Download - Florida Hosts Industry Leaders - National Crop Insurance ... · primarily state-licensed crop insurance agents, but also including more than 5,000 profession-ally certified loss adjustment

MAY 2015 • VOL. 48, NO. 2

P U B L I C A T I O N O F N A T I O N A L C R O P I N S U R A N C E S E R V I C E S ®

Florida Hosts Industry Leaders

2014Year In Review

Introducing RCIS Mobile™

Essential crop insurance information on the go from your Android or iOS mobile device

Convenient, one-stop access to policyholder, coverage, and claims information from the fi eld. We know you want to be as productive in the fi eld as you are from your offi ce. That’s why at RCIS, we worked with agents to develop the robust RCIS Mobile app. It harnesses the information and services agents use most into a single, easy-to-use tool for mobile devices. Our one-stop application helps RCIS agents provide better customer service outside the offi ce. Available on Android and iOS.

To learn more, visit RCIS.com.

Rural Community Insurance Agency, Inc., D/B/A RCIS. RCIS is an equal opportunity provider. © 2015 Rural Community Insurance Agency, Inc. All rights reserved. WCS-1226580

WCS-1226580-RCIS-Crop-Insurance-Today-Mag-12-14.indd 1 1/7/15 2:57 PM

Introducing RCIS Mobile™

Essential crop insurance information on the go from your Android or iOS mobile device

Convenient, one-stop access to policyholder, coverage, and claims information from the fi eld. We know you want to be as productive in the fi eld as you are from your offi ce. That’s why at RCIS, we worked with agents to develop the robust RCIS Mobile app. It harnesses the information and services agents use most into a single, easy-to-use tool for mobile devices. Our one-stop application helps RCIS agents provide better customer service outside the offi ce. Available on Android and iOS.

To learn more, visit RCIS.com.

Rural Community Insurance Agency, Inc., D/B/A RCIS. RCIS is an equal opportunity provider. © 2015 Rural Community Insurance Agency, Inc. All rights reserved. WCS-1226580

WCS-1226580-RCIS-Crop-Insurance-Today-Mag-12-14.indd 1 1/7/15 2:57 PM

In the February 25, 2015, New York Times daily briefing, there was a short piece about the Legos toy company. According to the article, Legos experienced a 13 percent increase in revenue and 15 percent increase in net profit for 2014. Legos now rival both Mattel and Fisher Price toy companies. Not too shabby. The article went on a bit further to provide an abbreviated history of the Legos enterprise.

The Legos company name is actually an abbrevi-ation of the Danish words “leg godt” meaning “play well.” Legos started out in Denmark in 1932 building wooden toys by a carpenter, Ole Kirk Christiansen. The new, ubiquitous plastic interlocking toy bricks came later. Legos have been used to construct a min-iature Brooklyn Bridge as well as a full-scale model of the Star Wars X-Wing Fighter. (How cool is that?)

Hmmmmmm... lots of critical interlocking pieces and playing well. Anything we can glean from this?

Lots of Interlocking Pieces and Playing WellThe crop insurance industry is a highly interconnected and sophisticated risk management

system for today’s modern farmer. Historically, hail coverage to growing crops has been avail-able in the United States since the late 1800s. As we have written in this publication on more than one occasion, the Federal Crop Insurance Act of 1938 first introduced crop insurance on a wide-scale basis to protect farmers from disasters out of their control. After more than 75 years and the introduction of the private-sector and additional crops and liability protected, we can fast forward to the 2014 Farm Bill where crop insurance is now the centerpiece of the farm safety net.

Today’s crop insurance system is characterized as a public-private partnership. Included in that partnership is the USDA’s Risk Management Agency representing more than 450 employ-ees and the private sector delivery system, represented by approximately 20,000 individuals, primarily state-licensed crop insurance agents, but also including more than 5,000 profession-ally certified loss adjustment specialists. Both RMA/ USDA employees, and their private sector counterparts, are responsible for delivering the most comprehensive crop insurance system in the world.

In terms of participation, in 2014 there were 295 million acres insured, representing approx-imately $110 billion in liability and 90 percent of insurable acres. Including Federally-reinsured and state-regulated Crop-Hail coverage, the liability of the U.S. crop insurance industry was approximately $150 billion of crop insurance protection for U.S. farmers.

For the Federally reinsured book of business, more than 80 percent of insured acres had

Laurie Langstraat, Editor

TODAY® IS PROVIDED AS A SERVICE OF NATIONAL CROP INSURANCE SERVICES® TO EDUCATE READERS ABOUT THE RISK MANAGEMENT TOOLS PRODUCERS USE

TO PROTECT THEMSELVES FROM THE RISKS ASSOCIATED WITH

PRODUCTION AGRICULTURE.

TODAY is published quarterly–February, May, August, and November by

National Crop Insurance Services

8900 Indian Creek Parkway, Suite 600Overland Park, Kansas 66210

www.ag-risk.org

If you move, or if your address is incorrect, please send old address label clipped from recent issue

along with your new or corrected address to Donna Bryan, at the above address.

NCIS® EXECUTIVE COMMITTEETim Weber, Chairman

Mike Day, Vice ChairmanJim Korin, Second Vice Chairman

NCIS® MANAGEMENTThomas P. Zacharias, President

Charles Lee, General CounselJames M. Crist, CFO/COO

Sherri Scharff, Executive Vice President and Chief of Staff

Troy Brady, Senior Vice PresidentFrank Schnapp, Senior Vice President

Mike Sieben, Senior Vice President

Creative Layout and Design by Graphic Arts of Topeka, Inc., Kansas

TODAY PRESIDENT’SMESSAGE

Printed on recycled paper. Printed with Environmentallyfriendly vegetable oil based inks.

