TOPIC | INDUSTRY INSIGHT WHAT'S CROPPING UP


WSJ Spotlights Crop Insurance Business

January 2016

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Farm policy opponents love to tell tall tales of crop insurance providers banking huge returns. In a quest to eliminate farmers’ primary risk management tool, they repeatedly attempt to mislead lawmakers into believing that crop insurance profits are guaranteed and will remain rosy for perpetuity.

Luckily, America’s premier business publication isn’t buying such nonsense and is actually reporting on what’s transpiring in the marketplace, where a string of expensive natural disasters and low commodity prices are reshaping the industry.

Just before New Years, the Wall Street Journal summed up the situation in an article titled “Cargill to Sell Crop-Insurance Unit to Silveus.”

The business of insuring farmers’ crops against financial or physical losses has grown tougher as corn, soybeans and wheat prices have slumped over the past three years, mainly due to a string of bumper crops and benevolent weather, according to Keith Coble, a professor of agricultural economics at Mississippi State University.

“Reimbursement for these companies is on a percentage of the [insurance] premium, and the premium is tied to the value of the crop,” Mr. Coble said.

Futures prices for corn, the most widely grown U.S. crop, have declined nearly 50% over the past three years, while soybean and wheat futures both are down about 40%. Other players, including tractor maker Deere & Co. and biotech seed giant Monsanto Co., have sold crop-insurance units over the past year as declining crop prices have pinched farmers’ wallets and pressured profits for the companies that sell farm supplies.

Wells Fargo & Co. this month agreed to sell its Rural Community Insurance Services, one of the largest U.S. crop-insurance providers…

If crop insurance profits were really so enormous and guaranteed, why are well-known companies headed for the exits? No one ever said farm policy critics exercised much common sense in their campaign to deceive.