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• Farmers in the Southeast echo the sentiment that crop insurance is critical in the new farm bill, many noting that high prices have brought with them highest in history input costs, and risk associated with planting such a capital-intensive crop demands some sort of safety net.
NEW FARMERS, like Marion, S.C., grower Jimmy Taylor, must have insurance for high risk crops, like dryland corn.
Difficulty with math
Some politicians appear to have little difficulty doing some of the math involved in agricultural crop production, but have no aptitude for nor interest in the more complex look at the overall risk involved in farming.
It’s easy to compute that a farmer who grows a thousand acres of corn and produces a crop at the national average of 150 bushels per acre and sells his or her crop for $7 a bushel makes a million dollars.
Calculating how much it really cost to produce that 1,000 acres of corn is quite a different story. More importantly, the economic risk involved in producing that crop is off the chart, compared to other manufacturing operations.
Keeping farmers in business is critical to the long-term viability of the U.S. economy and more critical to the U.S. being able to feed itself and produce enough extra food to benefit from lucrative foreign trade agreements — a little publicized fact that significantly helped soften the economic blow of the most recent financial recession.
As part of the current farm bill, farmers have two different safety nets.
Direct payments are by all accounts the least defensible when it comes to federal budget cuts. Currently farmers can be eligible to receive: 52 cents a bushel for wheat, 28 cents a bushel for corn, 7 cents a pound for cotton, 44 cents a bushel for soybeans and $36 a ton for peanuts.
For each commodity, the total direct payment is determined by multiplying 83.3 percent of the farm's base acreage times the farm's direct payment yield times the direct payment rate. Direct payments are not based on producers' current production choices, but instead are tied to established base acres and yields.
Crop insurance is subsidized by the federal government, but varying percentages of the cost are paid for by growers.
Vilsack contends this program is much more defensible than direct payments and appears to have centered his efforts on retaining some components of crop insurance provided in the 2008 farm bill and strengthening other sectors, despite projected budget cuts.
Growers, especially more diversified and small acreage farmers in the Southeast, tend to prefer crop insurance because it is more predictable than direct payments.
For example, last year wheat growers bought about 135,000 policies for crop revenue coverage insurance at a cost of more than $1 billion.
In 2011 the Upper Southeast harvested one of its biggest and best crops in years. Subsequently growers in the region planted another big crop this year.
The risks involved in planting a crop in the fall, carrying it over the winter and harvesting it in late spring are high. Without a viable crop insurance program, growers are likely to be reluctant to pay for the inputs needed to produce high yielding wheat in the region.
The momentum for a viable crop insurance program in the upcoming farm bill appears to be gaining steam. Most recently the joint directors of the corn, soybean, wheat and grain sorghum associations released a joint statement calling for a strong crop insurance program.
(Four major commodity groups recently came forward with a statement saying crop insurance is their No. 1 priority in any new farm legislation. To read that story, visit http://southeastfarmpress.com/government/commodity-groups-set-crop-insurance-top-farm-bill-priority. The National Crop Insurance Services has also weighed in on the subject. That information can be found at http://southeastfarmpress.com/management/farm-bill-advice-tread-carefully-when-altering-crop-insurance-policy).