Continued on page 28

Tom Zacharias, NCIS President

“Leg Godt,” or as the Danes would say, “Play Well”(Legos and Crop Insurance)

CROPINSURANCE TODAY® 1

Table of Contents

4

VOL. 48, NO. 2

MAY 2015

Copyright NoticeAll material distributed by National Crop Insurance Services is protected by copyright and other laws. All rights reserved. Possession of this material does not confer the right to print, reprint, publish, copy, input, transform, distribute or use same in any manner without the prior written permission of NCIS. Permission is hereby granted to Members in good standing of NCIS whose Membership Class (and service area, if membership is limited by service area) entitles them to receive copies of the enclosed or attached material to reprint, copy or distribute such NCIS copyrighted material in its present form solely for their own business use and solely to employees, adjusters or agents who are under contract with them, and as a condition to receiving such copies, such employees, adjusters and agents agree that they will not reprint, copy or distribute, or permit use of any such NCIS copyrighted material to or by any other person and/or company, or transform into another work such NCIS copyrighted material, without prior written permission of NCIS.© 2015 National Crop Insurance Services, Inc.

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43

24

Review

1 “Leg Godt,” or as the Danes would say, “Play Well” (Legos and Crop Insurance)

4 2014 Year in Review

24 Florida Hosts Industry Leaders

30 Four Presented with Industry Awards

33 Dean Benson Receives Outstanding Service Award

36 Jeff Meyer Receives NCIS Industry Leadership Award

38 NCIS Hosts Committee Leaders

43 Crop Insurance in Action Kiodette and Rich Stroh, Powell, Wyoming

CropInsurance TODAY

OverviewThe 2014 year was another successful demonstration of sales and

service for the crop insurance industry. Yet, the year turned out to be frustrating in several aspects. After two successive years of gross losses (indemnities exceeding premiums), the natural expectation was for a return to fewer losses and more normal returns. But that was not to be, as lower crop prices and pockets of production losses pushed the gross loss ratio to 0.89, the fourth highest in the past decade. (Unless indicated otherwise, data in this article are as of April 20, 2015.)

The 2013/14 winter featured extended periods of extreme cold. While many areas had adequate precipitation, cold and variable tem-peratures, wind, periods of inadequate snow covering and dryness hurt the 2014 winter wheat crop, which declined 11 percent from 2013. Spring was slow to come, and planting delays occurred in the Northern tier of states. Later in the spring and during the summer while California suffered, weather generally cooperated elsewhere, and much of the nation had a more favorable growing season.

Corn and soybeans consistently had high ratings of “good” to “excellent” throughout the summer and into the fall, and produc-tion of many crops was up in 2014. Corn yield and production set record highs. With soybean planted area up as corn area contracted, soybeans, too, featured record highs for yield and production. Other

oilseeds also saw production gains, such as sunflowers, canola and pea-nuts. The spring wheat crop was sharply higher with the Dakotas hav-ing record yields. Cotton and rice production were also higher, despite much lower rice area in California. Among specialty crops, vegetable and citrus production declined in 2014.

The increase in production of major crops again is leading to in-creased carryover stocks and lower prices. The index of prices received for crops by farmers was down nine percent from January-December 2014, which followed a 19 percent decline in the prior 12-month peri-od. The weak farm markets resulted in sharp declines in crop insurance base prices for all major crops for 2014. The market price declines con-tinued into 2015, reducing base prices again for all major 2015 crops. The drop in 2014 base prices, combined with lower volatility factors (which are used to set premium rates) for all major crops, contributed to a 15 percent drop in total program premiums.

As of this writing, the program provided farmers with protection on $109.8 billion in crop value in 2014, and the crop year loss ratio (in-demnities divided by premiums) stood at 0.89. While an improvement over the past two years, the final loss ratio is expected to exceed 0.90 and keep the returns to the crop insurance companies anemic under the financial terms of the current Standard Reinsurance Agreement (SRA), which has been in effect since 2011. The cumulative underwrit-ing gains of the insurance companies during 2011-14 are likely to be

The Year in ReviewBy Drs. Keith Collins and Laurence Crane, NCIS

4 MAY2015

in the range of only five-six percent of their cumulative retained premiums. Since under-writing gains are only part of gross revenue, pre-tax net income returns would be consid-erably lower.

Corn and soybeans continued to be the top premium crops, accounting for two-thirds of U.S. premiums in 2014, with wheat coming in third. Minnesota had the highest loss ratio among major states and Iowa had the highest level of claims among all states, with excess moisture and lower prices being the principal causes of loss in both states. Minnesota and Texas were second and third in claims while Oklahoma and Iowa were second and third in loss ratio among major states. By crop, loss ratios were highest for ELS cotton, olives, macadamia nuts, burley tobacco and pistachios. The losses on ELS cotton, olives and pistachios were all due to California’s persistent drought.

Implementation of the 2014 Farm Bill led the list of program and policy developments in 2014. The new Farm Bill was signed into law on February 7, 2014 and features many new products and changes for crop insurance. The new law reduced the 10-year projected outlays on farm programs by an estimated $14.3 billion but continued the emphasis on risk management and crop insurance by raising crop insurance projected funding by $5.7 billion. The increase in crop funding is primarily due to the addition of two new supplemental revenue programs, the Stacked Income Protection Plan, or STAX, for up-land cotton, and the Supplemental Coverage Option, or SCO for other crops. These plans will be available for cotton and major crops beginning in 2015.

