Minding Ag's Business
Marcia Zarley Taylor DTN Executive Editor

Friday 11/16/12

Is Crop Insurance on the Rocks?
Drought years like 2012 should be a testimonial for federal crop insurance and its evolution into meaningful revenue protection. After all, U.S. agriculture suffered the disaster equivalent of Hurricane Sandy and no one is writing "FEMA, please help me" messages in farm country.[Read Full Blog Post]
Posted at 11:10AM CST 11/16/12 by Marcia Zarley Taylor | Post a Comment
Comments (8)
Marcia, Everybody seems to rave about the crop insurance. What people don't realize every year that your yields are a wreck the less coverage you have for bushels because your average goes down. As alot of these farmers know in a combine you can have 300 on the monitor but the moment you get into pockets of bad the average gets killed. You continually show crop failures year after year your average and insurance bushels drop. Eventually it is to the point you got troubles. This will be an issue in the next couple of years if dry conditions persist and the yields are below the normal. Levels of proctection will decrease and no one is talking about this. Yield history is a part of the equation that will rear its ugly head. Interested to hear you thoughts and the thoughts of the American Farmer. Bruce
Posted by Bruce Cumberland at 9:35PM CST 11/15/12
Marcia, I don't think your thought process of health insurance & 25 years old vs. crop insurance vs. large farmers is an apples to apples comparison. I don't know a single banker out there that would lend money right now to a farmer paying $10k+ per acre or $300+/acre cash rent if they didn't have crop insurance. Look at it this way, home many farmers would have lost nearly all their working capital or profits in the drought stricken areas from this year? Maybe they can survive one year, but probably not 2. Crop insurance is a necessity, but if they cap it or reduce the premium, farmers will still have it, but they will carry more of the risk and/or cost.
Posted by Matthew Schreurs at 9:48AM CST 11/16/12
If this year isn't a testament to the functioning safety net crop insurance is, there isn't one. Congress just can't help seeing something be successful and work for a change... Ask any farmer if they're glad they had insurance this year. Then ask them if they're glad they have FSA disaster payments this year. See what kind of response you get from both. Insurance works folks, as it has for years; don't defund it Congress.
Posted by Jarrod Bennett at 4:13PM CST 11/19/12
Trillion $ deficits and the taxpayer on the hook for price/yield guarantee? Looks like low hanging fruit to me.
Posted by Unknown at 6:45PM CST 11/19/12
No farmer gets rich off of crop insurance. I took 70% cover with sping price option. I came in with about a 55% crop. you would think i would get 15% times the spring price. Wrong I got Nothing!!! They said the fall price was high enough to cover my costs. Funny thing is no one told me this when we were signing up for the program. I have found out Im not the only farmer that this has happend to. So if you foward contracted your crop at the spring price you were really on the short end of the stick. They still kept my premium though. What a scam.
Posted by Thomas Trojan at 8:10AM CST 11/30/12
The clueless and or corrupt congress ever fixated on re-election has chosen to be oblivious to the economic carnage it is creating with the unfair and inequitable crop insurance schemes. It should be obvious to everyone that targeting the largest and most profitable farm businesses with the largest investment and income guarantees grants these operations with an overwhelmingly competitive edge in a highly competitive business. It should be noted that many of these operations have little or no land costs and that government has no business guaranteeing ever increasing land values with insurance schemes that cover land costs. It should also be obvious that smaller farm operations targeted with no or minimal government benefits have little or no chance of competing in such an economic environment. Considering the stratospheric levels to which land values have escalated it should be obvious to all that extreme government income and investment guarantees are capitalized into land values and that government has no business targeting the wealthiest with multimillion dollar investment/profit guarantees and billions in insurance subsidies.
Posted by Lon Truly at 10:34PM CST 12/05/12
A major reason that margins in ag are tight is because of government not only assuming nearly all the production and marketing risks for many of the major ag crops, but also government guaranteeing a profit to many farmers with current prices and current government insurance schemes. Current farm bill proposals double down on these government risk assumption schemes with new and crazier shallow loss income guaranteeing schemes. When farmers have to budget for more of the production and marketing risks they are not as crazy about driving profitability margins below zero.
Posted by Lon Truly at 7:53PM CST 12/25/12
Thomas, your agent gave you bad advice which led to a poor purchasing decision. Unfortunate for you, the program you purchased worked exactly as it was supposed to. Had your agent advised you to purchase fall price protection (something I do to ALL policyholders in ALL years) you would have received not only that 15% payment on the lost bushels, but you would have also received another roughly 33% additional pricing payment on those lost bushels. I sure hate to hear that someone who had a half a crop didnt receive a payment this year...I would suggest you agent shop this year and seek one who will spend the time to fully explain what you're buying. As much as it costs, you deserve a knowledgable agent who'll take the time with you and make the right offerings based on what he or she knows about you. Best of luck Thomas.
Posted by Jarrod Bennett at 10:28AM CST 12/27/12
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