Crop insurance a boon for farmers to stay in business

WASHINGTON — Handling Mother Nature and market swings, coping with disaster, and even seizing fleeting opportunities for technology developments are commonplace for farmers.
However, crop insurance has allowed many farmers facing a wealth of odds to stay in farming.
Dating back to the 1930s, the reforms that created the public/private partnerships in 1980 laid the foundation to leverage the private sector and incentivize competition.
Further reforms in 1994 and 2000 increased acreage liability and coverage levels.
Currently, evaluating the 2018 Farm Bill crop insurance programs is continuing in preparing the 2023 Farm Bill in this Title XI.
The U.S. House Agriculture Committee’s hearings in July this year examined how these risk management provisions have been implemented and how the crop insurance program has functioned for producers.
In addition, questions have been raised about caps and possible cuts, notably a study released by the National Sustainable Agriculture Coalition in July, with an update in October.
Testimonies at the House Ag Committee’s hearing included an approved insurance provider, a crop insurance agent, a new products developer and farmers who experience the program.
Kathy Fowler, speaking on behalf of the Crop Insurance Professionals Association, related to the committee that when the Agricultural Risk Protection Act of 2000 passed, premiums totaled just over $2 billion.
The acreage insured was 200 million, with total coverage or liability at around $25 billion.
This year, Fowler noted, “Farmers and ranchers will spend more than $6 billion, out of their own pockets, to insure more than 450 million acres with what is now approaching $200 billion in total coverage or liability.” After thanking the committee members, she added, “You are part of a legacy that has saved millions of American farm and ranch families.”
Fowler pointed out that crop insurance is the most important tool that farm and ranch families have for making the kinds of investments and risks needed to meet the growing demands of our country and the world. She stressed that these risks are so great that multiple peril crop insurance would otherwise be prohibitively expensive.
Executive chairman of Agri-Sompo North America, Bob Haney, an approved insurance provider, explained that their industry covers 130 different commodities, protecting all types and sizes of farmers.
He characterized the program’s design as a “three-legged stool” because the risk of the policies is shared by companies such as his, the farmers who pay a premium, and the federal government that reduces the farmers’ premium.
“Each player has skin in the game,” Haney said, “which helps to ensure the success of the program over the long term.
Haney added that “the last several years have seen a drastic increase in ad hoc disaster payments as unprecedented crises such as hurricanes have hit rural America.”
The Risk Management Agency developed and the industry implemented simple inexpensive coverage based on wind speed. This addressed farmer concerns of traditional coverage’s costs.
Policies assisting micro farms that contributed to diversification and strengthening supply chains and margin insurance policies are also being evaluated.
Haney suggested discouraging disaster programs that would create disincentives for purchasing crop insurance, and funding by cutting crop insurance.
Also addressing gaps, Fowler said of options available, including the ad hoc disaster programs, history has shown strengthening crop insurance is the best route to the farmer, rancher and the taxpayer.
In evaluating the intersection between agriculture and climate change,
Haney said, “It is important to note that a farmers’ best tool in defense against climate change is crop insurance.”
The positive ways of Good Farming Practices — no-till farming and planting cover crops for example — mitigate climate change.
The lower production costs, better soil health and increased yields which result can lower their crop insurance premiums and increase their production guarantees in an actuarially sound way.
Consequently, those who purchase crop insurance are more likely to undertake climate-smart agricultural practices, Haney observed.
With respect to costs, Fowler called attention to a Congressional Budget Office comparison of costs associated with crop insurance that included premium cost-share, financial risk-sharing with private sector companies, and administrative and operating expense reimbursement over the past ten years.
It showed that crop insurance is a tailored risk management tool that leverages investment in the farm and ranch and which consistently is paying 20 percent more than the total taxpayer investment in the program.
The National Sustainable Agriculture Coalition’s report projected that billions in taxpayer savings over ten years if payment caps are instituted on federal subsidies paid to farmers who purchase crop insurance.
