CROP INSURANCE IN ACTION: Shawn Holladay, Lamesa, Texas

September 2014

shawn holladay photoShawn Holladay, a fourth-generation cotton farmer from Dawson County, Texas, looks to agriculture as his sole source of income. It’s not a bad argument for wanting the status quo to continue.

Ask one who’s been in farming for decades for his proverbial ‘staying power’ and he will likely tell you farming is a beloved legacy, he has a passion for growing crops that ensure the well-being of Americans, and throw in a bit of spiel about how crop insurance has made it possible for him to survive against nature’s odds.

For 25 years, Holladay has used crop insurance to protect his 6,500-acre farmland in Lamesa—devoted to cotton, some grains and peanuts—and ensure its stability in the face of prolonged drought. Especially vulnerable are farms like his that have been in families for three or four generations.

“My operation could not begin to stand the losses associated with drought and the severe weather without it,” said Holladay, an industry leader and cotton grower who has won the Farm Press/Cotton Foundation High Cotton Award for his conservation and sustainable farming practices. “The current drought would have taken out most, if not all, farms in the area where my operation is located.”

For Holladay, crop insurance has been mostly a budgetary expense. But he religiously takes out a policy year after year to keep his operation viable, especially with the current drought in Texas that has lasted three years and incurred losses for many Texas farmers.

“When our production is up to par we pay premiums and there have been many years when I have received no indemnity,” he said.

But he is also realistic about attitude toward his insurance.

“Crop insurance is established on production levels that are averaged over 10 years. The only cost effective purchase of insurance comes with a deductible of 20-40 percent. When considering the huge increase in input costs the U.S. farmer still has to be able to stand a significant amount of the loss between the actual production and the break-even on the farm. To be able to do this requires an efficient operation,” Holladay explained.

One of the most important things to consider when developing a safety net is the farms that are producing the lion’s share of the goods. “Penalizing your most efficient operations through payment limits and AGI (Adjustment Gross Income) determinations is self-defeating,” he argued.

The safety net aspect of crop insurance is vital for the United States farm industries to compete globally in the face of a volatile world economy.

“Our ability as a country to be self-sufficient in food and fiber is imperative,” he maintained. “The day we are not able to sustain a profitable ag industry will be a shift in our very identity as a country.”

A well-crafted farm bill that provides a cost-effective safety net is essential if the U.S. is serious about keeping its edge in the market.

“Our ability to keep producing the abundant, safe, supply of farm goods is in jeopardy if we don’t consider other countries and what they are doing when it comes to subsidies,” he theorized. “U.S. farmers have increased efficiency and for the most part increased in size to achieve economies of scale.”

For the most part, increased acreage and efficiency are essential to combat slim margins, Holladay said. And such can only be possible in an operation that is secure and thriving.