WHAT'S CROPPING UP
As the nation’s crop insurers prepare for the Farm Bill and funding deliberations in the future, National Crop Insurance Services (NCIS) has released a detailed question-and-answer resource laying out the facts about crop insurance and dispelling some of the most common arguments against crop insurance put forth by its critics.
“Crop insurance is the single most important risk management tool available to farmers today, and the public needs to understand why it is so valuable, how it benefits taxpayers and how it helps maintain a stable agriculture for the benefit of consumers,” said Tom Zacharias, president of NCIS.
Critics who said that farmers who purchased crop insurance were “praying for drought, not praying for rain” or were “laughing all the way to the bank” during last summer’s historic drought were strongly rebuked by farmers, crop insurance agents and claims adjusters in a new video released by National Crop Insurance Services (NCIS).
Marvin Andris, a farmer from Milford, Illinois, responded to Environmental Working Group’s accusations, noting that their comments underscored how little they know about farmers. “They obviously haven’t brushed shoulders with any farmer,” he said. Andris said he didn’t know a single farmer who farmed for an insurance check. “We’re into this because we want to raise crops, and the more bountiful, the more excited we become,” he said.
The area of the continental U.S. plagued by drought has more than doubled since February 2011, according to the U.S. Drought Monitor. Even more disturbingly, the portion of the country locked in a level of drought considered “severe, extreme, or exceptional” has increased by more than 400 percent over that same period of time, according to archived data and maps from the first week of February 2011 through the first week of February 2013.
Although one of the biggest stories in agriculture in 2011 was the intense drought and heat wave in the southern plains that seared crops and eventually led to widespread wildfires, only about 24 percent of the continental U.S. was experiencing drought on February 8 of that year, with nine percent of that sample facing “severe, extreme, or exceptional” drought.
Twelve states have loss ratios of at least 1.1 — meaning crop losses are $1.10 for every dollar received in premiums for the 2012 crop year — according to the January 21 data from the Risk Management Agency. The highest loss ratio states are in the heartland, with the top five states including Illinois at 2.36, Missouri at 2.24, Kentucky at 2.16, Nebraska at 1.83, and Iowa at 1.66.
To date, most of the crop losses are to corn and soybeans, with corn producers accounting for 59 percent of all indemnities paid and soybeans accounting for roughly 12 percent. Cotton, wheat and grain sorghum make up the other top five crop losses.
Eighty-six percent of all planted U.S. farmland – some 281 million acres – is protected by crop insurance this year, up 2 percent from 2011 and a nearly three-fold increase from the late 1990s when only about 30 percent of farmers purchased policies, according to data from USDA’s Risk Management Agency.
The growth in coverage has been fueled by a number of factors, including fewer federal risk management alternatives for farmers, many farmers’ desire to have increased control of their risk management choices, federally-funded premium subsidies for those who purchase policies, a wide array of policy options and the value banks place on crop insurance when making loans.
“Some of the same people who had to deal with the floods last year along the Mississippi and Missouri rivers are now dealing with the opposite – extreme drought,” says Calamus, Iowa, claims manager David Bousselot, in a new NCIS video.
The video highlights the critical role that many of the 5,000 claims adjusters play in helping farmers pick up the pieces after the worst drought in decades, with $6.3 billion already in the hands of farmers. “The adjuster is the connection with the producer,” says Bousselot.
Throughout most of the summer, more than 60 percent of the continental U.S. was locked in drought, which sent corn and soybean yields plummeting.
Support for crop insurance is especially strong in rural America after this historic drought. A new NCIS video focuses on the overall training, continuing education and primary role adjusters play in getting crop insurance claims processed efficiently and accurately. Adjusters have already processed more than 146,000 claims so far this year, resulting in more than $2.2 billion worth of indemnity payments reaching farmers in need.
The arrival of heavy rains from Hurricane Isaac made some farmers happy and others worried to death, depending on where they were located and what they were growing.
In Louisiana and Mississippi, most of the cotton crop was two to four weeks from harvest when Isaac made landfall. That was the same situation as 2008 when Hurricane Gustav ruined that crop. Louisiana corn harvest had been delayed as well, leaving much of that crop in the field and farmers scrambling when the winds and torrential rains came.
The weekly U.S. Drought Monitor map released August 14 held more bad news for the contiguous United States, with 62 percent remaining in some level of drought. And the expanse that is gripped by extreme or exceptional drought rose nearly two percent last week to 24.14 percent.
