A competitive & innovative farm sector requires a sustained investment

Editor’s Note: Farm Policy Facts is pleased to publish a guest editorial from Todd Van Hoose on the importance of our continued investment in farm policy and crop insurance. Van Hoose is the president and CEO of the Farm Credit Council and a strong advocate for America’s farmers and ranchers.

I did not pursue a career in agriculture. It pursued me. Although I grew up in the middle of Kentucky surrounded by farms, I was not a farm kid. But, an internship in Washington, D.C. at the U.S. Department of Agriculture (USDA) three decades ago, combined with my roots in rural America, gave me a glimpse of an industry that is vitally important to the progress and economic success of our country. I quickly realized that I wanted to work and advocate for the men and women who provide us with our daily needs of food and fiber.

Agricultural production in this country is the envy of the world. One of the reasons it has been successful is because of the investments we have made in farm policy and crop insurance through the years.

Crop insurance, in particular, has grown significantly that today roughly 297 million out 328 million acres of American farmland are insured. This includes the gamut of agriculture from traditional row crops to fruits and vegetables, from big operations to small and medium-sized farms, and from conventionally to organically grown crops.

It has become a modern tool that farmers rely upon year after year to help them manage price risk, weather risk, and all the other perils that go along with producing our nation’s food and fiber supply. From a lending perspective, crop insurance and farm policy are enormously important because they mitigate another kind of risk: defaulting on a loan after a catastrophic event.

Farming is capital-intensive and most farmers cannot self-fund their operations. Many farmers across the country rely on Farm Credit for loans and other financial services to help their businesses succeed.

The Farm Credit System holds nearly 41 percent of the farm sector’s total debt and has the largest share of farm real estate loans. Our farm operating loans are, in essence, unsecured because the only real security is the lien on the crop. If there is no crop because of a catastrophic event, then there is no way to repay the loan.

With crop insurance and farm policy, farmers and lenders have something that manages the risks involved. This in turn allows farmers to obtain financing because lenders know that they will have the ability to repay the loan, especially right now when we are experiencing a down cycle in the farm economy.

For most farmers this is the second or third straight year of declining prices while inputs have not followed the same trend. With a 56 percent drop in net farm income, there is a lot of pain in farm country right now and we are seeing a lot of farmers limiting or foregoing equipment purchases and recalibrating other expense controls to balance their operations against the new commodity price level. This is why maintaining strong farm policy and keeping crop insurance affordable are critical.

Part of that affordability includes the federal discount on premiums that farmers pay for coverage. Crop insurance is a sizable investment for farmers and they only receive an indemnity when they suffer a considerable loss. Many farm policy critics like to distort this fact and advocate for eliminating this discount or excluding certain large operations from receiving it, but the end result would be to undermine the effectiveness of crop insurance by shrinking the risk pool and making crop insurance unavailable for some farmers and unaffordable for others. Either way, it would make an already risky endeavor more difficult while America’s farmers and ranchers try to feed a growing, hungry world.

American agriculture has come a long way since my internship at USDA, but the one constant has been our ability to produce a secure and affordable food and fiber supply that we all rely upon. The role that farm policy and crop insurance plays in enabling that production cannot be overlooked or dismissed. In order to maintain and support a healthy, vibrant, competitive, and innovative farm sector, we must continue to invest in it.

Todd Van Hoose is the President and CEO of the Farm Credit Council.