Farm Credit and Crop Insurance Essential for Our Nation’s Farmers

It is planting season in south Texas right now and we are working long days and nights in the fields. As a third-generation farmer, if there is one lesson I have learned it is that when it comes to getting seed in the ground, time is of the essence.

As such, there’s not much that can tear me away from my farm this time of year. Recently, though, I traded my overalls and work boots for my best suit and tie and headed to Washington, D.C., to testify before Congress about an issue very dear to farmers like me — the importance of reliable financing and strong farm policies that reflect the unique challenges our nation’s farmers face.

For cotton farmers like me, this will be the fifth year of tough prices. We can’t control the markets any more than we can the weather, so we need a lender that works hard on our behalf even during the toughest of times. Thankfully, Farm Credit is that lender. Its most important mission, assigned by Congress more than 100 years ago, is to ensure that farmers like me have a consistent source of financing irrespective of economic swings or vagaries of the financial markets.

As I put together my farm operating plan for this year, I knew – just like thousands of other farmers around the nation know – that Farm Credit has the financial strength and strong desire to finance that plan and to help me succeed.

Equally critical to farmers, as Congress begins to work on the next Farm Bill, is protection of a strong and affordable federal crop insurance program. This program is key because it provides both farmers and our lenders some protection from many of the inherent risks involved in farming.

When it comes to obtaining credit, the vast majority of crop loans incorporate crop insurance in their operation plans, and coverage is a requirement for many loans. Without it, credit would be limited to those with the strongest balance sheets. Given the recent price trends and outlook for commodity prices, there just aren’t many farmers who fall into this category.

For beginning farmers, crop insurance is even more critical and often a prerequisite to getting operating loans to start farming. I am 64 years old, which is the average age of a farmer in the U.S. As baby boomers retire, we are relying on the next generation of farmers to follow in our footsteps. They will need crop insurance to do that.

But crop insurance doesn’t just support farmers. It benefits the broader rural economy as well. Insurance premiums that we pay out of our own pockets, which have tallied nearly $50 billion since 2000, help shield suppliers, processors and cooperatives, as well as our communities, from economic calamity after a disaster.

Last but certainly not least, taxpayers also benefit from a strong crop insurance program. Before we had crop insurance, the cost of natural disasters that destroyed our fields would fall to taxpayers as Congress approved ad hoc disaster assistance programs. This happened repeatedly before the widespread use and availability of crop insurance.

The current downswing in agriculture means the next Farm Bill will be more important than ever. American farmers are the most efficient in the world, but we need strong farm policies that give us the right tools, like reliable credit and a vibrant crop insurance program, in order to keep meeting our growing global food, fiber and energy needs.


Jimmy Dodson is the chairman of the Farm Credit Bank of Texas. He raises cotton, corn, wheat, hay and grain sorghum on his family farm near Corpus Christi.

Trust the ag lender, crop insurance cuts would most harm family farms

This is the time of year when farmers are meeting with their lenders to renew farm operating loans for 2016. The past few years have been challenging for producers as commodity prices have fallen, input costs have risen, and severe weather has damaged or destroyed entire crops. With the downturn in the ag economy, multiple years of lost revenue and less than favorable forecasts for 2016, many producers are facing the tough question: can I afford to continue farming?

Without access to capital, the answer to this question is a resounding no.

I’ve worked in the ag finance business in Texas for more than 30 years and have seen highs and lows in the farm sector. Though those in agriculture have always faced risks, those risks have escalated over the past two decades. Volatility has become the norm rather than an infrequent event. In the last five years farmers have experienced a multi-year drought, hail storms in October, late spring freezes, and too much rain literally drowning their crops. Prices for farm commodities have dropped drastically to below the costs of production as foreign subsidies and market-manipulating policies have drastically risen.

As a way to mitigate these risks and make access to capital possible, Congress selected crop insurance as the primary risk management tool for farmers in the last farm bill. The modern crop insurance system in place today replaced ad hoc disaster relief programs ensuring farmers would have some protection against natural disasters. Congress designed crop insurance to be affordable to the farmer, yet accountable, requiring producers to pay premiums for the insurance coverage on their crops and shoulder a portion of losses through deductibles.

INSURANCE ONLY PROTECTION AVAILABLE FOR COTTON

In the cotton industry, a major crop in the 43 counties served by AgTexas, crop insurance is basically the only risk management tool available to producers. It can literally make the difference between farming another year or losing so much a farmer must call it quits.

