Guaranteeing Peace of Mind, Not Profits06/15/2016
Critics of America’s farmers and the risk management tools they depend on would have you believe that U.S. farm policy somehow guarantees growers a plush profit.
Amid current falling crop prices, shrinking farm incomes, and rising debt loads, we’re sure most farmers would welcome such a guarantee. Too bad it doesn’t exist.
To make their case, farm policy opponents often misrepresent a form of crop insurance known as revenue protection. This kind of protection, which farmers help pay for out of their own pockets through premiums and deductibles, doesn’t guarantee profit. Rather, it helps smooth out big dips in income during volatile times.
And it doesn’t necessarily equal an indemnity payment in years with low crop prices like 2015.
Now that the insurance numbers for the 2015 crop year have been finalized, we know that total indemnities paid to growers, including revenue protection as well as coverage from weather events, were at the lowest level since 2010.
When you factor in the $3.7 billion farmers paid in premiums and the $7 billion they shouldered in deductibles, you see that it wasn’t even a break-even year for farmers from an insurance perspective.
And of all the insurance claims paid out in 2015, only 3 percent were the result of price, meaning those “profit-guaranteeing” revenue plans were rarely used. By contrast, nearly 70 percent of losses resulted from drought, rain, and excessive moisture – disasters that even the most hardened critics believe deserve coverage.
And where did farmers most experience the biggest price-related losses?
It wasn’t in the traditional Midwest operations that agriculture’s detractors like to demonize. No, it was in Rhode Island, and California, and Washington State, and Oregon, and other places where fruit and vegetable production dominate.
Farm policy antagonists once complained about these same specialty crop operations not having and adequate farm safety net. Now, ironically, they want to tear down the safety net recently put in place.
Looking at the numbers, 2015 also turned out to be noteworthy for other reasons, as National Crop Insurance Services recently examined in its TODAY Magazine.
For example, insurers wrote 1.2 million policies, covering more than $100 billion in crops on a record 299 million acres last year. That represents about 90 percent of America’s total planted farmland. Check out these facts and more in The Year in Review article.
Hopefully our critics take a few minutes to read. They might learn something.
Source: National Crop Insurance Services