Farmers face another survival decision
Farmers face crucial decisions on disaster insurance

By BRUCE ROWLAND
Contributing Writer

With major changes in the way crop insurance and disaster aid are disbursed, local farmers are facing yet another crucial decision affecting the survival of their farms.

"It's a whole new concept," said Donald LaPierre, county executive director of the U.S. Department of Agriculture Farm Service Agency (FSA) in Plattsburgh. In the past, he explained, a disaster would strike and farmers would go to their senator or congressman and an ad hoc, cost-free disaster program would be implemented.

INSURANCE COVERAGE
Now, he said, things are changing in a big way, and farmers will be required to have purchased insurance well before a disaster. If they don't, and a crop-destroying catastrophe hits, it could be devastating.

"It may be the last generation (on the farm) if you don't start looking at this," he said. "These are new programs and will probably last forever."

Under the terms of the new system, farmers will first be required to purchase insurance coverage for their crops from a private company if such insurance is available. Once they have that insurance, and have it for all their crops, supplemental policies may be required from the FSA to cover what private insurers don't. As with flood insurance, private companies don't always offer comprehensive polices on everything a farmer grows.

Also, policies can cover the amount of yield that's lost or the market price a farmer would have received, and often only certain percentages of that, so farmers have a lot of decisions to make. Minimum-required, least-costly policies — both private and FSA — cover 50 percent of yield at 55 percent of market price, for example. Better coverage costs more on a sliding scale, and the minimum coverage must be in place to receive disaster aid if there is a catastrophic event.

Farmers must decide how much they can afford to pay and how much risk they are willing to assume, but they must at least carry the minimum.

"It has to be that level to qualify for payment," LaPierre said.

AHEAD OF STORM
Before 1997, LaPierre said, FSA was the seller of crop insurance. At that time, a political decision was made to let private insurers enter the market, but they wouldn't insure every crop, creating a complicated patchwork of coverage in which FSA would cover the crops that slipped through the cracks.

"The rules are, you have to have every crop on your farm covered for this year either with the private crop insurance or the FSA," LaPierre said, adding that there is also a cost for the FSA coverage. And everything must be in place on time, well before a disaster could be anticipated.

"That's the killer, that you have these deadlines," LaPierre said, explaining that you would have had to buy hay coverage last September for the current year, for example.

"The idea is the government wants you to buy these insurances before you have any inkling what the growing conditions for that crop will be," LaPierre said.

He said farmers can play with the formulas to reduce their risk, but many are not "insurance oriented" and may not realize they have to have it before they qualify for disaster aid.

AID 'CRUCIAL'
"The ad hoc program in the past didn't require you to help yourself before the government helps you," LaPierre said. "Now, we'll deny you if you don't have insurance. There are five different disaster programs that came out of this (2008) Farm Bill that are going to replace all the disaster programs we offered."

He said this is the direction the United States Department of Agriculture is going in the future, and even price-support programs likely will be converting to a revenue-type system. Farmers can also benefit from modern trends such as selling milk on the futures market to hedge their bets.

"You can lock in a price, and if you know it's a profitable price, you can level this out," he said.

He also said farmers in the Northeast are historically underinsured when compared to other areas of the country. Here, he said, the reaction can be "it's too complicated. I'm too busy now trying to stay alive."

In the Midwest, he said, many farmers only have to deal with one or two crops like wheat or corn, so for them it's easier.

Sam Dyer, a Beekmantown dairy farmer and vegetable grower, said the insurance — even if it isn't that good and in the past farmers might have gone without it — will be crucial now to stay eligible for disaster aid.

"For the larger farmers, it's a necessity," he said, adding that that's true especially with low milk prices. "You can't absorb that kind of losses."

HELP FOR FARMERS
He said diversification is important, but it's a logistical challenge to get all the crops insured. Diversified farmers could be looking at six different deadlines they have to face during the non-growing part of the season.

It's so complicated, it may require farmers to hire extra help.

"You almost have to have somebody on board paying attention to this side of the business," Dyer said. "You're going to have to hire someone to take care of this."

Multiple office visits, preparing yield reports, insurance shopping and paperwork can be costly and discouraging, and many officials fear farmers will throw up their hands because it's so complicated, do nothing and then lose the farm if disaster strikes.

Anita Deming of the Essex County Cooperative Extension said she has put in an application to have someone go around to farms and explain the new system.

"I think (the Cooperative) Extension is very willing to take that on," she said.

She added that perhaps farmers can band together to hire one professional to do the work for five or six farms, each with their different crops, risk tolerance and needs.

Private Crop Insurance Consultant Charles Koines said he is now consulting with the New York State Depart of Agriculture and Markets and recently received a grant to provide risk-management consultation for farmers for all kinds of crops, including apples, grapes, winter wheat and all kinds of vegetables and forage crops. He is currently conducting informational meetings around the state and can be reached at 858-3337 or ckoines@nycap.rr.com.

plan for unforeseen
He said it's all about staying informed.

"I refuse to say it's a complicated program," he said. "I'm no smarter than anybody else."

But especially with dairy, he conceded, it's extremely difficult to plan because of the wildly fluctuating milk price and instability of the market.

"How do you give advice to individuals that are going to experience a 100-percent change of price in a year?" he asked, noting that milk prices have fluctuated from about $22 to $10 per hundredweight in a very short time.

Still, he said, it's a problem that has to be faced or a farmer could be bankrupted by one disaster or adverse growing season caused by weather, insects, plant disease, wildlife, an earthquake, fire or something else unforeseen.

"You need to have a risk-management plan in place," he said, adding that the more he's learned the more he appreciated it's importance.

"It was quite sobering to me."

MORE INFO

A program called Managing the Margins for Dairy and Beef Producers will be held from 10:30 a.m. to 3 p.m. at the Miner Institute auditorium in Chazy on Feb. 25.

This program is a day-long workshop building risk-management awareness and expertise for livestock producers. The topics include exposure to ag risk, family risk tolerance, and tools to minimize farm family and business risk. The workshop consists of written reference materials and computer-simulation activities.

The objective is to provide producers with concepts and tools to determine break-even prices, marketing plans and crop-insurance decisions appropriate for their operations under various conditions with the end goal of being able to lock in profitable margins.

Here are some of the topics:

What is margin risk?

Farm and family risk tolerance.

What direction are input costs going?

Break-even analysis for farm enterprises.

Introduction to crop insurance.

The Farm Bill offers new choices, what are the implications of ACRE and SURE?

How does your crop-insurance decision affect your market planning and ACRE decision?

Pricing alternatives at the local buyer.

Market volatility and dynamics.

The importance of bases.

Pricing alternatives at a Board of Trade.

This workshop is limited to 25 participants. Pre-register with Anita Deming at 962-4810 or ald6@cornell.edu or Emily Myers at 353-4949 or erm35@cornell.edu. There is no fee, and lunch will be provided.

NOTE:I think the area code in the phone numbers above would be 518
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Johnny wrote:Don't forget Monsanto

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