Image provided by: University of Oregon Libraries; Eugene, OR
About Capital press. (Salem, OR) 19??-current | View Entire Issue (Aug. 17, 2018)
8 CapitalPress.com August 17, 2018 The great crop insurance debate Critics say crop insurance subsidizes farmers, but it is the only guarantee of help when disaster strikes By MATTHEW WEAVER Capital Press PATERSON, Wash. — Sev- eral years ago, drought dec- imated Nicole Berg’s wheat crop. To break even, her fami- ly needed a yield of at least 7 bushels per acre, but a crop insurance assessor estimated Berg’s wheat would yield just 3 bushels per acre. That would bring in far less money than it would cost to harvest the crop. Berg, who is now secretary of the National Association of Wheat Growers, and her fam- ily instead received a payment from the crop insurance they bought that year for about 70 percent of their farm’s average production, about 25 bushels per acre, minus the wheat re- maining in the field that they decided not to harvest. The scenario is not unusual. In many areas across the West, Midwest and South, farm- ers can experience multi-year droughts, Berg said. Even with crop insurance, “when you get back-to-back- to-back drought, you’re just basically paying your bills and that’s about it,” Berg said. “You can’t buy new machinery, you can’t turn the corner to help keep up with maintenance. There’s just not enough mon- ey.” Wheat farmers can’t remain viable without crop insurance, Berg said. “Over time, over the long-term, they would go out of business.” Yet crop insurance, a key part of the federal farm bill, continues to draw criticism from both conservative think tanks and liberal environ- mentalists inside Washington, D.C.’s Beltway. What critics say Some organizations argue crop insurance needlessly sub- sidizes farmers. In an April report, Daren Bakst, senior research fellow in Matthew Weaver/Capital Press Paterson, Wash., wheat farmers Frank and Nicole Berg, father and daughter, consult in the field July 24 during harvest south of Prosser. Nicole, secretary of the National Association of Wheat Growers, says wheat farmers can’t remain viable without crop insurance. Chandler Goule Bryan Brock agricultural policy for the Her- itage Foundation think tank, said, “It is ... very difficult to justify providing multiple sub- sidies to cover the same losses, to cover shallow (minor) loss- es or to insulate farmers from competing in the market like other businesses.” Bakst told the Capital Press his organization recommends moving away from subsidies to a “more properly” focused safety net, emphasizing poli- cies insuring yields instead of those insuring revenues. “It’s about making changes that make sense for everyone — farmers, taxpayers, con- sumers and everyone across the board,” Bakst said. The Environmental Work- ing Group, an environmental group, claims farmers who are “millionaires and billionaires” should shoulder more of the Marva Ulleland Scott Faber cost of insurance, and recom- mends setting limits on federal- ly supported insurance. Scott Faber, vice presi- dent of government affairs for the group, believes taxpayers should know how much crop insurance support farmers re- ceive. “After all, the American people are footing the bill,” he said. “It seems like a reason- able proposition that a farmer or farm owner who’s made mil- lions in the marketplace should have to pay a little bit more for their crop insurance than a farmer who’s just struggling to stay on the farm.” Not if, but when Crop insurance isn’t like homeowner’s insurance. A homeowner might pay for insur- ance but never have a fire or oth- er catastrophic loss to a house. For farmers, though, it’s not a matter of if disaster strikes, but when. Pro- longed drought can bring even Daren the most suc- Bakst cessful farmer to his, or her, knees financially. Under the 2014 Farm Bill, when farmers purchase crop insurance, they share the risk of a drought or other disaster with one of 15 private insur- ance companies and the federal government, which “reinsures” the insurance companies for a pre-determined amount of ex- cessive losses. In good years, the companies also share their gains with the federal govern- ment, according to the National Crop Insurance Services, a crop insurance industry group. The idea behind the pub- lic-private partnership included in the Farm Bill was to avoid crop disasters like those that oc- curred from 1989 through 2012 that forced Congress to pass 42 emergency bills costing $70 billion to rescue farmers. Depending on the policy, farmers can cover as much as 75 to 85 percent of a crop for naturally occurring damage and price loss. According to the USDA Risk Management Agency, 86 percent of total U.S. acres were covered by federal crop insur- ance in 2015, not including hay, livestock, nurseries, pasture, range and forage. Eighty-nine percent of