Crop insurance carries the day for otherwise good crops

By Mike Corn
 he Hays Daily News, Kan.
 It wasn't a bumper wheat crop, but the yields were respectable nonetheless. In some cases, in fact, they were darn good, beating out county averages.
  In something of an ironic twist, however, crop insurance was the icing on the cake.
Bottom line, crop insurance is making up what farmers lost in the price of wheat, even though many of the costs associated with growing and harvesting the crop didn't fall as far as prices did.
  Crop insurance payments for 2009, so far, are a relatively low $271.2 million statewide
Northwest Kansas farmers, in spite of an overall good year, picked up slightly more than $47 million in crop insurance payments.
  But two-thirds of that -- about $28 million -- is designed to make farmers whole again on wheat prices.
  "We had really pretty good yields," said Jerry McReynolds, a Woodston farmer who also serves as vice president of the National Association of Wheat Growers.
  What happened is when farmers purchased crop insurance for their 2009 wheat crop, the guaranteed price was more than $8 a bushel -- a reflection of actual prices a year earlier.
But as the 2009 crop started growing, and demand started falling, market prices plummeted.
   When the final tally was made to determine average prices, wheat stood at $5.88.
"The market dropped almost $3 by July," said Art Barnaby, a crop insurance specialist at Kansas State University.
   Prices have since dropped even further.
   While Barnaby didn't expect to see crop insurance pick up much of the shortfall for corn and grain sorghum, there is some evidence farmers in heavily irrigated counties are picking up some of that windfall.
   In Thomas County, for example, nearly $3 million has been paid out under revenue-guaranteed plans. Sherman County picked up about $4 million. Sheridan County farmers, however, collected less than $1 million.
    That's all sure to change, as final prices are determined on corn and it's finally determined how to deal with some corn and grain sorghum crops that remain uncut.
It's also possible additional money still could trickle in for wheat farmers, although it won't be much.
   For McReynolds, it just shows how important crop insurance is as a tool for farmers.
"It's making us work a lot more efficiently," he said.
  But even McReynolds recognizes that unusual nature of the price guarantees.
"If we always had good crops, we wouldn't need crop insurance," he said.
   Even now, he's looking at the possibility of crop insurance kicking in for this year's crop.
   "We had some terrible cold weather," he said. "We had some snow, which was good. Then the wind blew at 50 mph."
  That sent the snow, something of an insulating blanket for wheat, into ditches and drifts.
"I'm expecting some damage," he said.
   The question not yet answered is how much? And he thinks the Woodston area -- 50 miles northeast of Hays -- might have had more snow than even the Hays area.
"Crop insurance covers a lot of things," he said. "Sometimes it's drought. Not too often it's too much moisture."
   Price guarantees is another, although it comes in several flavors. Which one is best depends on where the land is located.
   "In this day and age, with the price of inputs, the price of fertilizer and seeds, you have to have some protection and crop insurance is tremendously important to us," he said. "We are in an area where yields are so variable and moisture is so variable."
Crop insurance doesn't solve all problems
 Despite its importance, crop insurance still doesn't take the gamble out of farming.
    Generally, farmers can only justify buying insurance to cover 70 percent of the risk. By the time averages are figured in, the farmer often just covers costs, allowing another crop to be planted.
  "Well, you know you're insured," said Jerry McReynolds, a Woodston farmer. "But when you have a loss, you find out they'll cover 55 percent of the loss."
  That's not always the case, but farmers either have to prove yields on a particular piece of land or take a county average.
  There are places to buy more insurance, he said, but the cost becomes prohibitive.
  McReynolds said he generally spends anywhere from $15,000 to $20,000 to buy insurance on his wheat crop.
  "People can spend that much on fall crops," he said.
  That doesn't include multi-peril insurance, which only covers yield losses stemming  from the likes of hail.
  And there are wide gaps in the coverage, he learned just this year.
With wheat planting and the harvest of fall crops -- corn, milo and soybeans -- all falling at the same time, McReynolds was hard pressed to get everything done.
   And then the moisture came, preventing him from getting all of his wheat planted.
  While the federal crop insurance program had a "prevented planting tool" available to farmers, where they would get paid for part of the crop, McReynolds said there was a catch.
   That catch, he said, would have required putting a zero in the yield average for the program's actual production history category -- the proving of yields for a particular field.
   That APH is a rolling 10-year average.
    Adding a zero to the average would have had dramatic consequences, he said.
  "You're giving up a lot," he said. "For the next 10 years, you have to live with that."
  That gave him pause.
   "I just didn't take it in as prevented plantings," he said. "I said, 'Whoa, I'm not going to take a zero.' "
  McReynolds instead will be planting something else, such as milo, in the acres intended for wheat.