Farm Policy Facts has long stressed the importance of crop insurance to our farm safety net. We are pleased to see these same views being echoed in mainstream media, especially in light of the number of column inches given to our critics.
The following column, by farmer Matthew King, appeared recently in the Columbus Dispatch:
In tough years, crop insurance is vital
Farming in central Ohio tends to be very even-keel, largely due to the great soil we sit on and the favorable climatic conditions in most years. Local crops, including corn, soybeans and wheat, tend to come in at fairly predictable yields, offering local farmers some peace of mind in a business known for its risk.
That whole equation was turned on its head in 2012, which will be forever seared in the minds of those of us who work the land as the Great Drought of 2012. Thankfully, most farmers here in central Ohio, like me, purchase crop insurance every year.
Crop insurance is a public-private partnership whereby farmers purchase individual policies with their own money and tailored to their own risk tolerance.
Folks who are not involved directly in farming don’t understand the enormous costs — for fertilizer, seed, machinery, labor and herbicide — that must be shouldered by farmers in order to get a crop in the ground. Farmers spend tens of thousands of dollars, then pray for good weather. If it all comes together, you’ve got a bountiful harvest and you’re set for the next year. If it doesn’t, hopefully you have crop insurance.
Now, crop insurance is also no small expense. In 2013, our farming operation’s crop-insurance premium totaled more than my wife’s annual salary as a local teacher. And in most years, we don’t make a claim. It’s just like homeowner’s insurance — you hope you never need to make a claim.
During the 2012 drought, farmers talked about how awful things were, but, curiously, none mentioned the possibility of losing their farms. That’s because they had all purchased crop insurance, knowing that if the bottom fell out, they had a backup plan.
And thankfully, for consumers in the U.S. and abroad, those farmers were back again in 2013, producing the healthiest, best and most affordable food in the world.
And here is a recent guest column by farmer Bill Christ that appeared in the Peoria Journal Star (Illinois):
In the Spotlight: Previous droughts taught Illinois farmers how to manage risk
Some have said there is no better place on Earth to farm corn than in America’s Corn Belt. Our soil and climate for growing corn and soybeans are among the best, and our farmers are driven to produce record crops every year. In some years, they do. But drought does occasionally visit the Land of Lincoln, as in 1983 and 1988. In those years, many farmers watched their crops wither and their dreams blow away because they didn’t have a backup plan in case something like this happened.
Today, most farmers purchase crop insurance, which ensures that when drought or flood or early freeze visits our region, they have some level of protection to recoup the tens of thousands of dollars they’ve spent trying to raise a crop.
The droughts in the 1980s taught area farmers that if they relied on disaster payments and subsidized federal loans to bounce back from natural disasters, they were going to eventually fall on their faces. On the other hand, crop insurance — which today protects 94 percent of planted cropland in the U.S. — combines the resources of the federal government with the ingenuity and entrepreneurship of the private sector.
Crop insurance allows individual farmers to purchase the coverage they need, tailored to their farms, their financial standing and their tolerance to risk. Farmers purchase policies from participating insurance companies that are approved by the government, which discounts them to ensure their affordability. In 2012, farmers spent $4.5 billion out of their own pockets purchasing crop insurance, which has become indispensible because farming is so expensive that banks are afraid to make production loans without an insurance policy as collateral. That way, if the crop fails, the bank and the farmer have something to fall back upon.
I’ll never forget the drought of 2012. Farmers calmly walked their fields, yet inside we all knew we were heading for big trouble. Well before the harvest, the corn was burning up. In some parts of the state, corn crops were condemned but the plants were so small they could hardly be chopped for silage. But unlike previous droughts I had witnessed, there was a sense of optimism because the farmers I knew had adequate protection. Everyone bounced back in 2013 and produced an enormous harvest for the nation.
In 2014, Illinois farmers spent $302 million purchasing 124,000 crop insurance policies protecting 19 million acres valued at nearly $11 billion.
We live in one of the richest nations in the world. Virtually anything you want to eat is right at your fingertips. That doesn’t occur by accident. It’s possible due to good farm policies and hard-working farmers, who together produce the cheapest, most reliable food supply in the world. And I’ll be forever proud of that fact.