Implementation of the Farm Bill’s crop in-surance provisions has proceeded timely and effectively during 2014, with opportunities for industry input into the Risk Management Agency’s (RMA) development of regulations and procedures. Farmers will have many new opportunities to expand coverage under the new programs and provisions. One concern continues to be the risk of loss for the pro-gram and the companies created by the new products that will raise producer coverage levels, such as the provision to exclude loss history in years of low county yields (APH Exclusion) and by the use of premium rating methods that have limited or no historical ex-perience on which to base rates.

In addition to protection provided by the crop insurance program, farmers had $39.7 billion in privately provided crop-hail insur-ance protection in 2014. Farmers’ premiums for 2014, as currently reported to NCIS, were the largest in the history of the program at $992 million, up from $953 million in 2013. This coverage proved valuable in 2014 as it paid out $1.2 billion in losses as the pro-gram had the largest hail losses in its history and became only the third year since 1948 in which the U.S. loss ratio exceeded 1.0. Cana-da, too, experienced 2014 hail losses that were significantly worse than 2013. The Canadian 2014 loss ratio was 0.84, as compared to the 2013 loss ratio of 0.50.

U.S. Weather and Production of Major Crops

Winter 2013/14. The production cycle for the major 2014 crops commenced with planting of winter wheat beginning in August 2013. Most of the nation had near to above average fall rainfall and by the end of Septem-ber, seeding was slightly behind the 5-year average pace, but exceeded that pace over the next month and most acreage was rated good to excellent in late November. Planted acreage was 42.4 million, down about two percent from 2013, with an increase in Hard Red Winter (HRW) wheat, particularly in the Central and Northern Plains, which was off-set by a sharp drop in Soft Red Winter (SRW)

wheat. White wheat in the Pacific Northwest was down from a year earlier.

The 2013/14 winter was extremely cold with much snowfall in the Midwest. Many Corn Belt states had the coldest winter since 1978/79. The drought continued from Cali-fornia to the Southern Plains as indicated in Figure 1. California had its warmest and third driest winter on record. Arizona, New Mex-ico, Oklahoma and Texas all had abnormal-ly dry winters. California also experienced a damaging December freeze that affected citrus and other crops in the Central Valley. Many wheat areas had adequate precipitation, much as snow, but variable temperatures, wind, periods of inadequate snow covering and dryness in the Southern Plains caused poorer wheat conditions across the Central and Southern Plains. The South and East also saw wintry weather and extreme cold but did not experience the severity of the Midwest.

Spring 2014. Despite late spring show-ers, the Central and Southern Plains and the Southwest experienced below-normal spring precipitation (Figure 2). The late rains were too late to alleviate stress on the winter wheat crop. California’s three-year drought contin-ued with above-normal temperatures, which, along with a limited snowpack, boosted irri-gation needs. Most of the rest of the nation had near- to above-normal precipitation, with the wettest areas being the Pacific North-west, North Central states, and the South and

Figure 1. Winter 2013-2014 (Dec-Feb) Statewide Precipitation Rank, 1895-2014

RecordDriest

(1)

MuchBelow

Average

BelowAverage

NearAverage

AboveAverage

MuchAbove

Average

RecordWettest

(119)


Southeast. Dryness in the interior Northwest states became a concern for pasture, range, and wheat as the spring continued, while spring temperatures during March-May aver-aged at least 4 - 6°F below normal in the Great Lakes states.

Cold, wet conditions in early spring de-layed planting in the Northern tier of states, but corn producers had planted three percent of the 2014 crop by April 13, slightly ahead

of the prior year but 50 percent of the five-year average (Figure 3). Wet fields and low soil temperatures slowed progress and by May 4, 29 percent of the crop was planted, only 70 percent of the five-year average. In May, warmer and drier weather across most of the nation enabled producers to catch up with planting and improve on the poor pace of 2013. Soybean planting started slowly due to the cold, wet weather, but as May progressed,

producers made significant gains, particular-ly during the latter part of the month as they completed corn planting and concentrated on soybeans. Producers had planted 78 per-cent of the Nation’s soybean crop by June 1, 23 percentage points ahead of last year and 11 percent more than the five-year average. Following the pattern of other crops in the North Central states, planting progress for spring wheat started well behind normal with the largest delays in Minnesota and North Dakota. By May 4, producers had planted 26 percent of the spring wheat crop, ahead of the previous year, but only 63 percent of the five-year average. However, 88 percent of the spring wheat crop was in the ground by June 1, equal to the five-year average. The severe drought conditions in the Southern Plains led to poor fields in Oklahoma and Texas being baled for hay or abandoned.

With cotton planting activity limited to Arizona, California, and Texas in early spring, six percent of the U.S. crop was planted by April 6, slightly ahead of 2013 and equal to the five-year average. By May 4, producers had planted 16 percent of the cotton acre-age, only 63 percent of the five-year average. Similar to other crops, May’s above-average temperatures and below-average precipita-tion greatly aided planting, with 62 percent of cotton planted by May 25, 97 percent of the five-year average. Rice showed a similar pat-tern and was 95 percent complete by May 25.

When spring planting was complete, total U.S. acreage planted to principal crops was 326.8 million, up about two million from 2013. With lower prices and reduced returns expected compared with soybeans, corn plantings fell nearly five million acres to 90.6 million, while soybean plantings increased nearly seven million acres to 83.7 million. A number of other crops also had planting in-creases as corn area decreased. For example, other oilseed plantings including canola, pea-nuts, safflower and flaxseed all saw higher area planted, while sunflower acreage remained about the same. Upland cotton area increased by over a half million acres to 10.8 million. Even, spring wheat overcame its planting delays and over 13 million acres were sown, nearly 1.5 million above 2013. Rice, too, expe-rienced an increase, rising to 2.9 million acres compared with 2.5 million in 2013.

