Kansas blizzard highlights importance of crop insurance

The foot of snow that fell recently left wheat stalks bent and broken across western Kansas. The damage is heartbreaking. Estimates show as many as 1.7 million acres could be affected.

As I survey the damage, I think back to what it must have been like when my grandfather started farming in western Kansas in 1928. He built his home and had only his hands, and his family, to rely on. It was a tough life.

My father was born in 1934, and my grandmother changed the wet tea towels covering his crib every half hour to keep the dirt from the Dust Bowl out of his lungs.

I’m proud of the adversity my family has overcome to build our successful farming operation, and I’m proud to carry on that tradition as the third generation.

My dad, and my grandfather, taught me an important lesson about farming: We are only stewards of the land. Our job is to care for it and leave in better condition for the next generation. As farmers, we are at our best when we plant successful crops that feed our families, and the world, while conserving the land.

But who takes care of the farmers while we are caring for the land and growing the food? Who helps us when an unexpected April snow destroys our crops and threatens our way of life?

In my father’s day, and certainly my grandfather’s, farmers were mostly on their own. Back then, farmers faced bankruptcy and would have to ask Congress for ad-hoc disaster relief to save their farms.

The politicians would then debate, and years might drag on before farmers got relief at taxpayer expense. Oftentimes, that relief was too late.

Thankfully, things have changed since then.

Today, modern crop insurance means farmers who lost wheat in the storm won’t lose everything they invested in the winter season. It means aid is on its way in weeks, not years. And it means taxpayers don’t have to cover the whole cost.

Some critics claim crop insurance is a way for farmers to pad profits in lean years. But that’s simply not true.

Crop insurance is very expensive. Farmers pay a lot every year out of our own pockets for policies specifically tailored to our operations. We also have to shoulder a percentage of the loss as a deductible – usually about 25 percent – before we get any help. In other words, we are active participants in our own farm policy.

Crop insurance is something you hope you never have to use. It doesn’t pay for the total cost of planting a crop of wheat. But it will keep farmers in business for the next season – and that’s the whole point of a safety net.

Congress and the new administration have promised to protect American jobs. A great way to accomplish that is to maintain an affordable and widely available system of crop insurance in the next farm bill. Our recent hardship in Kansas shows just how important it is.

David Schemm is the president of the National Wheat Growers Association. He farms in Sharon Springs.

Crop insurance helps farmers and ag lenders manage risk

Weather anomalies have challenged farmers since the earliest days of agriculture. A flood, hail storm or drought can leave a farmer without a harvestable crop at the end of the season. In Central Kansas, producers have been fortunate in the fact that they have not had to endure multiple years of drought or poor production. However, neighboring areas such as Southwest Kansas, Oklahoma and Texas and areas further west have not been so lucky. There is no doubt that crop insurance has helped some farmers stay in business through the tough times.

The United States has learned in hindsight that providing retroactive disaster relief is not only destabilizing for farmers but expensive for taxpayers. Prior to our current crop insurance system, it could have taken months if not years for farmers to receive relief payments following a disaster. While the support did not go unnoticed, there were many instances when the payments came too late to save a farmer from insolvency.

It is a fact that strong farm policy and support for crop insurance goes beyond the farmer, not only benefitting rural America but consumers as well. In the 2014 Farm Bill, crop insurance was recognized as the primary risk management tool for farmers, shifting a good share of the risks associated with farming away from the American taxpayer.

The key to a viable crop insurance system is the public-private partnership that makes it the success it has been. The private sector sells and services crop insurance policies and farmers pay premiums and have deductibles, just like other insurance policies. To incentivize farmers to buy crop insurance, the government partially discounts premiums to ensure that coverage is affordable, available to everyone, and economically viable.

Lenders also play a role in encouraging farmers to make informed decisions about managing their operating risk. At Central National Bank, we are agriculture lenders as well as licensed crop insurance agents. We encourage all of our farmer customers to protect their investment with crop insurance and as a financial institution, we may even be able to offer better loan terms to a producer that implements a solid risk management program.

