Crop insurance is vital component to U.S. agriculture industry

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Editor’s Note: Farm Policy Facts is pleased to publish a guest editorial from Rep. Jim Costa on the importance of maintaining a strong safety net for farmers. Congressman Costa is a senior member of the U.S. House Committee on Agriculture and also served as a conferee during negotiations of the 2014 Farm Bill. We applaud his efforts in supporting American farmers and ranchers.

From working to get a five-year Farm Bill passed to fighting for water for California’s farmers, protecting and growing America’s agricultural economy is one of my top priorities in Congress. This includes preserving a robust farm safety net for producers.

During the latest Farm Bill negotiations, Federal crop insurance was the topic of much conversation, especially relative to the role that direct payments play in modern agricultural production. Some Members and special interest groups attempted to create a narrative that the program is an inefficient “handout” to rich farmers and turn popular opinion against our farm communities. Luckily, we successfully beat back that false rhetoric and passed a farm bill. However, despite how untrue it is, the sentiment that began to develop against farm risk reduction programs like crop insurance has festered.

The truth is that crop insurance is a highly successful public-private partnership between the federal government and private insurance companies. It functions as a risk management tool for farmers to mitigate the numerous risks – financial, meteorological or the like – that they take to produce the finest food and fiber in the world. In 2015, crop insurance providers sold policies for more than a 120 different crops valued at $102 billion and covering 298 million acres. Farmers deserve the opportunity to purchase the same security provided by crop insurance in a similar way that homeowners can protect themselves in the wake of a natural disaster.

As areas of the United States deal with drought conditions, particularly areas such as California’s San Joaquin Valley, crop insurance is very important to a farmer’s bottom line if they are unable to plant or to harvest their crops.

When Congressional leadership negotiated the omnibus budget deal in October 2015, they failed to consult with the House Agriculture Committee and included a provision to drastically reduce the rates of return that crop insurance companies would receive. At a time when rural America is facing challenges, and especially as California is dealing with devastating drought conditions, those cuts would have would have been detrimental for farmers throughout the country and real harm would have been done to the agriculture industry.

House Agriculture Committee members and I successfully urged the budget negotiators to strip the provision in the final deal that would have crippled insurance companies by making it too expensive to provide insurance products. To ensure continued support and success of the crop insurance program, Members of Congress, community leaders, farmers, and consumers who purchase meat, dairy, fruits, vegetables, and nuts at the grocery must express the importance of the program. If not, we may one day see the program cease to exist, and with that, we will see lost revenue, higher prices at the grocery store, and increased unemployment.

Crop insurance also provides help to beginning farmers and ranchers, as well as socially disadvantaged and veteran farmers and ranchers. It is critical that these individuals have access to the farm safety net, especially as the average age of the American farmer continues to inch higher and higher.

The public needs to understand that growing food is a very risky business, and farmers are price takers, not price makers. Every year, the people who produce our food face numerous risk factors, like weather, high input costs, and the global market, for which they have no control over. With more and more people demanding that rural America produce higher yielding and safer products at lower prices, we need to utilize every tool available in our toolbox, like crop insurance, to help those who sacrifice every day to produce the food and fiber we consume.

Rep. Jim Costa (D-CA-16) is a senior member of the U.S. House Committee on Agriculture and the Ranking Member of the Subcommittee on Livestock and Foreign Agriculture. He also served as a conferee during the 2014 Farm Bill negotiations.

Farm policy is essential to maintaining ag production in the U.S.

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If there is one place that, in recent years, overwhelmingly demonstrates the need and importance of U.S. farm policy, it is California. For the past four years, this top agricultural producing state has experienced record drought conditions and for farmers like my husband and me, it has taken a toll on our operation.

We have been growing rice in the Sacramento Valley for 30 years and we have never seen a weather event this relentless. Although the arrival of El Nino has provided much needed rain, the effects are marginal because of the intensity of the drought.

Operating loans are essential for every farmer because of the cost of producing crops, but for my family they have enabled us to keep going to the next year despite depressed yields and prices, and in some cases the inability to plant a crop at all.

We would not be able to receive this crucial financing without crop insurance and farm policy in place. Farming is an inherently risky business and bankers want assurances that we will be able to pay back the loan if disaster strikes. We were not born into farming – we built our operation from the ground up – so we still have land and equipment payments to make regardless of whether we have a good or bad growing season, or whether a natural disaster wipes out our crops altogether. Crop insurance is something we purchase each year to manage this risk and we only receive an indemnity when we suffer a verifiable loss. Even then, it doesn’t make us whole, but it does soften the blow from a bad year.

