Value Of Crop Insurance

07-13CFcvrBy Woody Anderson
Colorado City, Texas

As I prepared to plant my cotton here in the Texas Rolling Plains, I once again was reminded that growing cotton without access to crop insurance is an awfully risky venture these days.

Hundreds of dollars per acre are spent to plant a crop in the hope that it will come up, the weeds won’t be too bad, the pests won’t kill it and, in the end, there actually will be a market that will pay a high enough price to cover all of the production costs.

Weather is a whole other challenge. Mother Nature consistently, but not predictably, doles out floods, drought, high winds, hail and temperature extremes throughout the season. The process of putting seed in the ground in a timely manner, producing a healthy stand of cotton and then preserving the crop’s yield and quality through harvest time can test your nerves. For example, last year was one of the worst droughts the nation has faced in decades. Crop insurance played a pivotal role in helping farmers through that disaster and is a classic example of why we need this important risk management program.

When the 2013 planting window approached for me, conditions at my Colorado City farm were less than ideal to say the least. We were dealing with minimal subsoil moisture. What was frustrating, though, was that we finally got a good rain (two to four inches) in mid-May, but all the precipitation occurred in an hour and because the land was so dry, most of the water ran off and took a good deal of soil with it.

As this column was being submitted in early June, my projection was that due to a lack of subsoil moisture, the farmers in my area might get 40-50 percent of their cotton crop to emerge.

Fortunately, the current House and Senate Farm Bills being debated contain provisions that ensure this important risk management tool not only will continue to be available to America’s farmers but provide more coverage options.

To those who might criticize the federal government’s (taxpayer) partial subsidization of crop insurance, let me point out that the House Farm Bill contains significant reforms and saves some serious money. Some of the reforms in that Federal Agriculture Reform and Risk Manage-ment Act include: nearly $40 billion savings in mandatory funds; more than 100 programs repealed or consolidated; streamlined and reformed commodity policy that gives producers a choice in how to manage risk; consolidation of conservation programs and improved program delivery to producers. Spending dropped by two-thirds from fiscal years 2000 to 2012, according to USDA and Congressional Budget Office data.

Crop insurance has taken a logical and appropriate place in America’s farm safety net infrastructure. Consider that in 2000, nearly $28 billion was spent on commodity programs and less than $3 billion on crop insurance. Over the course of 12 years, the overall amount of spending slowly but consistently fell while commodity spending and crop insurance spending equalized. In 2012, total farm safety net spending was $10 billion and was split equally between the two.

Moving forward over the next two years, crop insurance spending will be up in 2013 due to the 2012 drought but still small in comparison to past disasters. Beyond that, USDA projections show spending on commodity programs (even before sequestration and Farm Bill cuts) will remain flat at $5 billion, while crop insurance spending will decline from the 2013 level.

The bottom line is that sound crop insurance provides American farmers more than just the ability to stay in business. These programs provide the certainty for making the long-term investments necessary for maintaining on-farm productivity and economic viability.

– Woody Anderson, Colorado City, Texas

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