prin- cipal crop acres — wheat, bar- ley, potatoes, rice, soybeans, corn, cotton, grain sorghum, peanuts and tobacco — were covered, as well as 74 percent of all fruit and nut crops and 34 percent of vegetable crops. The agency offers a vari- ety of policies that cover crop yields, revenues, livestock and whole-farm revenue protection. The most common policy by far covers individual farm reve- nue. It represents more than 80 percent of the entire crop insur- ance portfolio. The cost of purchasing crop insurance consists of an administrative fee and the in- surance premium. The total premium amount paid by the producer can be adjusted by a premium subsidy paid by the Federal Crop Insurance Corp. The amount of premium subsi- dy depends on several factors, including the coverage level selected by a producer. Last year, the agency paid out $5.22 billion in crop in- surance indemnities to farmers across the nation, including nearly $163 million to farmers in the Pacific Northwest. Crop insurance is far more likely to cover a crop loss than homeowner’s insurance will cover a loss such as fire, said Ben Thiel, director of RMA’s regional office in Spokane. He occasionally hears from people who don’t think they need crop insurance, but always have homeowner’s insurance. “Crops are a living or- ganism exposed to all these weather events that potentially can occur, where a house is a John Deere Dealers See one of these dealers for a demonstration hard, rigid structure — weather events occur to it all the time, and you don’t sustain any dam- age...,” he said. “A house has the ability to withstand certain things where a crop is more fragile and doesn’t have that ability. There is greater risk.” That’s one reason crop in- surance is provided with the help of the federal government, as opposed to only the private sector, Thiel said. “The risk is so great that the private sector can’t offer multi-peril crop insurance with- out the assistance of the federal government being involved in a public-private partnership,” he said. A ‘sure bet’ Some farmers are required by their banker to buy crop in- surance. “When the combine’s worth $300,000 and you’ve got to make a payment on the combine, they want to make sure you’re going to make your payment on the combine,” Berg said. “Farmers don’t want a pay- out from the crop insurance,” said Bryan Brock, senior vice president of lending for north- eastern Washington for North- west Farm Credit Services in Spokane. “They want to pro- duce an amazing crop and get paid for it. That would be their goal.” Crop insurance is the only “sure bet” for farmers, agreed Marva Ulleland, vice presi- dent of operations for insur- ance services for Northwest Farm Credit Services in Spo- kane. “If you plant the seed, you can’t be assured that it is going to rain — you don’t know if you’re going to have moisture, drought or a fire,” she said. “Crop insurance is the one thing that they can count on when they put that seed in the ground. It’s something they can take to the bank and demonstrate that this is the worst-case scenario: ‘Should we have a shortfall in our crop, this is the guarantee that we would receive.’” Debate continues Improvements to crop in- surance can be made, said Chandler Goule, CEO of the National Association of Wheat Growers. But getting rid of it or shrinking the program so that only small farmers have access would only increase the cost to all farmers, and increase the cost of food for all Americans, he said. Groups such as the Heritage Foundation and the EWG want to get rid of crop insurance, Goule says. Their messages are well-crafted for a Washington, D.C., crowd, and for members of Congress from urban areas, designed to raise money and are usually misleading and false, he said. Very few farmers could re- main viable without crop insur- ance, Goule said — those who have been farming a long time, and are at the point where they can weather two or three years of drought. But that’s a small, sin- gle-digit percentage of grow- ers, he said. Goule expects attacks on crop insurance to continue. “It’s getting harder and harder every year,” he said. “We should never let up on our continuous support for crop in- surance.” ‘Do no harm’ 33-3/102 Advocates and critics alike say the House and Senate ver- sions of the Farm Bill did little to affect crop insurance this go- round. Members of Congress worked to “do no harm,” said Texas Rep. Michael Conaway, chairman of the House Ag Committee, during a recent vis- it to Spokane. He hopes to pass the new Farm Bill by the end of September, when the current bill expires, he said. “Whether you’re farming a thousand acres or 100 acres, risks are risks,” Conaway said. “If you want safe, affordable food and you want it produced in America, we need that safe- ty net, and crop insurance has proved itself to work year-in and year-out.”
