By JOE BURKE
Now that the 2013 harvest has wrapped up, we have a truer picture of what farmers like myself and others throughout the Midwest were — or were not — able to grow this year. And as is typical after harvest, we hear lots of numbers in the news such as bushels per acre. Weather during the planting and growing season is always a factor and plays into the statistics that we hear a lot about. As the Farm Bill progresses through Congress' legislative process, attention is likely to be focused on the number of crop insurance claims filed and on the amount of money that farmers will receive as a result of failed crops.
For farmers, whether to purchase crop insurance is a business decision that gets made on a year-to-year basis. But crop insurance typically gets the attention of the news media and the general public only in a catastrophic year. And unfortunately, there is much about crop insurance that is misunderstood.
Farmers understand that crop insurance is the only meaningful risk management option available to them today. Fortunately, 79 percent of eligible acres in the United States were insured as of 2012. That compares to just 25 percent of eligible acres during the last significant drought in 1988. There are a couple of implications of these statistics. It stands to reason that more money will be paid out in claims this year, simply because more acres are insured. It also means that a larger percentage of farmers will have the financial wherewithal to purchase inputs and produce a food crop again next year.
Farmers also know that crop insurance isn't cheap. The out-of-pocket expense for farmers, based on average per-acre premiums for corn and soybeans, can run in the neighborhood of $23,000 per year for an Illinois farmer with 1,000 acres. In 2013, Illinois farmers spent $367 million out of pocket on crop insurance premiums. It's so expensive because of the inherent risks of farming including the weather, global markets and government policies, among other factors.
While farmers invest heavily when they choose to buy crop insurance, they don't always see a return. If they don't experience losses, they don't collect benefits. In the past 10 years prior to the 2012 drought, corn and soybean farmers in Illinois have received an average of $0.43 for every $1 spent on insurance premiums. Compare that to corn policies in Illinois in 2012 returning $6.08 for every $1 spent on corn coverage as an illustration of the extreme volatility and riskiness inherent in farming and the need for a sound crop insurance program. The fact that Congress was not even asked to provide an ad-hoc disaster program after a drought of that magnitude speaks volumes for the success of the crop insurance program.
Far beyond being a business decision made by an individual farmer, crop insurance is a matter of national security. History shows that a country that is hungry or that depends on others for food is vulnerable and unstable. During the dust bowl of the 1930s, American citizens literally starved to death. In the years since then, Congress has taken seriously the need to support American agriculture to ensure a stable and abundant food supply.
Ensuring (and insuring) the country's ability to produce food is a team effort — farmers, private crop insurance companies, private reinsurance companies and the federal government are all part of the equation.
Joe Burke farms in the Thomasboro area and is the chairman of the Marketing Committee for the Champaign County Farm Bureau.