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Archive for Saturday, September 30, 2000

Farmers bulk up on crop insurance

Drought fears motivate wheat growers

September 30, 2000

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— Enticed by higher federal subsidies and fearful of a deepening drought, Kansas farmers have dramatically bolstered insurance coverage on their 2001 winter wheat crop as they seed parched fields.

"They are just selling crop insurance hand over foot out here because it is hot and windy," said Vance Ehmke, a Lane County farmer who is planting 2,000 acres of winter wheat.

In 25 years of farming, this is the first time Ehmke has bought insurance on his wheat crop. In the past he had carried minimal catastrophic insurance provided by the government for a small processing fee.

"It is pretty gruesome out here," Ehmke said in a telephone interview from his farm. "I've seen some fields where there is not one chance in a trillion of getting a stand and I guarantee you those guys are getting crop insurance."

As the Monday deadline for insuring the crop looms closer, Kansas wheat growers have already paid a 30 percent increase in gross premiums, most for added insurance coverage of their crop, said Gregg Classen, vice president of Rain and Hail Insurance Co. in Omaha.

His firm is a major insurer of Kansas farmers, with 30 percent of the market share in Kansas for crop insurance. Classen said the biggest increase is among farmers who have upped their usual insurance to take advantage of higher subsidies for policies of 70 percent or 75 percent coverage.

The big factor behind the decision to bolster insurance coverage is recent federal legislation which dramatically increased their subsidies for higher levels of insurance, Classen said.

For example, the U.S. Department of Agriculture pays 59 percent of the premium for a farmer who buys coverage at the 70-percent level, said Art Barnaby, agriculture economist at Kansas State University Research and Extension.

Many are also taking advantage of relatively new crop insurance policies guaranteeing not just a level of production but a minimum price for their crops.

"We see a lot of growers making an effort to increase their coverage from 2000 to 2001, and probably because of the lack of moisture and volatility of prices," Classen said. "They are making some pretty important decisions right now on how they are going to protect their income for 2001."

Most of the people upgrading their coverage are farmers like Ray Crumbaker, who in the past carried a 65-percent insurance level at his Brewster farm in northwest Kansas. He is boosting his coverage to 75 percent this year and buying a revenue assurance policy that guarantees a harvest price.

"My premium is slightly higher, but with our conditions, and the prospects that we are not going to have a very good wheat crop for next year, it just made good economic sense to cover myself for that risk," Crumbaker said.

Ehmke said higher crop coverage is driven not by the insurance companies but by the producers themselves: "Those poor crop insurance agents are just like game animals farmers are hunting them down."

Classen said his insurance company is advising farmers that they must plant even if it is in the dust if they hope to collect come spring on a claim for a poor crop. The company doesn't pay on claims for prevented planting unless the fields are under water.

About half of next year's winter wheat crop has already been planted in northwest Kansas, where conditions are dry, Crumbaker said.




MORE: www.agecon.ksu.edu/Risk/

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