Crop insurance preserves S.D. farm economy

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South Dakota’s history is deeply rooted in agriculture, perhaps more so than any other state in the union. From the homesteaders who came here in the 19th century, with little more than a plow and a dream, to their descendants who still work the land, agriculture is the way of life for many South Dakotans.

As the president of the S.D. Farm Bureau and a livestock, corn and soybean farmer myself, I can tell you firsthand that our state’s farmers personify a work ethic and a sense of pride and purpose that we are seeing less and less of outside of agriculture these days.

But agriculture is more than just a proud tradition — it’s also S.D.’s top industry, with a $25.6 billion economic impact each year. Our farmers and ranchers generate 20 percent of our state’s economic activity and provide jobs, directly and indirectly, to 122,000 residents.

It’s essential that we preserve S.D.’s farm economy, not just for our own economic well-being, but for all Americans. Our nation’s farmers play an indispensable role in ensuring a safe, affordable and stable food supply. And this role is becoming increasingly important as we struggle to meet the needs of a growing world population. In short, food security is a vital part of our national security and that’s something we need now more than ever.

Unfortunately, our farm economy has seen better days. Our farm families are facing a year of projected below-cost returns on corn, soybeans and wheat. Overall, farm income is also projected to decrease again in 2016. This will be the third consecutive year of declining farm income, following sharp drops in 2014 and 2015 totaling 56 percent in those two years. If the 2016 income projection comes to fruition, it would mark the lowest farm income level since 2002.

This is why having a sufficient farm safety net — with crop insurance as the cornerstone — is more critical than ever. Crop insurance provides protection against the one thing that even the most resilient farmer cannot defeat — the wrath of Mother Nature.

Crop insurance is a unique public-private partnership that not only supports farmers, but eases the burden on taxpayers. Prior to the emergence of crop insurance as the top risk management tool for farmers, natural disasters regularly resulted in very expensive, unbudgeted ad hoc disaster bills from Congress. Now, when disaster strikes, farmers receive an indemnity check.

Let’s be clear, crop insurance is not a handout — far from it. To gain coverage, farmers have to put skin in the game. In fact, since 2000, farmers have spent nearly $30 billion out of their own pockets to purchase crop insurance protection. We only collect an indemnity after we’ve suffered a verifiable loss and met our deductible.

We purchase crop insurance for our family farm every year and have never filed a major claim. But that’s hardly the point. Like our fellow farmers, we purchase crop insurance for the same reasons we purchase home insurance or car insurance — with the hope we’ll never need it. But we’ll keep purchasing it every year because some day we might. Crop insurance gives us peace of mind, and if we ever experience a major crop disaster, would provide us with the resources to keep farming.

Farmers have faced tough times before and rest assured we will get through them again. Old fashioned hard work, innovation and smart farm policies like crop insurance will help ensure that the proud S.D. farming tradition will live on for many future generations, and, in turn, will secure a bright future for us all.

Scott VanderWal is a third-generation family farmer from Volga. He is president of the South Dakota Farm Bureau and vice-president of the American Farm Bureau.

History demonstrates the importance of a farm safety net

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If my family had kept the farm, I would have been a fourth-generation farmer of a grain operation. But they couldn’t.

The ’80s were not kind to us, and my family made the difficult decision to exit the business. They were not alone. Some statistics show public farm auctions numbered around 500 a month during the darkest days of the decade, with hundreds of thousands of farmers defaulting on their loans. Nearly 2,000 banks failed or received assistance through the Federal Deposit Insurance Corporation between 1980 and 1994, which is more than any other period since the FDIC was created.

Watching my family and neighbors go through this kind of torment made an impression. It’s one of the reasons I am passionate about what I do today. It is a high priority for me as an agricultural banker to do everything I can—not only as a provider of capital and traditional banking products, but a provider of expertise and counsel—to help farmers make the right decisions about their operations. I want them to be prepared for a crisis.

Fortunately, for farmers today there are more tools available to manage the risky business of farming than there were a few decades ago. One of those tools is crop insurance, which has improved significantly through the years to become one of the key pieces of the farm safety net. Farmers have to invest so much money to grow a crop that they rely on banks for operating loans. Banks would have a hard time making those loans without assurance farmers would have a way to pay it back if a natural disaster struck. Crop insurance enables everyone—from the farmer to the banker—to plan for those disasters.

Additionally, crop insurance is structured in such a way that spreads risk across a large and diverse pool of participants so that the impact of losses from a disaster is minimized. That’s because it is widely available and affordable for producers all across the country regardless of their farm size. Without this kind of farm safety net for all of our farmers, large production losses could set in motion a series of events reminiscent of the 1980s when farms failed and banks were stressed to the point of shutting down.

Therefore, it’s critical crop insurance remain intact. Something that seems harder and harder to do in today’s political environment where opponents are determined to destroy the one thing farmers can count on during tough times.

We saw their work in full force during the latest budget agreement that was negotiated at the last minute and included cuts to crop insurance. Thankfully, the agricultural community responded in equal force and demanded the cuts be reversed. Lawmakers are expected to address this provision in the next omnibus spending bill.

We do not want to repeat the mistakes of the past where harsh economic conditions combined with an inadequate safety net caused producers to leave the farm altogether. Right now, we have farm policy in place that encourages sound risk management practices and helps farmers to position themselves for the future.

In the midst of the crisis as he signed the 1985 farm bill, President Ronald Reagan said, “This country is nothing without the farmer, and those who work the land have the right to know that there’s a future in farming. Their children have the right to know that they’ll still be able to work the family farm generations from now and make a decent living.”

By then it was too late for my family and countless others to continue farming, but if we’re smart, we’ll learn the hard lessons from the past so future generations can continue.

Indeed, we are nothing without farmers. And, they can’t survive the vagaries of the business without sound farm policy.

Nate Franzen is the President of the Agribusiness Division at First Dakota National Bank in South Dakota. He has worked in agricultural banking for more than two decades.