Farming is not for the faint of heart. Long hours and hard work are hallmarks, as are the risks like weather events and natural disasters. These can create dramatic swings in your farm’s income.
In 2017, a number of billion-dollar weather-related disasters devastated agricultural lands in the United States. Farmers in multiple states suffered incredible losses due to hurricanes and wildfires. For example, Hurricane Harvey claimed 27% of Texas’ beef cattle, according to Texas A&M AgriLife Extension Service. And the Florida Department of Agriculture & Consumer Services reported that Hurricane Irma flattened 534,324 acres of sugarcane in the state.
But these aren’t the only uncertainties: Crop production and prices, government regulations, and global markets can also affect your farm’s ability to thrive. With your livelihood on the line, crop insurance is a way to offset economic damages that could result from these variables.
When Congress passed the Federal Crop Insurance Act of 1980, coverage was extended to many crops and farming regions in the United States. After a number of ad hoc disaster assistance bills, the Federal Crop Insurance Reform Act of 1994 made participation in the crop insurance program mandatory for farmers to be eligible for federal benefits. Even though the mandatory participation requirement was repealed in 1996, participation in the crop insurance program continues to be popular among American farmers.
Crop insurance today
Crop insurance, also known as multi-peril insurance or federal crop insurance, protects your farm against losses that occur during the crop year. Losses must be due to unavoidable issues beyond your control, like an extreme weather event. Insurance companies have also introduced protection that combines both yield and price coverage. These safeguard a crop’s loss in value due to a change in market price during the coverage period. While crop coverage is generally similar across all crops and farms, some customizations are allowed to reflect your farm’s unique risks or because of the unique nature of the crop.
The U.S. Department of Agriculture Risk Management Agency has issued various policy types, each covering specific risks. Some examples include:
- Actual production history (APH) policies, which insure farmers against yield losses due to natural causes like drought, excessive moisture, insects, and disease
- Livestock policies, which insure against lowered market prices of livestock and exclude any other losses
- Revenue protection policies, which, like APH policies, insure against yield losses due to natural occurrences and revenue losses caused by a change in the harvest price from the projected price
- Whole-farm revenue protection (WFRP) policies, which cover everything on the farm under one policy; WFRP policies are typically used by any farm with up to $8.5 million in insured revenue
Supplemental coverage is available through policy endorsements, like catastrophic risk protection and high-risk alternate coverage.
From an economic standpoint, you and your farm play an important role in the U.S. and global economies. In fact, according to the American Farm Bureau Federation, one U.S. farm feeds 166 people around the world annually. Whether it’s milk, beef, eggs, or produce, farming also comprises about 1% of the U.S. gross domestic product. Your farm is also your livelihood, and while a disaster or unforeseen event can greatly impact the bigger picture, it can also wreak personal havoc.
The crop insurance program continues to evolve and change. To learn more about our products and how we can match your specific needs, speak with one of our licensed agents. Remember! The deadline to purchase or modify your Spring crop insurance policy is March 15th!