Summer 2014. The winter wheat harvest

Figure 2. Spring 2014 (Mar-May) Statewide Percipitation Ranks, 1895-2014

RecordDriest

(1)

MuchBelow

Average

BelowAverage

NearAverage

AboveAverage

MuchAbove

Average

RecordWettest

(119)

Figure 3. Planting Progress: Acres Planted in 2014 as a Share of 2009-13 Average

Corn

Soybeans

Spring Wheat

Cotton

Per

cent

of

pre

vio

us 5

-yr.

avg

.

120%

100%

80%

60%

40%

20%

0%14 15 16 17 18 19 20 21 22 23

As of Week in 2012 (Week 20 ended May 18, 2014)

6 MAY2015

ended with production down 11 percent. Yields were favorable in many North Central and Midwest States, but reduced Southern Plains acreage and yields, suffering from the harsh winter and continued dryness, account-ed for most of the decline (Table 1). Summer weather developments were conducive to corn and soybean progress during 2014 (Fig-ure 4). Rainfall was average-to-above average in most of the nation, and temperatures did not stress crops, particularly in the Midwest. Farther south, precipitation was inconsistent or lacking, resulting in some stress on South-ern crops. Late summer rain affected grains across portions of the Northern Plains, reduc-ing quality and slowing harvest. While many western states experienced helpful summer rain, California remained hot and dry.

Figure 5 provides a snapshot of general weather conditions as of midsummer (July 29, 2014). The Drought Monitor indicates the persistent drought faced in the Southwest and California. Exceptional drought covered large parts of California. A 2014 study by the Uni-versity of California at Davis indicated that the drought was the third most severe on re-cord and caused the greatest water loss ever seen in California agriculture, with river water for Central Valley farms reduced by roughly one-third. Groundwater pumping replaced river water losses, with some areas more than doubling their pumping rate over the previous year, the study indicated. Reduced acreage, yields and higher pumping costs were esti-mated to result in $1.5 billion in direct costs to California agriculture.

While California suffered, much of the nation had much more favorable growing seasons. Corn and soybeans consistently had high ratings of “good” to “excellent” through-out the summer and into the fall (Figure 6). Spring wheat conditions tailed off as the sea-son progressed, as wet weather damaged grain, slowing development and causing sprouting. Cotton conditions were lower than those for grains in the Midwest, reflecting erratic rain-fall and temperatures in the South and South-ern Plains, although cotton crop development was slightly ahead of the previous five-year average.

Fall 2014. Most of the Nation had aver-age-to-above-average fall rains, although there were somewhat dry conditions in the upper Midwest and interior Northeast (Figure 7).

The Midwest dry weather aided the maturing and harvesting of corn and soybeans. Precip-itation was insufficient to provide much relief in the West’s drought areas. California also had its warmest September-November pe-riod on record. While the west was warm, it was cool in the central and eastern states, with fall temperatures among the ten coolest in Illinois and Indiana. By the week ending Au-

gust 31, the corn crop was rated 74 percent in good-to-excellent condition compared with 55 percent for the previous five-year average, and soybeans was rated 72 percent good-to-excel-lent condition, compared with 54 percent for the five-year average. Both crops maintained those high ratings through the fall harvest pe-riod. The corn crop condition was the highest October rating since 2004.

Figure 4. Summer 2014 (Jun-Aug) Statewide Precipitation Ranks, 1895-2014

RecordDriest

(1)

MuchBelow

Average

BelowAverage

NearAverage

AboveAverage

MuchAbove

Average

RecordWettest

(119)

Figure 5. U.S. Drought Monitor July 29, 2014 (Released Thursday, July 29, 2014) Valid 8 a.m. EST

Drought Impact Types: Delineates dominant impacts

S=Short-Term, typically less than6 months (e.g. agriculture, grasslands)L=Long-Term, typically greater than6 months (e.g. hydrology, ecology)

Intensity D0 Abnormally Dry D1 Moderate Drought D2 Severe Drought D3 Extreme Drought D4 Exceptional Drought

The Dought Monitor focuses on broad-scale conditions. Local conditions mayvary. See accompanying text summaryfor forecast statements.

http:/droughtmonitor.uni.edu/

Author:Brian FuchsNational Drought Mitigation Center


By November 2, producers had planted 90 percent of the U.S. intended winter wheat acreage for the 2015 crop year, equal to the 2014 crop and slightly ahead of the five-year average. Fall seedings totaled 40.5 million acres, five percent below the year earlier. Overall, 59 percent of the 2015 winter wheat crop was reported in good-to-excellent condi-tion at the end of the month, four percentage points below the same time in 2013. As the year ended, rain and snow provided bene-ficial moisture across winter wheat areas of the Central and Southern Plains, although

continuing drought in the Southern Plains and late planting and poor establishment in parts of the Corn Belt troubled the 2015 win-ter wheat crop. Late precipitation also afford-ed some drought relief in California helping pastures, but groundwater depletion and low reservoir levels continued to be an issue. Precipitation also spread into other areas of the West, although snowpack was limited by warm conditions.

Table 1 indicates 2014 production totals for major crops based on the annual end-of-year estimates reported by USDA’s National

Agricultural Statistics Service (NASS). With generally more favorable weather and higher overall planted area than in 2013, production of many crops was up in 2014. NASS esti-mates record-high corn yield and production at 171.1 bushels per acre and 14.22 billion bushels, respectively. As for other feed grains, even though planted area declined, grain sorghum production is estimated at 433 mil-lion bushels in 2014, up slightly over 10 per-cent from 2013, as harvested area relative to planted area improved. Average yield, at 67.6 bushels per acre, is also up eight bushels from 2013. Despite a good yield, barley production fell 18 percent under reduced plantings.

