Crop insurance takes larger role in drought aid


Issue Date: November 5, 2014
By Christine Souza

The combination of the drought and the recently adopted federal farm bill means new decisions for farmers and ranchers. The 2014 Farm Bill requires farmers to rely more on crop insurance as their primary risk-management tool.

"I'm finding that those who have risk-management plans in place are in tune with their insurance needs in this drought year," said Josh Rolph of the California Farm Bureau Federation Federal Policy Division, who monitors federal crop insurance and assistance programs. "There is definite interest in new policies as seen by the data in California. We are analyzing that to determine how Farm Bureau can get more involved and in what areas."

Jeff Yasui, who manages the regional office of the U.S. Department of Agriculture Risk Management Agency in Davis, said the department "provides many programs and products that assist growers to develop their farm safety net and risk-management plans." (See related story.)

California crop insurance policies cover 6.7 million acres and more than $7.6 billion of liability for 55 different crops. Specific to drought, so far this year more than $88 million has been paid to growers who were prevented from planting a crop due to drought, Yasui said. Crops with prevented-planting provisions include barley, corn, cotton, dry beans, grain sorghum, oats, onions, potatoes, rice, safflower, sugar beets and wheat.

In addition, farmers with insured crops have received more than $122 million so far for losses caused by hot, dry weather, and those losses continue to accumulate, Yasui said. Crop insurance programs are administered by insurance agencies and overseen by the USDA agency. Insurance companies also provide private insurance programs that are not government-reinsured.

For the available crop insurance programs in California, farmers must purchase coverage prior to sales closing dates for each crop from their crop insurance agent. Growers must pay a premium, based on the amount of liability and options they select. Yasui said premiums are partially subsidized to encourage participation and keep the cost at an affordable level. As with other forms of insurance, the amount of coverage is flexible, and there are options to enhance coverage or reduce costs to fit individual needs. The premium rates and availability of the insurance are the same, he said, regardless of the agent or crop insurance company for federal crop insurance policies.

"Crop insurance policies that are reinsured by USDA cover nearly all adverse weather events, natural disasters or related losses," Yasui said. "Policies for many of the annual crops include prevented-planting coverage to offset losses from the drought, and a few of the crops provide revenue protection against price declines."

In addition to coverage for specific crops, farmers may also participate in the Whole Farm Revenue Protection program. This new farm bill program will indemnify against revenue losses, including losses as a result of drought, by providing coverage for an entire farming operation, including crops not covered by policies. Historical revenue records of all agricultural commodities produced on the farm will be used to determine if there are eligible losses.

Crop insurance options are also available to ranchers to provide coverage for rainfall deficits, compared to historical data in the area or surrounding areas, under the Pasture Rangeland and Forage or PRF policy. In California, there are 2.9 million acres covered under the PRF policy, and Yasui said more than $8.6 million has been paid in indemnities thus far in 2014 as a result of rainfall deficits.

Todd Snider, an agent for Personal Ag Management Insurance Services in Bakersfield, said farmers use crop insurance as a precautionary measure for poor prices or for major disasters, such as a freeze in citrus or poor pollination in pistachios.

"We have definitely seen more people take an interest in these types of (crop insurance) programs (this year)," said Snider, who is also a Kern County Farm Bureau director. "Many of these growers have had a few good years without any decrease in production and now, if they are relying on their groundwater, they are at the mercy of Mother Nature and the water table. With that risk, they have to consider the worst-case scenario—and without crop insurance, that worst case scenario would be zero."

Looking ahead to next year, Snider suggested that farmers "pray for rain, make sure your wells are up to par, figure out the depth of your water table and develop a risk-management plan in case of a worst case scenario."

Information about crop insurance programs and the commodities covered is available from insurance agents or on the RMA website: www.rma.usda.gov.

(Christine Souza is an assistant editor of Ag Alert. She may be contacted at csouza@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.