It is important to keep in mind that crop insurance is a risk management tool, not a profit center. Some have charged that farmers would rather collect a crop insurance check than a good harvest. Nothing is further from the truth. Simple math suggests that “playing the crop insurance game” is not a sustainable business plan. In 10 years of working with producers, I’ve yet to meet anyone who would rather collect a crop insurance check than harvest a good crop.

As we enter into a period of declining margins, it will be important for producers to review all aspects of their operation, including risk management programs. Recently, the farm economy has seen double-digit declines in net farm income as well as increases in the number of short-term operating loans. Having access to viable risk management tools will not necessarily add to the bottom line, but it is important for producers to utilize tools such as crop insurance to protect revenue streams through a possible prolonged downturn in the farm economy.

Not only does a well thought-out crop insurance plan speak to a producer’s management skills, but crop insurance also provides a backstop so producers are able to meet their financial obligations. Ensuring farmers have access to affordable, viable crop insurance options is not only critical for the farm business, but it will certainly impact future ag lending decisions in terms of assessing operating risk for loans.

Aaron Gasper is an agriculture and commercial lender at Central National Bank in Salina, Kansas.

Farmers need protection of crop insurance

When the homesteaders came to Kansas, they were looking for land to farm and a chance at the American dream. If they were like my family, they arrived here in a covered wagon, and many of us still live on the land where they began to build their dreams.

But Kansas can be a cruel place to farm. On the turn of a dime, a lifetime’s worth of work and every penny you have can be wiped out by a single hailstorm, a heat wave or drought, a springtime flood or frost, or a market crash that erases any chance of profit regardless of how well your crops do that year.

And that, in a nutshell, is why the vast majority of Kansas farmers purchase crop insurance every year, and why it must remain available, affordable and viable. In fact, with the passage of the 2014 farm bill, crop insurance is the primary risk management tool available to commodity farmers and the only risk management tool available to many specialty crop farmers.

One thing that has dramatically changed in agriculture since my family homesteaded in Minneapolis, Kan., is that farming has now become an incredibly capital-intensive venture. It takes so much money just to put a crop in the ground and harvest it at the end of the season that anyone farming without crop insurance might as well be playing Russian roulette.

I’ve had lots of friends tell me over the past several years that if it weren’t for crop insurance, they would not have been able to put a crop in the ground the next year. Crop insurance is a public-private partnership whereby farmers purchase private policies from participating companies that sell and service the policies. One of the government’s main roles is to discount the policies to a degree that they are widely affordable to most farmers.

In 2014, about 90 percent of planted cropland was protected by crop insurance, paid for out of the back pockets of farmers to the tune of $3.8 billion. Nationally, more than 1.2 million policies were purchased, protecting almost 294 million acres of food, feed, fiber and fuel crops that accounted for more than $110 billion in liabilities.

With the cost of farming so high, most farmers have to actually show proof of having purchased crop insurance in order to secure a production loan from a bank. The farmers get to sleep better at night because they have purchased the protection of crop insurance, and banks are able to make production loans to folks who might otherwise be judged too risky.

Some think that crop insurance is a freebie. Let me set the record straight right now: It’s not. Farmers have skin in the game when they pay their premiums, which is not pocket change. I bet the farmers I know spend $35,000 to $40,000 every year to purchase their policies. And in many years, they don’t collect a dime.

The reason why food supply in the U.S. remains abundant is that we have tools in place to make sure that when farmers are knocked to their knees by the whims of Mother Nature, they have a policy tool in hand to pick themselves back up and plant again. Let’s make sure that crop insurance remains affordable, viable and available for generations to come, to ensure a continued legacy of abundance in America.

Steve Baccus of Minneapolis, Kan., is the immediate past president of the Kansas Farm Bureau.