With soybean planted area up as corn area contracted, NASS estimates record-high yields and production for the 2014 soybean crop—just as for corn—with average yield of 47.8 bushels per acre and production of 3.97 billion bushels. Other oilseeds also saw gains, with sunflower production up 10 percent over 2013, despite slightly lower planted area, as South Dakota led the nation in production. Much higher planted area boosted 2014 cano-la production by 14 percent, even though yields were off a bit, with North Dakota being the leading production state. Peanut acreage was up 27 percent in 2014, helping to boost production by 25 percent over 2013.

Although there were late season weather issues, spring wheat production is estimated at 595 million bushels for 2014, up 11 percent from 2013. U.S. average yield is estimated at 46.7 bushels per acre, down slightly from 2013, with the Dakotas having record-high yields. Upland cotton production is estimat-ed at 15.5 million bales, up a substantial 26 percent from 2013, although U.S. upland cot-ton average yield is estimated at 781 pounds per acre, down 21 pounds from 2013. With increased plantings, rice production in 2014 is estimated at 221 million cwt, up 16 percent from 2013. However, planted acreage in Cal-ifornia for 2014 declined 23 percent due to the ongoing drought. With generally better weather across much of the country, produc-tion of all dry hay is estimated at 139.8 million tons, up four percent from 2013.

Among other crops, production of dry ed-ible beans is estimated at up 19 percent from last year as planted area increased 26 percent from 2013. Production of dry edible peas is estimated up 10 percent as planted area rose nine percent.

Figure 6. U.S. Crop Conditions, 2014: Share of Crop Rated “Good” to “Excellent”

80%75%70%65%60%55%50%45%40%35%30%

22 24 26 28 30 32 34 36 38 40 42 44

Week in 2012 (Week 35 ended August 31, 2014)

CornSoybeansSpring wheatCotton

Figure 7. Fall 2014 (Jun-Aug) Statewide Precipitation Ranks, 1895-2014

RecordDriest

(1)

MuchBelow

Average

BelowAverage

NearAverage

AboveAverage

MuchAbove

Average

RecordWettest

(119)

8 MAY2015

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U.S. production of principal fresh vege-tables was down a little over one percent in 2014, reflecting less acreage. Interestingly, in California, which accounts for a little over half of all U.S. vegetable production, acreage fell 3.4 percent but production was about the same as in 2013. The largest production drops in 2014 were in Florida and Texas and reflect-ed lower planted area. Production of princi-pal processing vegetables in 2014 was up 12 percent from 2013. Tomatoes, sweet corn, and snap beans account for 93 percent of the total. California leads the nation with 74 percent of the processing vegetable production. In 2014, California processing acreage planted was up 10 percent and production was up 15 percent. Despite the drought, strong prices for some vegetables, such as tomatoes, increased acre-

age. Many producers relied on well water for irrigation, which, over time, could increase soil salinity problems.

Citrus production is mostly in California and Florida and was down 15 percent during the 2013-14 year compared with the year earlier. California citrus is mostly fresh, and despite a modest drop in production, value was up 33 percent. Florida citrus is mostly for processing and both production and val-ue fell in 2014. U.S. production of noncitrus fruit and nuts was down three percent in 2014 compared with a year earlier. In Califor-nia, grape production was down 11 percent, with growers reporting hail and drought as contributing factors.

[Information sources for this section in-clude: NOAA National Climatic Data Center,

State of the Climate: National Overview for Annual 2014, published online December 2014, retrieved on February 24, 2015 from http://www.ncdc.noaa.gov/sotc/national/2014/13; from USDA NASS, Quick Stats available at www.nass.usda.gov/Quick_Stats/index.php and the following annual reports: Crop Produc-tion 2014 Summary, January 2015, Vegetables Annual Summary, January 2015, Citrus Fruits 2014 Summary, September 2014 and Noncitrus Fruits and Nuts 2014 Preliminary Summary, January 2015; Center for Watershed Sciences, University of California, Davis, UC Agricultural Issues Center, ERA Economics, Economic Anal-ysis of the 2014 Drought for California Agricul-ture, Davis, California, July 23, 2014.]

Commodity Market Developments

The adequate rainfall and moderate tem-peratures over much of the Central United States in 2014 produced record-high produc-tion of corn and soybeans as well as produc-tion increases for many other crops (Figure 8). Following on the heels of the sharp re-bound in global production in 2013, the large crops in 2014 continued the downward trend in crop prices initiated a year earlier.

Global grain and oilseed production in-creased by a whopping 10 percent in 2013, compared with a robust increase in global do-mestic use estimated at over five percent. That imbalance started the accumulation of global carryover stocks. In 2014, production was up a slight 1.5 percent, but still sufficient to ex-ceed total use, which is expected to grow by 2.6 percent, about the long-term average. As a result, global carryover stocks are expected to be up estimated 10 percent by the end of the 2014/15 marketing year. Global wheat pro-duction increased modestly in 2014, led by an increase in EU production, and exceeded global use, resulting in a small expected in-crease in global wheat stocks. Similarly, global coarse grain stocks are estimated to increase again as global production exceeds last year’s high level, as production decreases in Brazil, Australia, Argentina and Canada are offset by the record U.S. coarse grain production. The most prominent imbalance between global production and use is in oilseeds markets, where the large 2014 U.S. and Brazilian soy-bean crops are expected to cause a 35 percent increase in global soybean stocks. The story of

CROP 2013 YIELD 2014 YIELD 2013 2014 % PRODUCTION PRODUCTION CHANGE

Bu./Harv. Ac. Bu./Harv. Ac. Mil. Bu. Mil. Bu.

