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Thursday, September 5, 2013

Crop Insurance Cushions Farmers From Drought

Livingston County, Ill., led the nation in crop insurance indemnities for the 2012 crop year. (Darrell Hoemann/The Midwest Center for Investigative Reporting)

Livingston County, Ill., led the nation in crop insurance indemnities for the 2012 crop year. (Darrell Hoemann/The Midwest Center for Investigative Reporting)

Farmers in the Midwest were devastated by a crippling drought in 2012. The federal crop insurance program paid out a record $17.3 billion.

In rural America, that money is still paying dividends.

To understand the impact, Harvest Public Media reporter Bill Wheelhouse took a tour of Livingston County, Illinois, where farmers received by far the biggest insurance payout in the nation.

Reporter

Transcript

JEREMY HOBSON, HOST:

It's HERE AND NOW, and today we're looking at how the drought is affecting different parts of the country. In the Midwest, drought conditions have returned after a relatively wet and cold growing season. Many farmers survived last year's drought thanks to federal crop insurance, which paid out a record $17 billion.

Livingston County in central Illinois received the largest insurance payout. From the HERE AND NOW Contributors' Network, Bill Wheelhouse of Harvest Public Media visited farmers there and has this report.

DOUG WILSON: We'll grab this one here.

BILL WHEELHOUSE, BYLINE: That is the sound of curiosity. On this sweltering day in mid-August, surrounded by healthy eight-foot-tall corn stalks, Doug Wilson peels back the husk to see how his corn is looking. The verdict?

WILSON: I'm seeing an ear that - there is probably about an inch to an inch-and-a-half tip on the end of where kernels did not pollinate. Last year it wouldn't have been unusual to see tipping back of half the ear width, three or four inches long. And so that just kind of shows the difference.

WHEELHOUSE: Last year Wilson lost nearly half his corn to the drought. It was his worst harvest in more than 30 years of farming. But today, less than a year later, he's not suffering financially at all.

WILSON: You carry homeowner's insurance and hope your house doesn't burn down. Well, we carry crop insurance, hoping our crops don't burn down, but last year they burned down, you know, kind of literally.

WHEELHOUSE: And the burn was so severe in Livingston County that about $154 million returned to the county in crop insurance indemnities, tops in the country. Why the big payout in Livingston County? It was in the heart of the drought. The University of Illinois' Bruce Sherrick, who tracks such issues, says it was a happy accident. The heat baked Livingston County right at the time of pollination, and a high percentage of farmers carried crop insurance there.

Checking in at a local bank, they'll tell you that $154 million has had a huge impact.

GARY BRESNER: We had individuals, without the crop insurance they probably would have had a third of a normal year's worth of gross income last year relative to them having a relatively normal year because of the insurance.

WHEELHOUSE: That is banker Gary Bresner(ph), who works in the county seat of Pontiac, Illinois.

BRESNER: They were still buying machinery and equipment because they did not get devastated like they would have done had they not had their insurance coverages.

WHEELHOUSE: It's no surprise, really, that here in Livingston County, crop insurance is praised. Many of the folks I talked to credited crop insurance with saving the local economy, where the jobless rate is at nine percent, and where the state of Illinois closed a women's prison this year as part of budget cuts.

And many here recall the days when drought meant years of economic hardship. Tim Kelly(ph) employs about 30 people at his John Deere dealership in Pontiac. Business is a little slow this month, he says, leaning against a green combine, but not like it was when severe drought hit in 1988.

Far fewer farmers carried crop insurance then. He says his dealership was empty, and it took a couple of years to get back to normal.

TIM KELLY: If you can keep a farmer with money in his pocket, he's going to spend it. That's how they always have been and always will be. So if the farmer makes a dollar, then everybody else that works for the farmer, the implement dealer, the grocer, the - everybody is benefitted by if a farmer can make money.

WHEELHOUSE: As Congress again tries to negotiate a five-year farm bill this fall, farmers and others in rural America point to this impact as the reason why crop insurance exists. And farmers do have some skin in the game. In Livingston County, for example, farmers paid about $9 million for their share of the premiums. The government's share, though, was close to 11 million.

The government was also on the hook for a large portion of the payouts, and that large payout draws plenty of attention from government spending critics. Others fault how crop insurance influences farming decisions. Claire O'Connor is with the Natural Resources Defense Council, an environmental group that recently released a report critical of crop insurance. O'Connor says the program should be reformed to encourage farmers to use conservation methods, something she says current crop insurance programs don't do.

CLAIRE O'CONNOR: It charges farmers using a formula that doesn't distinguish between farmers who are degrading their soil and farmers who are regenerating their soil in order to be more resilient. It's almost like a car insurance company that would charge more to a careful drive than to a reckless driver.

WHEELHOUSE: Today's subsidized policies are certainly popular with farmers. For the 2013 crop year more than 270 million acres are covered, continuing a steady annual increase since 2008. What crop insurance and other farm subsidies look like in the future is an important part of the farm policy discussion in Washington. With drought so fresh in their mind, Midwestern corn farmers continue to tell Congress they are willing to give up other types of farm payments in exchange for the protection that crop insurance brings.

In Livingston County, banker Gary Bresner offers one key takeaway from the 2012 disaster, at least for Livingston County.

BRESNER: We're going to be better off for quite some time because of last year's safety net.

WHEELHOUSE: The hope for many of these farmers is that some kind of clarity will emerge out of Washington this fall on the future safety net. However, there's no insurance for that. For HERE AND NOW, I'm Bill Wheelhouse in Springfield, Illinois. Transcript provided by NPR, Copyright NPR.


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