From the lending perspective, crop insurance provides a guarantee of a minimum income for a lender to rely on to repay loans should a farmer lose a crop. This insurance guarantee makes it much easier for producers to obtain the financing they need to farm. This is similar to the guarantee any car owner would have on their car loan if they got into an accident. Crop insurance is a safety net for some of the events that cannot be controlled.

For perspective, an average family farm in the panhandle of Texas farms between 1500 to 2500 acres and must borrow $500,000 to $1 million each year to produce a cotton crop. Because of the low price of cotton and the high input costs in 2015, many had farm losses exceeding $150,000. On top of the loss, they still have loan payments, living expenses, and the same farming costs to keep operating another year.

As producers and ag lenders work together to prepare cash flows for 2016, it is extremely difficult to forecast enough income to cover operating loans, meet debt payments, and pay living costs. Especially vulnerable are the young and beginning farmers who face these challenges with limited financial resources. These young producers and multi-generation family farms are the most affected by the volatile prices, increased production costs, and weather uncertainty in their operations.

Some in our country wish to do away with farm programs and any support of a crop insurance system that supports farmers and ranchers who produce the food and fiber that not only feeds and clothes our nation, but also serves other nations around the world. The reality is, without a viable, affordable crop insurance program most of these producers’ businesses will not survive. And if farmers go under, the Main Street businesses they support are not far behind.


Scotty Elston is the Chief Credit Officer at AgTexas Farm Credit in Lubbock, TX.

It’s up to us to explain the importance of crop insurance

It was 2010 and I was expecting to harvest my best crop. I had done everything right and the weather had been kind. Or so I thought. Then on a late October night, it hailed for six hours and what was anticipated to be my best crop year turned into nothing. But the worst of it was yet to come. It stopped raining. It stopped for 336 days straight. It kicked off what would be the worst drought since the 1950s. The conditions would improve slightly, but it’s not an exaggeration to say that for the last five years, my part of the world—West Texas—has essentially been on fire.

Mother Nature is the toughest, most unpredictable boss. Farmers are resilient and they adapt, but a safety net is crucial to their survival. And, it’s not a safety net if it’s not affordable.

That’s what today’s crop insurance offers farmers. A safety net that is both affordable and widely available. It’s what’s helped me make it to the next year.

That hasn’t always been the case. When crop insurance got its start in the 1930s, it was a poorly run government program. It hobbled along through the 60s and 70s, but the premiums were too high so the participation was low with limited available coverage. Farmers mainly relied on costly ad hoc disaster assistance when natural disasters wiped out their crops. It was so ineffective that the Secretary of Agriculture, Bob Bergland, told Congress in 1977 that disaster programs “are for the most part…a disaster.” This gave birth to the Federal Crop Insurance Act of 1980 that created a successful public-private partnership that remains today. Since then there have been other pieces of legislation along the way that have made additional improvements to the delivery and mechanics of crop insurance with the most recent being the 2014 farm bill.

Sadly, there are some who don’t know or understand the history and improvements that have taken place through the years. Meanwhile, there are others who are bent on attacking farm policy regardless.

I was reminded of this on a recent visit to Washington, D.C. where I met with lawmakers and staff on behalf of producers across the country. Each time I visit I am struck by how important outreach is to ensure agriculture remains successful in this country and that crop insurance remains a viable, affordable and widely available safety net for farmers and ranchers.

I tend to walk away both encouraged and discouraged by my visits. I am encouraged because there are some who understand the challenges that we face and discouraged because there is always more to be done. The battle never ends, and we need more voices in support of American agriculture.

Our form of government requires participation. When we don’t show up and tell our story then, without a doubt, someone who doesn’t understand or care about production agriculture and the importance of crop insurance will fill the void.

We’ve each sat in the tractor cab or with our neighbors in the coffee shop and talked to ourselves about how to make things better, but that’s not the way to drive real change in Washington or anywhere else. Sometimes you have to get off the tractor and reach out beyond those circles in your own community.

We can’t assume policymakers understand the anxiety we feel when we’re days away from harvesting a good crop and it’s destroyed in a matter of minutes by something beyond our control. We can’t assume policymakers know the one thing that enables us to start again is crop insurance. It’s up to us to tell them.


Wade Cowan is the president of the American Soybean Association. He farms soybeans, guar, cotton, wheat and grain sorghum in West Texas.