Insurance Consolidation Continues

By Marcia Zarley Taylor
DTN Executive Editor

HADDONFIELD, N.J. (DTN) -- In a sign of more consolidation in the crop insurance industry, Cargill announced Tuesday it will sell its crop insurance agency, Cargill Crop Insurance LLC (CCI), to Silveus Insurance Group of Warsaw, Indiana. The transaction is expected to close in mid-January.

Silveus is a fourth-generation family owned agency that specializes in risk management decisions from both grain hedging and insurance perspectives. It was already one of the largest crop insurance agencies in the United States but will now employ close to 90 agents in the combined company serving all states.

"Running crop insurance agencies has become more difficult in recent years, with a lot of mega agencies changing," Tyler Silveus, CEO of Silveus, said in an interview with DTN. "We're fighting for scale and economics that technology can buy. As farms continue to consolidate, agencies will too."

Silveus believes its strength is in amassing technologies that can support a large, mobile agent force. While about 12,000 agents are listed on the Risk Management Agency website, Silveus estimates maybe only two-thirds are active. In addition, there is a shortage of beginning agents. "There aren't a lot of kids signing in to be crop insurance agents," he said.

Cargill entered the crop insurance agency business in 2007, but slumping commodity markets have pressured most grain trading giants to restructure operations and plan layoffs to boost profits. Several other agribusiness giants -- including Wells Fargo and John Deere -- have announced or sold their crop insurance units in the past year. Those sales had little impact on farmers, since the federal government dictates crop insurance prices and terms nationwide, much like it does with Medicare. The Cargill sale to Silveus is a bit different, since agencies are the ones who handle sales and service for crop insurance policies at the farmer level.

"The mission of our grain and crop inputs businesses is to effectively and efficiently help farmers make the most of their investments in agriculture, and help them manage their risks." Dave Baudler, president of Cargill AgHorizons U.S., said in a press release. AgHorizons includes the company's network of grain elevators and farm service centers in the country. "We believe we can accomplish this mission through our core grain marketing and risk management programs without being directly involved in the sale of crop insurance."

Silveus anticipates there will be more opportunities to work with Cargill clients, analyzing how both insurance and hedging practices protect against risk. Last season was the first year in many where crop insurance alone would not cover grain producers' cost of production, and 2016 crop insurance guarantees will likely follow suit, Silveus noted. "Growers will need a strong eye on their sales and hedging practices to see where their exposure lies."

Follow Marcia Taylor on Twitter@MarciaZTaylor

(AG/CZ)

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