Crop insurance helps farmers survive unpredictable weather

“Frost threatens northern U.S. corn; rains soak southern Plains.”

This recent headline says it all. The diversity of American agricultural production coupled with the varied growing conditions across the country and the swings in weather explains why farmers need a safety net. More importantly, it describes why crop insurance is the centerpiece of the farm safety net.

U.S. multi-peril crop insurance is a risk management tool that farmers, regardless of their location, crop, or production method, purchase to protect against the loss of their crops due to natural disasters such as hail, drought, freezes, floods, fire, disease, or the loss of revenue due to a decline in price. Farmers buy policies to fit the individual needs of the their operations. In 2014, 1.2 million policies were sold protecting more than 120 different crops covering 294 million acres.
I have been farming corn and soybeans for about three decades and I have always purchased crop insurance even though I work in a climate setting that typically doesn’t experience wide weather extremes like our neighbors in other parts of the country.

That doesn’t mean we haven’t been hit with our share of unpredictable weather conditions that made planting and harvesting a crop challenging. It does mean I customize the policy I purchase to meet the needs of my operation.

For example, just two years ago, we had a hard time getting a crop in the ground because nine inches of snow blanketed the area on the second day of May, which is normally the time when we’re wrapping up the planting season. The soil was already soaked from a rainy spring season. That year we didn’t start planting until the middle of May and didn’t finish until the first week in June.

Late planting can potentially put a farmer in double jeopardy – not only are they expecting lower yields because of the delay in planting, but that crop is also vulnerable to frost around the autumn harvest time.

This was the first time in more than 20 years of farming that we planted corn in June – more than a third of our crop. It was also the first time we elected to take prevented planting provisions for roughly 5 percent of our acres as part of our crop insurance policy. Prevented planting provisions are designed to provide coverage when extreme weather conditions prevent a farmer from getting in the fields.

Crop insurance helped us cover some of the loss from that bad year. It made it manageable, which is why it’s an essential risk management tool for my farm and others like mine all across the country. The cost of growing crops has increased substantially. It wasn’t too long ago that it took about half of what it takes to grow an acre of corn. Because of these costs, a substantial crop loss would be a major financial setback for anyone. With crop insurance, we are able to level the highs and lows.

There have been a lot of changes to farm policy through the years to reflect the changing times, but given the diversity of agriculture in our country and the way crop insurance can be uniquely tailored to address disastrous conditions in an efficient and effective way, it should only be strengthened in the years to come.

Peterson is a farmer from Northfield, Minnesota and the president of the Minnesota Corn Growers Association.

Evolution of farm policy benefits farmers, taxpayers

Some stereotypes about U.S. farm policy just won’t die.

For example, the belief that farmers get paid for not growing; or that benefits just go to big agribusinesses; or that farm spending is out of control.
Such criticisms make splashy headlines but are no longer relevant thanks to the significant evolution of farm policy over the past 20 years. Over that time, government control of agriculture has given way to a system where farmers take more responsibility, make decisions based on market forces, and are asked to help fund their own safety net.

The most significant reforms occurred in the 2014 farm bill, which is projected to reduce farm spending by billions over the next decade.

The farm bill repealed direct payments – checks that some farmers received every year no matter the market conditions or how crops fared. In their place are crop insurance policies made available to all growers regardless of size, geographic location or cropping decision.

With crop insurance, most farmers get bills in the mail instead of government checks, and because producers are now paying more of the farm policy tab, spending has trended downward over the years (to less than three-tenths of 1 percent of the federal budget).

Here’s how it plays out on my sugar beet, soybeans and wheat farm.

Every year, I analyze input costs, market prices and yield trends. Then I purchase crop insurance tailored to the unique risks on my farm.

Most years, my crops succeed and no insurance check is collected, meaning insurance companies and the government keep my premiums to offset other policy costs.

In disaster years when we suffer from drought, frost, flood, hail or a host of other calamities, insurance only kicks in after I’ve shouldered a sizable deductible, meaning I share the cost of aid.

Collectively, farmers spend about $4 billion out of their own pockets every year to buy insurance. They do this because the government ensures policies are affordable and widely available and because an efficient infrastructure maintained by the private sector speeds assistance to us much faster than old government disaster programs, which were 100 percent taxpayer-funded.

Crop insurance is just part my story. Our farmer-owned cooperative also takes out government-backed operating loans on our sugar crop. These loans help cash flow the operation as the sugar is sold over the course of the year, and, like any other business loan, it is repaid with interest.

As a result, sugar policy typically operates at no taxpayer expense and is projected by the U.S. Department of Agriculture to cost $0 over the next decade.

Admittedly, agriculture’s transition to lower costs isn’t fast enough for some detractors. But, as a farm leader involved in the 2014 farm bill debate, I can attest that tremendous headway has been made, and I know that it is vital to remove remaining stumbling blocks to further reform.

For example, unnecessary environmental regulations on agriculture breed bureaucratic inefficiencies, drive up costs of production and make it difficult to compete.

And, while U.S. farm supports are getting smaller, foreign subsidies are rapidly increasing abroad and distorting global markets.

In the case of sugar, foreign subsidies have created the most volatile commodity market in the world, where global prices currently cover just half the cost of producing the crop. In other words, exporters would lose 50 cents for every $1 worth of sugar sold if it weren’t for subsidies propping them up.

Putting an end to the domestic and foreign policies that stifle U.S. agriculture’s competitiveness should take top priority in the years ahead as the current farm bill is implemented.

And as we wage that fight, taxpayers can take comfort in the fact that they are shouldering less risk and that U.S. farm policy is headed in the right direction.

Erickson is immediate past president, American Sugarbeet Growers Association, and farms with his son near Hallock, Minn.