TAXPAYERS ARE BETTER OFF WHEN FARMERS HAVE CROP INSURANCE

Basic premises that we must agree on before you read this post: 
       1. Food security is important, both for America and for the world.
       2. Food security depends on farmers being able to make enough money               to farm the next year.

According to a recent study published in the Journal of Agricultural and Resource Economics (JARE), U.S. taxpayers spend less when the government discounts farmers’ crop insurance premiums instead of relying on unbudgeted disaster aid packages.

When farmers have a major loss, often due to weather extremes like drought or tornadoes or hail storms, it benefits the American people to help those farmers make enough money to survive to farm another year (see food security premise above).  Before crop insurance, the U.S. government would hear about the major loss and Congress would often pass a disaster aid package.

This would be similar to what happened after the major hurricane events we’ve seen lately.  The disaster happens, the loss is extreme, the government steps in to help.

However, those unbudgeted needs are a strain to the national financial situation and aren’t ideal.  Also, political games can impact the timely deliver of the disaster programs and aid.

When the government pays a portion of the farmers’ crop insurance premium, it is a budgeted amount that provides farmers an incentive to protect themselves.

corn fields planter illinois

Federal crop insurance has become a pillar of U.S. farm policy in recent years and is being considered by policymakers around the world.  As it stands, farmers collectively spend $3.5 to $4 billion from their own pockets to purchase insurance protection a year.

Since crop insurance’s rise, annual disaster bills, which are fully funded by taxpayers and used to be the norm, have been largely reduced.  That’s been welcomed news for farmers since the disaster bills of the past were often politically motivated and were slow to deliver relief.

Congress is debating the farm bill right now, and this – among other topics – is a very important nuance to note.  When farmers have access to a working crop insurance program, they are partnering in the costs of the disaster losses.  Without a working crop insurance program, farmers turn to the government and tax payers fully fund the cost of the loss.

This study uses mathematical, peer reviewed data suggesting that it will be important for lawmakers to recognize the reduced insurance participation and increased likelihood for ad hoc assistance associated with the proposals being championed by farm policy critics during the ongoing Farm Bill debate.

Thank you to our source, National Crop Insurance Services.

Lindsay Mitchell
ICGA/ICMB Marketing Director

START SEEING MONARCHS

This past weekend, we celebrated National Monarch Day!

The Monarch Butterfly is an important pollinator for corn farmers and one whose numbers are dwindling.  The problem?  Monarchs need milkweed to complete their life cycle and modern herbicides are making milkweed very hard to find.

The solution?  Plant milkweed!  Farmers are working to keep milkweed in roadside ditches and waterways, pastures and creek beds, and even planting pollinator gardens around their homes.

Chris Novak, Chief Executive Officer of the National Corn Growers Association, told Prairie Farmer that he understands farmers’ reluctance to embrace milkweed.

“When I was a kid, I hated pulling milkweeds the most, and we knew at the time it was a noxious weed. We watched the thousands of seeds that came from a milkweed pod,” Novak says. “At that point, we weren’t thinking about monarch butterflies!”

But he says as science has improved, agriculture has taken a closer look at habitat for wildlife and recognized that people need to take steps to help. Currently, the U.S. Fish and Wildlife Service is considering a petition to list the monarch as a threatened or endangered species and plans to deliver a decision in June 2019.

“The farmers I work with are independent folks, and if they can get to the point where they don’t have government regulations coming down on them, they certainly prefer that,” Novak says.

He calls monarch habitat protection a “new part of the system farmers have to manage.” He and the rest of the Farmers for Monarchs coalition want to encourage farmers to take areas that aren’t part of productive working lands — fencerows, ditches, pivot corners — and plant habitats there.

“That’s at the heart of this effort,” Novak explains. “What we do first and foremost voluntarily gives us an opportunity to experiment and find what works best.”

Thank you to our sources:
Prairie Farmer
Start Seeing Monarchs

DON’T MISS IT! RIDE IN THE TRACTOR AND PLANT CORN WITH AN IL FARMER

Interested in what the farmers are doing in the fields right now?

You can virtually ride in the tractor and plant corn with fifth-generation farmer Justin Durdan in LaSalle County, Illinois.   Justin explains when its time to plant, how he gets the corn seeds into the field and all the prep work that happens before the actual planting day.

You won’t want to miss this!

EVERYTHING RUNS ON HOMEGROWN CORN

Ok, not everything.  But a lot of things that you probably haven’t thought about depend on corn grown right here in Illinois.

These benefits to the Illinois economy are just the foundation; the building blocks of corn’s contribution to our state are found in the clean air we breathe, the steak and bacon we enjoy, and the tires, cleaners, diapers, and plastics we use.

And let’s not forget the whiskey.

Find out more at www.watchusgrow.org/corn

FARMERS’ SHARE OF FOOD DOLLAR AT RECORD LOW

What is “Farmers’ Share of Food Dollar?”