Corn 158.1 171.1 13,829 14,216 2.8 Barley 71.3 72.4 217 177 -18.4 Grain Sorghum 59.6 67.6 392 433 10.3 Soybeans 44.0 47.8 3,358 3,969 18.2 All Wheat 47.1 43.7 2,135 2,026 -5.1 Winter Wheat 47.3 42.6 1,543 1,378 -10.7 Other Spring 47.1 46.7 534 595 -11.4 Lbs./Harv. Ac. Lbs./Harv. Ac. 1,000 Bales 1,000 Bales

Upland Cotton 802 781 12,275 15,496 -26.2 Lbs./Harv. Ac. Lbs./Harv. Ac. 1,000 Cwt. 1,000 Cwt.

Rice 7,694 7,572 189,953 221,035 -16.4 Source: NASS Crop Production Annual Summary, January 2015

Table 1. Crop Yields and Production

Figure 8. World Grain & Oilseeds Production, Use & Stocks

2.4

2.2

2.0

1.8

1.6

1.4

1.2

1.0

0.8

60%

40%

20%

0%

Bil. TonsStks/Use

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

10 MAY2015

another year of stock increases in 2014/15 is also playing out in the world cotton market. Despite the large boost in U.S. production, global cotton production is down slightly, as a number of countries all experienced small de-clines. Still, global production remains above expected use and stocks are expected to in-crease eight percent to 110 million bales, with China continuing to shape the market, as it is expected to hold over 65 million bales, nearly 60 percent of the world total.

To put the 2014 grain and oilseed market in perspective, the 2000-2013 average global stocks-to-use ratio is 20.5 percent. The esti-mated level at the end of 2014/15 is estimat-ed at 21.5 percent. Thus while carryover as a share of use is the highest since the 2009/10 season, the buildup is not wildly excessive and is more a return to normalcy after the rare drought-affected 2012 year. The steady carryover rise over the past two years in the face of somewhat slow consumer demand sets the stage for a price environment that may lie between the past few years and the lower lev-els of the earlier 2000s.

Figure 9 depicts the overall movements for the aggregate indices of prices received by U.S. farmers for crops and for animals and an-imal products on a monthly basis since 2000. As global crop production rebounded in 2013 and 2014 following the 2012 U.S. drought, and global economic growth proved slug-gish, crop prices declined sharply. Meanwhile, livestock prices had been in the doldrums in the mid to later 2000s as feed price increas-es, driven by ethanol growth and Southern Plains dryness, led to reduced herds and larg-er meat supplies. These herd reductions then tightened production capacity, reducing meat production in 2012-14 which boosted pric-es. With feed prices falling, farmers began holding back animals to expand production, and livestock prices continued to stay strong, although starting to decline in late 2014 and early 2015. Animal number expansion is like-ly to help build a demand base for feed grains over the next few years as ethanol-driven de-mand stagnates.

The supply and demand situation for corn and soybeans is illustrated in Figure 10. With record production, the increase in expected U.S. carryover stocks is clearly much larger than for the world. The increase for soybeans is especially dramatic, particularly when

compared with the 2013/14 carryover, which turned out to be a historically low 2.6 percent of use. The tight supply prevented soybean prices from falling as much as corn during 2013/14 and was an important factor in ex-plaining the shift in 2014 planted acres from corn to soybeans. For 2014/15, USDA fore-casts soybean stocks will jump to 10 percent of total use, and prices will average $10.10 per bushel, down 22 percent from the year earlier. Corn carryover is forecast to rise from 9.2 per-cent to 13.4 percent of use with 2014/15 corn farm prices averaging $3.70 per bushel, down

17 percent from the year earlier and a bit less than the drop in soybean prices. Wheat ex-ports are expected to drop in 2014/15 as EU competition heats up and the value of the dol-lar increases, leading to a moderate increase in carryover stocks with prices expected to average about $6.00 per bushel, down about 12 percent from the year earlier. Soaring U.S. cotton production in 2014 is forecast to raise cotton carryover by 80 percent in 2014/15 and reduce average farm prices to 60 cents per lb, compared with 77.9 cents averaged during 2013/14. Sitting on enormous stocks, China,

Figure 9. U.S. Farm Prices for Crops & Livestock

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2014

Figure 10. U.S. Prices & Carryover Stocks as a Share of Total Use

16.00

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the largest U.S. market, has reduced imports from 20 million bales in 2012, to 14 million in 2013, to about 7 million expected in 2014.

Projected prices for revenue policies, known as base prices, are shown in Table 2. Base prices are futures prices averaged during a discovery month that precedes the sales closing date. Thus, they are heavily influenced by market conditions in both the crop year of the discovery month and the upcoming crop year. Declining wheat farm prices in 2013 and 2014 and rising carryover contributed to low-er winter and spring wheat base prices in 2014 and 2015. Corn and soybean base prices in 2014 and 2015 reflect the back-to-back years of rising production and stocks following the 2012 drought, and these 2015 base prices are at 5-year lows. For cotton, the large drop in production and stocks in 2013 strengthened farm prices for 2013/14 and helped maintain the base price for 2014. However, the very

large U.S. cotton crop in 2014, partly due to a surge in harvested relative to planted acres as a result of very low abandonment, drove the 2015 farm and base prices down. The rice base price in 2014 reflected the early-season expectation of a large increase in long-grain rice production in the mid-South. That in-crease did occur, with 2014 long-grain pro-duction rising 23 percent, while medium/short grain production was about unchanged. Large production is expected to raise long-grain rice carryover at the end of 2014/15 by nearly a third, and that has reduced US-DA’s expected farm price for long-grain rice by 20 percent to $12.30 per cwt in 2014/15. However, futures price data in early 2015 was insufficient to establish a base price for 2015, thus revenue insurance is not available. The projected price used for yield policies was set at $11.20 per cwt for Arkansas long grain rice.