The center of the drought remains directly over the Corn Belt. With some stage of drought covering the entire states of Indiana, Illinois, Iowa, Missouri and Kansas, the drought is certainly taking its toll on the corn and soybean crops. According to the August 10 estimates from USDA – the first “in the field” estimates of the year – production numbers are down substantially from what was projected at the beginning of the planting season.
A drought specialist with the national weather service recently compared the drought and heat wave here in the Midwest with the catastrophic dry period of 1988 that at the time cost agriculture $78 billion. USDA Chief Economist Joe Glauber recently said that “49 percent of the corn crop, 50 percent of the soybean crop, and 45 percent of the hay crop are all in areas that are experiencing drought,” adding that a lot of that area is actually in the “severe drought” category.
Three new educational videos on the importance of crop insurance were released by National Crop Insurance Services: ”Crop Insurance 101;” “2011 Southwest Case Study;” and, “2011 Midwest Case Study.”
Several witnesses representing key agricultural lending institutions and credit agencies told members of the House Agriculture Committee’s Subcommittee on Department’s Operations, Oversight, and Credit that access to credit is essential for farmers and crop insurance plays an important role in that access.
Losses paid out by crop insurance companies to farmers for 2011 crops have now exceeded $10.7 billion and are edging ever closer to the $11 billion mark, according to data from the Risk Management Agency (RMA). This surpasses the previous record of $8.76 billion set in 2008 by almost 25 percent.
Illinois farmer John Williams told the House Agriculture Committee that he firmly believed the number one goal of the 2012 Farm Bill should be to “do no harm to federal crop insurance,” during his testimony at the second of four field hearings held across the country throughout March and April to gather input in advance of writing the 2012 Farm Bill. The hearing was held on March 23, 2012 at Carl Sandburg College in Galesburg, Illinois.
“How crop insurance emerges from the 2012 Farm Bill process will hold major ramifications for this risk management program and for America’s farmers and ranchers who have come to rely on it,” Steve Rutledge told the Senate Committee on Agriculture, Nutrition and Forestry on March 15, 2012.
With 2011 indemnities quickly approaching the all-time record of $10 billion, and farmers preparing to plant another impressive crop just months after the worst weather year in U.S. history, the current crop insurance system is earning high praise from agricultural leaders and lawmakers alike.
With claims still streaming in — only an estimated 81 percent of expected claims have been finalized — crop insurance companies have already paid out a record $9.1 billion in indemnity payments to America’s farmers in 2011.
Crop insurance companies have paid out more than $7.1 billion and climbing in claims so far this year, which makes 2011 second only to 2008’s $8.6 billion in the total value of indemnities paid out to farmers. The combination of several large-scale floods in the Central U.S., record droughts in the southern plains, a strong tropical storm in the Northeast and a hard freeze in Florida set the stage for the widespread agricultural losses.
Most would agree that the private sector excels at some tasks while the government is better-suited for others. This melding of the private and public sectors has yielded a crop insurance policy with affordable premiums, personalized risk management solutions and a private delivery system that puts needed monies into the hands of farmers when timing is critical.
October 31, 2011 will mark the first time in history that seven billion humans will populate the planet, according to a recent United Nations report. The Executive Director of the UN’s Population Fund called the prediction “both a challenge and an opportunity,” noting that “globally, people are living longer, healthier lives and choosing to have smaller families.”
In the President’s budget reduction proposal released yesterday, crop insurance and the farmers who both support it and depend on it are once again being asked to shoulder a disproportionate portion of the budget cuts.
As the recent budget deal is interpreted and the Farm Bill debate heats up, important members of the House Agriculture Committee are singing the praises of crop insurance and underscoring its prominence as a necessary risk management tool that helps farmers weather adversity.
“Crop insurance is a vital part of the farm safety net and has become an integral part of business life for a large majority of American farmers and ranchers,” said USDA’s Risk Management Agency (RMA) Administrator William J. Murphy in testimony before the House Subcommittee on General Farm Commodities and Risk Management.
The 2011 crop year continues to face a trifecta of weather-related anomalies that have hit America’s heartland and have cast a long shadow over the highly optimistic projections for crop yields and farm incomes.
The hopes of the largest and most profitable harvest in U.S. history are being placed into question by a series of historic weather events that are inflicting major damage to America’s agricultural heartland.
This inaugural issue of the National Crop Insurance Services’ monthly newsletter provides the latest developments in the industry and information on why crop insurance is essential to America’s farmers, ranchers and agricultural economy.
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