TOPIC | FARM POLICY WHAT'S CROPPING UP


Crop Insurance: Smart, Fiscally Responsible Farm Policy

December 2012

Crop Insurance

Every county in the state of Iowa is experiencing severe or extreme drought conditions, according to the U.S. Drought Monitor. This time last near, not a single county in the state was experiencing drought. In fact, it would be fair to say that farmers saw quite the opposite conditions last year, especially here in Western Iowa.

We had water, and lots of it. In fact, counties bordering the Missouri River had thousands of acres of farmland – homes and communities – that were under water for four months. The Missouri River, which is typically less than 1,000 feet wide, was roughly six miles wide from bank to bank.

From a farmer’s perspective, the only thing last year and this year have in common is that crop losses will be steep. But this is the nature of agriculture, where we are blessed with some of the most productive land on earth in the good years, and then the threat of losing an entire crop, back to back, in the bad years. Thank goodness most farmers purchase crop insurance to help us get back on our feet after those bad years strike.

Last year, Iowa farmers shelled out more than $444 million from their own pockets to purchase crop insurance. Crop insurance has become the best risk management tool available for most farmers because it is a public-private partnership that limits taxpayer exposure to risk and helps farmers get back on their feet when disaster strikes.

Prior to widespread participation in crop insurance – which in 2011 protected 84 percent of eligible lands – farmers would often rely on federal disaster relief when a flood, or drought, or both, wiped them out. This disaster relief was not cheap for the taxpayers, who funded a string of relief bills totaling $45 billion from FY1989 to FY2001 for this very purpose.

While the disaster bills were greatly appreciated by the farmers who received them, they took a long time to arrive – up to two years – to get into the hands of the farmers who had lost everything and needed those funds badly.

Because crop insurance is sold, managed and delivered by the public sector, the indemnity checks come in a much more timely manner. In fact, more than $1 billion has already been paid out nationally to farmers who suffered losses this year.

For those worried about federal spending, crop insurance is a smart, fiscally responsible farm policy. It requires farmers who want protection to put some “skin in the game,” in the form of purchasing premiums, and it only benefits those who suffer a real, verifiable loss. As crop insurance has grown in use, spending on farm safety net programs as a whole has dropped from $19.2 billion in 2002 to an estimated $12.3 billion in 2011, a 36 percent decline.

Because we are blessed with great soil and a usually amenable climate, many Iowa farmers – and others in the Corn Belt – rarely collect indemnities. The returns that the companies have made over the years, combined with the $3.5 billion the federal government has made in underwriting gains, will help pay for big losses, like the ones we have experienced back to back this year.

But like all farm policies, crop insurance has taken its fair share of criticism from those in Washington who would like to see a much less robust agriculture sector. These critics are actually using this year’s drought to paint farmers as self-serving and living off the government; people who, according to the Environmental Working Group, are “praying for drought, not rain.”

What nonsense! Suffice it to say that only in Washington DC would a group think that a check for an insurance loss could possibly be anywhere close to as satisfying – both financially and emotionally – as a bountiful harvest. The statement is ludicrous, and would lead one to conclude that people purchase car insurance in the hopes of having a bad wreck and cashing in on that misfortune.

Some rains have returned to Iowa but in most cases, it’s too late for the corn crop, of which 53 percent is considered in poor, or very poor condition. The rains will not renew our crops, but they do remind us of the promise of the future. But promises don’t pay creditors, so in addition to the rain, I’ll be thanking my good instincts for purchasing crop insurance yet again this year. Because I can tell you for certain, that if I hadn’t purchased multi-peril crop insurance this year with the drought, or last year with the flood, I’d be out of the farming business altogether.

Richard Archer is a corn and soybean farmer from Onawa, Iowa

This op-ed appeared in the Sioux City Journal on October 3, 2012.