Figure 11 shows the futures price for corn

over the last year of the contract for Decem-ber delivery. Corn is frequently tracked as an indicator of general conditions, as it heavily influences the prices of other crops and live-stock, and corn has the highest crop insur-ance liability and premium among all crops. During 2010, corn yield was below trend, exports were very strong and stocks were fall-ing sharply, pushing futures price to a high of near $6.00 per bushel in the second half of the year. That increase led to the record-high base price of $6.01 per bushel for the 2011 corn crop. Weather concerns led to another below-trend yield in 2011 and further supply tightening, which continued to push futures to near $8.00 per bushel in late summer 2011. After that, prices tailed off as a more normal crop was anticipated in 2012 with the expec-tation of much larger planted acreage, and the 2012 base price settled at $5.68 per bushel. However, after a good start, the 2012 drought set in and futures prices soared to a peak of $8.49 by early August. Prices declined in the second half of 2012 as demand contracted under the high prices and foreign grain pro-duction was strong. Prices still finished 2012 near $7.00 per bushel. Futures prices trended down in early 2013 resulting in $5.65 base price but then fell sharply as a near-trend corn yield of 159 bushels per acre with 95 million planted acres resulted in record-high produc-tion and higher stocks. For 2014, USDA pro-jected another record-high crop of nearly 14 billion bushels and another drop in farm pric-es. That sentiment led to the 2014 base price of $4.62 per bushel. Production turned out to be 14.2 billion and farm prices are expected to average $3.70 for the 2014 crop year.

The volatility factor is used to estimate premium rates for revenue plans of insur-ance. The volatility factor is derived from the futures market’s forward-looking measure of

% CHANGE 2008 2009 2010 2011 2012 2013 2014 2015 2013-14 2014-15

Wheat, Winter ($/bu) (KS) 5.88 8.77 5.42 7.14 8.62 8.78 7.02 6.3 -20.0 -10.3 Wheat, Spring ($/bu) (ND) 11.11 6.20 5.43 9.89 7.84 8.44 6.51 5.85 -22.9 -10.1 Corn ($/bu) (IL) 5.40 4.04 3.99 6.01 5.68 5.65 4.62 4.15 -18.2 -10.2 Soybeans ($/bu) (IL) 13.36 8.80 9.23 13.49 12.55 12.87 11.36 9.37 -11.7 -14.3 Upland Cotton ($/lb) (MS) 0.77 0.55 0.72 1.15 0.94 0.81 0.78 0.63 -3.7 -19.2 RICE ($/cwt) (AR, 2011-15, Long Grain) 14.40 13.10 14.00 16.10 14.70 15.70 13.90 2 -11.5 -11.5 1Revenue Protection for 2011-15 and Revenue Assurance for prior years. 2Due to insufficient futures price data, revenue insurance is not available in 2015. Source: Various RMA Manager’s Bulletins

Table 2. Major Revenue Policy Base Prices1

Figure 11. Weekly Corn Futures Prices Last Year of the December Contract, 2010-2014

9

8

7

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4

31 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49

Week

$/Bu.

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12 MAY2015

the riskiness of prices expected for the com-ing crop year. The factor is estimated using the Black-Sholes model of implied volatility, which is based on observed prices for futures market options contracts. RMA uses the vola-tility factor to derive an expected price distri-bution for the crop. That distribution is then used to simulate price risk and establish the component of the premium rate for revenue plans that reflects the price risk. The volatility factor is shown in Table 3. When base pric-es decline, as they did in 2013 and 2014, in-sured liability declines, provided other factors affecting liability are unchanged, and total premium declines. If volatility factors also de-cline, as they did for 2014 and 2015, premium rates decline which adds to the drop in total premium caused by the lower base prices. For 2014, the volatility factors for major crops all declined, with a notable 24 percent drop for soybeans. The options market was signaling that price risk may be lower in 2014. However, prices dropped considerably for major crops, as noted in Figure 11 for corn, and price de-clines were a contributing cause of loss on many policies.

The changes in futures prices during 2014 from the time base prices were established to the harvest period are shown in Figure 12. The harvest prices shown are the average dai-ly prices in the harvest month for the futures contract used to establish the base prices. These prices are used to calculate revenue to count to establish the level of indemnity for an RP policy. A second consecutive year of re-cord corn production in 2014 explains the de-cline in harvest price to $3.49 per bushel, a 24 percent drop from the base price. Such a drop was enough to trigger indemnities on policies

with 15 percent and 20 percent deductibles for producers whose yields were about equal to their actual production history. Rising supplies were also the story behind the soy-bean, cotton, rice and spring wheat harvest price declines. The winter wheat harvest price was established before the large 2014 outturn was known for other grains and oilseeds, and its increase relative to its base price reflects the 11 percent decline in the 2014 winter wheat crop.

[Information sources for this section in-clude: USDA, Foreign Agricultural Service, P,S&D data base; USDA, Office of the Chief Economist, World Agricultural Supply and Demand Estimates Report (WASDE), vari-ous issues; USDA, NASS Quick Stats; RMA Manager’s Bulletins and the Price Discovery Application.]