The report was authored by Dr. Eric J. Belasco at Montana State University. The report and the October addendum are at the NSAC website.
Among various options in the report, one would be to examine the impact of cutting premium assistance by up to 30 percent.
During the House Ag Committee hearing, Ranking Member Glenn Thompson, R-Pa., questioned the viability of that cut.
Fowler responded, “I can give it to you pretty short and straight: absolute nonstarter.”
She further explained how the program would not work if some people are taken out of the user pool.
Fourth-generation family farmer Tom Haag, first vice president of the National Corn Growers Association, said “Our No. 1 priority for the Farm Bill is to protect crop insurance from harmful budget cuts and reforms.”
As revealed in their member survey, he added, “In the survey work, growers also stressed that cuts to federal crop insurance would negatively impact their farming operations.”
Thompson related that while just barnstorming forty states, crop insurance was the most mentioned policy piece farmers raised.
It is fair to taxpayers, provides collateral for lenders, obviates asset-based lending and helps farmers take advantage of new tools and practices.
Regarding the role of climate change in the program, Thompson criticized the push by some to hijack the crop insurance program to carry out a “half-baked environmental experiment.”
He continued, “This must stop before irreparable harm is done to a farmer’s most critical management tool.”
Thompson added that he supports efforts to expand and improve conservation, and that crop insurance already supplies incentives to be land stewards.
Conservation programs are in Title II of the Farm Bill.
Plus, farmers naturally gravitate to the adoption of practices best for the farm.Haney said, “It is important to note that a farmers’ best tool in defense against climate change is crop insurance.”
The positive ways of Good Farming Practices — no-till farming and planting cover crops for example — mitigate climate change.
The lower production costs, better soil health and increased yields which result can lower their crop insurance premiums and increase their production guarantees in an actuarially sound way.
Consequently, those who purchase crop insurance are more likely to undertake climate-smart agricultural practices, Haney observed.
With respect to costs, Fowler called attention to a Congressional Budget Office comparison of costs associated with crop insurance that included premium cost-share, financial risk-sharing with private sector companies, and administrative and operating expense reimbursement over the past ten years.
It showed that crop insurance is a tailored risk management tool that leverages investment in the farm and ranch and which consistently is paying 20 percent more than the total taxpayer investment in the program.
The National Sustainable Agriculture Coalition’s report projected that billions in taxpayer savings over ten years if payment caps are instituted on federal subsidies paid to farmers who purchase crop insurance.
The report was authored by Dr. Eric J. Belasco at Montana State University. The report and the October addendum are at the NSAC website.
Among various options in the report, one would be to examine the impact of cutting premium assistance by up to 30 percent.
During the House Ag Committee hearing, Ranking Member Glenn Thompson, R-Pa., questioned the viability of that cut.
Fowler responded, “I can give it to you pretty short and straight: absolute nonstarter.”
She further explained how the program would not work if some people are taken out of the user pool.
Fourth-generation family farmer Tom Haag, first vice president of the National Corn Growers Association, said “Our No. 1 priority for the Farm Bill is to protect crop insurance from harmful budget cuts and reforms.”
As revealed in their member survey, he added, “In the survey work, growers also stressed that cuts to federal crop insurance would negatively impact their farming operations.”
Thompson related that while just barnstorming forty states, crop insurance was the most mentioned policy piece farmers raised.
It is fair to taxpayers, provides collateral for lenders, obviates asset-based lending and helps farmers take advantage of new tools and practices.
Regarding the role of climate change in the program, Thompson criticized the push by some to hijack the crop insurance program to carry out a “half-baked environmental experiment.”
He continued, “This must stop before irreparable harm is done to a farmer’s most critical management tool.”
Thompson added that he supports efforts to expand and improve conservation, and that crop insurance already supplies incentives to be land stewards.
Conservation programs are in Title II of the Farm Bill.
Plus, farmers naturally gravitate to the adoption of practices best for the farm.