Hail damaged corn

Farming is a risky business — so risky, private insurers wouldn’t touch it alone. The federal government long ago stepped in as a partner.

“Overall, farmers realize how important the program is and are very happy to have it,” said John Read of The Assure Group, a Peoria-Ill.-based insurance company.

The Risk Management Agency handles the Federal Crop Insurance Corporation, which was created during the 1930s when the Great Depression and the Dust Bowl dealt a double whammy to farmers.

Crop insurance is a work in progress, constantly evolving, especially when RMA took over as the nation’s crop insurance facilitator in 1996.

Most farmers prefer the current program of subsidized insurance providing differing levels of coverage. In the past, financial relief from disasters such as drought or storms came only after Congress agreed on disaster payments on a case-by-case basis.

“I believe most farmers are happy with crop insurance,” said Ervin Orwig of Federal All Risk Crop Insurance of Spencer, Iowa. “It’s favorable to most of them because of the way it’s figured nowadays. Now you pay for insurance and you insure the level you want.”

Read agrees.

“In the Midwest, typically 90 to 95% of row-crop farmers have it,” he said. “There are guys who farm 20,000 to 25,000 acres who insure 100% of it. And I know guys who are self-insured on 3,000 acres. In our opinion, with the premium and the subsidy, it would be crazy for anybody to completely self-insure.

“Even with a catastrophic policy, $200 can guarantee 50% of your yield. In a year like 2012, a policy that costs $1 or $2 an acre, in the Midwest it’s a no-brainer.”

Changes in farm insurance have opened up opportunities for specialization. Steve Nicklaus and Shelly Turner used to sell regular crop insurance through their business, The Crop Shop in Clear Lake, Iowa.

About eight years ago they sold off that portion of the business and decided to focus solely on liability insurance targeted at seed company representatives. They now sell policies that cover errors of advice and consultation. Their major client is Pioneer, but they also work with Beck’s and other seed companies.

“We took just a regular vanilla seedsman policy that Lloyd’s (of London) has carried for 100 years,” Turner said. “We went to Pioneer with the idea. They have no stake in our business but were very helpful.

“It’s one of a kind. It’s a professional liability policy, like what a doctor or attorney would carry. They’re giving you advice and recommendations.”

The Assure Group has also branched out into the niche market, forming a separate company designed to insure growers of the newest crop, industrial hemp. Two years ago, White Field Hemp was born.

“It’s the first in the Midwest,” Read said. “We see hemp production becoming large-scale agriculture in the Midwest. We’re a one-stop shop, offering genetics, consulting, processing and markets.”

Like the industry itself, hemp insurance is finding its footing.

“Crop insurance is adapting slowly,” Read said. “There’s a slow purchase rate because there are so many guys who are growing hemp now who were not involved in crop insurance before. Even though the number of policies bought over the past year is pretty low, I see a significant interest level and definitely a huge need with the amount of inputs.”

Meanwhile, conventional row-crop insurance remains the farmer’s best bet. This year is a vivid example, with the derecho that swept through Iowa and flattened millions of acres of corn and soybeans. Without government subsidies, there would likely not be affordable insurance.

“On a loss year like this, I don’t think there’s enough backing for private insurers to make that work,” Orwig said. “Most people, if they had to pay the full rate, would not buy the higher levels of coverage. A year like this when that wind storm went through Iowa, they’re glad they had insurance and wish they had more.”

Nat Williams is Southern Illinois field editor, writing for Illinois Farmer Today, Iowa Farmer Today and Missouri Farmer Today.