It’s important to have this kind of safety net in place for all farmers, all across the country. And, I am always alarmed by the calls in Washington to cut what remains of the farm safety net, especially from those who have no idea what it takes to grow food and fiber. We need risk management tools now more than ever to help us overcome unpredictable weather events.

Additionally, we need policy in place to combat unfair practices with our foreign competitors like China and Thailand whose support for their rice growers far exceeds that of the United States and actually violates agreements under the World Trade Organization (WTO). While the U.S. was reforming its policy in the 2014 Farm Bill, other countries were ramping up support for their farmers, in some cases by more than a 100 percent. Their policies are trade distorting and leave American growers at a competitive disadvantage.

American farmers can and do manage extraordinary risks, year in and year out, but we cannot manage the challenges associated with unpredictable and sustained natural disasters, volatile markets, and trade distorting policies of our foreign counterparts without risk management tools like crop insurance and farm policy.

Lawmakers in Washington should consider this reality. If they want to continue to have agricultural production in this country, and in California in particular, they need to invest in it.

Lorraine Greco serves on the California Board for the U.S. Rice Producers Association. She grows organic rice with her husband in northern California.

This drought just isn’t giving up, but farmers aren’t quitters

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California’s central valley has been called America’s salad bowl, but honestly in the last four years, it looks more like a dust bowl than a vegetable garden. The historic drought has caused many California farmers to pay prices for water – just to keep their orchards alive – that most Americans would find unfathomable.

Almond, stone fruit, grape and citrus owners once paid roughly $70 per acre foot to ensure that their long term investments had enough water to remain healthy and productive. That cost is now as much as $1,300 per acre foot – about an 1800 percent increase – all while the retail value of their crops has risen very little in comparison.

Estimates are that 170,000 jobs in Kern County alone are directly connected to farming and harvesting. But the number of jobs connected to supporting those farmers, growers and harvesters is around eight times that amount. Crop insurance acts as an underpinning for all of these important jobs and productivity that represent a sizable portion of our economy.

In the past, a wide scale disaster of this magnitude would have triggered a series of very expensive ad hoc disaster bills paid for exclusively by taxpayers. But there has not been a single disaster bill passed even though this drought refuses to release its grip. And that’s because nowadays, farmers are able to purchase the protection and peace of mind of crop insurance.

Crop insurance is a public private partnership whereby farmers purchase policies with their own money, and the policies are sold and serviced by participating companies and agents.

Clearly, the success behind crop insurance is that it’s affordable, viable, and available. Unlike other forms of insurance, any farmer who wishes to purchase crop insurance can do so, regardless of the size of their farming operation or how many years they may have under their belts farming.

Farmers prefer crop insurance because it allows them to pay a premium to help remove some degree of risk from a very volatile business. Twenty years ago, many farmers had never heard of crop insurance. Today, crop insurance protects more than 90 percent of planted acres nationally.

A crop insurance check will never come close to what a farmer can get from a good harvest. But it does offer farmers some peace of mind so that they know that if Mother Nature gets ugly, they can bounce back and be in business again next year. That’s good for consumers, who don’t want their food supply disrupted, and good for the rural economy as well.

When I began this career 13 years ago, I was surprised that bankers were making loans without the guarantee of crop insurance. Obviously, that doesn’t happen much anymore. In fact, it’s very difficult for farmers to get a loan at all without a crop insurance policy in hand.

Of course, crop insurance has its critics who try and make the program sound like another federal handout. Nothing could be further from the truth. In fact, when farmers purchase crop insurance, they receive a bill, not a check. And only receive a payment if they incur a loss greater than a deductible amount chosen a year in advance. Just like homeowners insurance, farmers buy crop insurance hoping they won’t have to use it, but rest better at night knowing they are more secure.

Yes, this drought has been historic and is about as stubborn as a drought can be. But farmers are hardworking, honest and smart businessmen and women who have armed themselves with the best tools possible to weather this storm. And crop insurance has ensured that California’s central valley will remain America’s fruit and vegetable garden for generations to come.

Todd Snider is a crop insurance agent, Kern County Farm Bureau director, Bakersfield Homeless Center director, and resides in Bakersfield.