The Farmers’ Share of the Food Dollar is the amount of money out of every dollar that actually gets back to the farmer.  The data quantifies how much of each dollar that you spend on food is paid to the farmer for growing that food.  This data is tracked annual by the US Department of Agriculture Economic Research Service.

The Farmers’ Share is at a record low?

Yes.  In 2016, the farmers’ share of the food dollar fell to 14.8 cents, down 4.5 percent from the prior year and the lowest level since 1993 when this data began being collected and calculated.  This means that when you spend $1 on food, on average, the farmer is only getting about $0.15 of that dollar and the rest of it is going to transportation, packaging, marketing, etc.

In this case, the opposite is also true: non-farm related marketing associated with the food dollar (transportation, processing, marketing, etc) rose to a record high of 85.2 cents.

Is this really as straightforward as it sounds?

Yes.  In fact, if we adjust for inflation and alter all the numbers to 2009 dollars, the farmers’ share of the food dollar was just 12.2 cents.  So the actual low of 14.8 cents is even a little optimistic.

But food eaten at home and food eaten out is surely different …

Yes again.  Farmers receive more out of each dollar spent on food at home than they receive out of each dollar spent on food at a restaurant.  This makes sense … the prepared food at Chili’s is more expensive than what you can prepare at home because Chili’s has to pay waiters, cooks, overhead and more.

And the trend is for Americans to eat more meals out than at home.  So that drags the farmers’ share of the food dollar down.

What does this mean for farmers?

Pretty simply, it means that commodity prices are really low, food costs are growing, and when the general American wants to attribute that increased food cost to farmers or farm policies, they are incorrect in doing so.  Farmers are receiving less and less of the money you spend on food.  More and more of that cash is going to processors, marketers, restaurants, etc.

That doesn’t make any of this inherently bad, but it is important to understand the reality of our food system if we want to change farm policies or try to impact food prices.

Lindsay Mitchell
ICGA/ICMB Marketing Director

CROP INSURANCE 101

Many non-farmers don’t understand crop insurance.  It’s difficult to understand – I’ll give you that!

On the surface, the premise is just like home insurance or car insurance that most of us already understand.  But the implementation of crop insurance is pretty different.

This article from National Crop Insurance Services really helps describe how and why crop insurance is different from auto, life, and health insurance.

All insurance, from auto to life, health, and crop insurance works best when it expands the number of people it covers – a concept known as the “risk pool.” That is because the greater the participation, the more widely risk can be spread. And by spreading the chance of loss among a diverse group of insureds, premiums become more affordable for everyone involved.

Additionally, participants in all forms of insurance must pay premiums and shoulder deductibles. This gives the insured some ownership of their own protection and prevents participants from engaging in risky behavior – sometimes referred to as “moral hazard.”

In this sense, crop insurance works like other forms of insurance. However, the parallels are not perfect because agriculture is a unique kind of business that suffers unique kinds of losses. Unlike other insurance lines, agricultural losses tend to be geographically targeted and severe.

For example, there is little chance that every car in a city will be simultaneously totaled, or that every person in a state will need medical help at the same time. But a single flood, storm, or drought can cause a catastrophic loss for every farming operation in a county or region, which makes it more difficult to insure.

Because of this higher risk, the concentration of losses, and the likelihood of wide-scale disaster, crop insurance policies would be cost-prohibitive and very limited without some form of government support. Thus, America has a crop insurance system based on a public-private partnership between private insurance providers and the U.S. Department of Agriculture.

Under this arrangement – spelled out in a contract known as the Standard Reinsurance Agreement – companies that sell crop insurance must sell a policy to any eligible farmer at the premium rate set in advance by the Federal government. In addition, insurers cannot refuse to provide protection, raise the premium rate or impose special underwriting standards on any individual eligible farmer, regardless of risk.

EARLY PLANTING PROGRESS 2018

Spring has sprung in Illinois … finally.  We’ve had snow in April which isn’t super common around here.  It ruined the flowers and kept the farmers out of the field.  And if you think these Illinois corn farmers aren’t antsy to get in the planter, you’d be very very wrong.

Thing is, according to data released last week by the USDA, we aren’t really THAT far behind in Illinois or on a national level, even though it feels like things are moving slower than a January blizzard.

As of last week, Illinois hadn’t started planting at all yet, which is a little behind average, but not much.  And we can catch up quickly with a week of good weather.

Here’s what one of our farmer leaders had to say about his start this weekend:

Jim Reed, Monticello: Got started planting corn Saturday. Had a four hour delay trying to get John Deere monitor and Kinzie planter to speak the same language but after erasing the memory of the JD and rebooting it all was well. Soil temp at 1:00 pm was 50 at 4 inch depth.

So, at least in Central Illinois, soil temperatures are warming up enough to try to put a few seeds in the ground.  Stay tuned for more updates from the field as our #plant18 commences!