VIDEO: Crop insurance the saviour for US farmers

Iowa, United States. American heartland and food capital of the world. Graced with prime land producing high-yielding crops and helping to make the USA one of the most powerful agricultural producers in the world.

In the spring of this year, however, North America entered its worse drought since 1956 – one that has been described as a “natural disaster of epic proportions”.

The ramifications have been catastrophic for some individuals, with many fields being completely wiped out and livelihoods destroyed. Some estimates suggest about 80% of farmland is currently affected.

There are also fears that more is to come, with the drought predicted to persist into 2013.

GM has been key to survival


GM crops have been a factor in helping arable farmers survive this year’s drought, according to Alan Tiemann, who farms 1,800 acres (728ha) of Roundup Ready corn and soya beans in south-east Nebraska.

A firm believer in GM crops, Mr Tiemann says they have helped to make US agriculture one of the strongest in the world.

“I believe the USA is the leader in new technology and this is evident in our ability to produce the best quality and highest-yielding crops in the world.

“Even in a year of extreme weather we will raise enough grain to meet all of our needs and that of many customers outside the USA. I have concerns that other countries’ protectionist policies in regard to US technologies will only delay our ability to feed the world.

“The slow or non-acceptance of GMs in Europe seems to defy logic, when sound science has been used to prove the safety of these products and some GMs are used around the world and others are banned at the convenience of the restricting country.

“The use of GM crops in the USA has allowed our producers to increase yields and quality while reducing the need for applied insecticide. But nothing is forever and Mother Nature will adapt to overcome any resistance we are able to place in a plant, so we will need to be prepared to continue to evolve the technology (always based on safety and sound science),” he added.

The biggest area of “exceptional” drought (the most severe of five classifications) centres on the Great Plains, with Nebraska and Kansas some of the worst-hit areas. But every state west of the Mississippi is struggling, with Oklahoma, South Dakota and Colorado also badly affected.

Such extreme weather means the world’s largest exporter of corn, soya beans and wheat has produced smaller crops in every sector this year.

According to the Department of Agriculture (USDA), production of corn – the biggest crop in the USA – fell by about 13% to 274.4m tonnes in 2012, its lowest since 2006. Soya bean production, meanwhile, is estimated to have dropped 4% to 80.86m tonnes.

While wheat has been one of the least affected of the major crops so far, the possibility that the drought will continue into 2013 is causing fears – particularly in Kansas, the top US producer of winter wheat – that next year’s crop may struggle. Such sentiments are backed up by recent USDA reports suggesting that nearly one-quarter of the winter wheat that has germinated is in either “poor” or “very poor” condition.

Despite the weather woes, the irony is that the USA’s arable sector remains in a relatively strong position.

Although the drought could represent a $75-150bn hit to the US economy, arable production has proved resilient during the worldwide recession and the feeling among growers is that many in the industry will bounce back.

This optimism can be attributed partly to record-breaking prices for grain and the “safety net” of crop insurance. In sharp contrast to the UK, where farmers are completely exposed to problems caused by the weather, US producers can choose to manage their level of risk by taking out insurance.

Under the federal crop insurance programme, which dates back to the Great Depression, farmers can buy insurance policies for more than 100 crop types that cover poor yields, declines in prices or both. The insurance is obtained through private companies, but the federal government pays about 62% of the premiums, plus administrative expenses.

About 85% of US farmland – roughly 281m acres – was covered by crop insurance this year (higher than in any previous year).

It is estimated payouts may total between $20bn-30bn. Net farm income for 2012 is forecast at $114bn.

But while crop insurance and high prices have saved many arable farmers, livestock and dairy producers have been less fortunate, with insurance less readily available and high feed prices taking their toll.

Beef and dairy producers have been forced to sell their stock, slaughter early, or even quit completely. Figures released by the USDA suggest September cattle placements on to feed lots dropped 19% compared to the same month last year. According to recent figures, dairy cows are being slaughtered at the fastest rate in more than 25 years.

The USDA currently lists 54% of the nation’s pastures in “poor” or “very poor” condition – the lowest two pasture condition ratings. And this lack of quality of grazing land means beef producers are having to supplement animal diets with expensive feeds, causing possible losses of up to $200 a head.

It’s a major blow to a part of the industry that had been performing relatively well in recent years, with cattle meat providing the USA with its second largest valued agricultural product.

Yet weather aside, what will undoubtedly have the biggest influence over farmers’ fortunes in the next few years is the outcome of the Farm Bill.

Currently being debated by Congress, this multi-billion-dollar piece of legislation is being keenly watched by farmers, particularly as crop insurance is a key element of the policy.

While farmers are keen for Congress to pass a five-year plan before the new year, the likelihood of this happening is becoming slimmer by the day. Until it happens, producers across the pond face uncertainty. However, there’s no doubting the strength of US agriculture – even in the midst of the sandstorm created by the worst drought in living memory.

No insurance is unthinkable
Farming without crop insurance is unthinkable for the Lynch family, who farm 1,600 acres (650ha) in north Iowa.

Rob Lynch and son Jay believe the insurance system is pivotal in US agriculture.

“The importance of high prices and crop insurance couldn’t have been more important this year. I don’t think you’re a farmer if you don’t carry insurance. It is like driving a car; you don’t do it without insurance,” said Rob Lynch.

“The yields were down on our corn and soya beans but for us it has not been the disaster it could have been. I know, however, for some it was. We’ve got folks a few miles east of us who didn’t get the rain we had and have had total wipeouts.”


In the video below, Jay Lynch talks about farming in the USA.

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