Federal Crop Insurance Program Experience

Reflecting the improved weather and large harvests, the actuarial performance of the Federal Crop Insurance Program improved moderately in 2014. After back-to-back years of gross underwriting losses (defined as gross indemnities exceeding gross premiums) in 2012 and 2013, the program had a gross un-derwriting gain (gross premiums exceeding gross indemnities) in 2014. The sharp decline in farm and base prices and volatility factors, as described in the prior section, reduced the total insured liability to about $110 billion in 2014, $14 billion lower than the record high set in 2013. Accordingly, gross premium was $10.1 billion in 2014, down $1.7 billion from the prior year. Although lower prices reduced insured production values and premiums,

% CHANGE 1968-2013 2008 2009 2010 2011 2012 2013 2014 2015 2012-13 2013-14

Wheat, Winter ($/bu) 0.20 0.24 0.33 0.27 0.33 0.26 0.24 0.19 0.17 -20.8 -10.5 Wheat, Spring ($/bu) 0.23 0.33 0.25 0.24 0.25 0.19 0.15 0.14 0.15 -6.7 7.1 Corn ($/bu) 0.21 0.30 0.37 0.28 0.29 0.22 0.20 0.19 0.21 -5.0 10.5 Soybeans ($/bu) 0.18 0.31 0.31 0.20 0.23 0.18 0.17 0.13 0.16 -23.5 23.1 Cotton ($/lb) 0.24 0.20 0.27 0.21 0.40 0.19 0.17 0.15 0.16 -11.8 6.7 RICE 0.23 0.15 0.22 0.19 0.22 0.14 0.11 0.10 3 -9.1 3

1Historical volatility values are obtained by fitting log-normal distribution to the time series of the ratio of the harvest price to the base price from 1968 to 2014. For each year in that time period, the harvest and base prices are calculated by using relevant futures prices in that year. Source: Barchart.com 2Revenue Protection for 2011-15 and Revenue Assurance for prior years. 3Due to insufficient futures price data, revenue insurance is not available in 2015 Source: Various RMA Manger’s Bulletins

Historical Price Volatility Factor2

Volatility1

Table 3. Volatility Factors

Figure 12. Prices for 2014 RP and RP-HPE Plans of Insurance

$/Bu.

Soybea

nsW

inte

r Whe

atSprin

g W

heat

Corn

12.00

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7.02 7.176.516.17

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Up. Cotto

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$/Lb.

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Harvest

0.78 0.64

13.9012.60


14 MAY2015

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294.6 million acres were insured, slightly be-low the record-high 296.1 million set in 2013. Lower prices and less corn acreage proba-bly accounted for the decline, however, total acreage planted to principal crops increased in 2014, limiting the decline in insured acres. Despite the decline in insured acres, produc-ers continued to buy higher coverage levels in 2014, with the share of acres covered at 70 percent or higher rising from 82.1 percent in 2013 to 83.5 percent in 2014 (Figure 13). The program loss ratio on April 20, 2015 stood at 0.89, the fourth highest in the last decade.

Table 4 provides the standard measures used to comprehend the scope and perfor-mance of the crop insurance program. The generally smaller sizes of the program compo-nents measured in dollars in 2014 are driven mainly by the reduced prices for major field crops. Gross underwriting gains and loss-es of the program are shared between FCIC and the insurance companies, as determined by the provisions of the Standard Reinsur-ance Agreement (SRA). For 2014, the gross underwriting gain for the business recorded to date is $1.14 billion and would be the first gain in three years. The final estimated gross underwriting gain is expected to result in an underwriting gain that is about 12 percent of retained premium of the companies. While this rate would be an improvement over the past couple of years, company underwrit-ing gains as a percent of retained premium during the 2011-2014 life of the current SRA would average in the range of five to six per-cent, remaining well below the level expected when the SRA was negotiated. Furthermore, underwriting gains are not profits but a com-ponent of the companies’ pre-tax revenues.

Accounting for all revenues and costs leaves company pretax net income close to zero over 2011-2014.

The public cost of the crop insurance program can be calculated using program outlays and revenues and are equal to: gross indemnities less farmer-paid premiums, plus administrative and operating expense (A&O) payments made on the producers’ behalf to the companies, plus company underwriting gains. For the 2014 crop year thus far, net in-demnities of $5.1 billion plus A&O payments of about $1.4 billion bring these two compo-nents of program cost to $6.5 billion. Adding estimated company underwriting gains would put the program cost in a range of $7.6 billion. This figure compares favorably with costs of $9.7 billion in 2013 and the record-high $13.5 billion resulting from the historic 2012 drought. Final costs for 2014 will depend on

final figures for indemnities, farmer-paid premiums and company underwriting gains, but the total cost is likely to wind up a bit less than the expected long-run level of $7.9 bil-lion shown in the January 2015 projections of the Congressional Budget Office (CBO) for the life of the 2014 Farm Bill.

The changes in insured acres of major crops for 2014 are shown in Table 5. The changes in insured acres mainly reflect the shifts in planted acres. While planted acres of principal crops increased by 1.9 million in 2014, insured acres fell by 1.5 million. Part of this discrepancy in direction is explained by the 5.9-million-acre drop in corn insured acres which exceeded the 4.8-million-acre decline in corn planted acres. Also, soybean plantings were up by 6.9 million acres while insured acres grew by a lesser 6.3 million. The 1.5-million-acre decline in insured acres of

Figure 13. Share of Insured Acres Covered at 70% or Higher

90

80

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0

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2001

2002

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2008

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1996

Sha

re o

f In

sure

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cres

, %

2013

CROP POLICIES UNITS WITH FARM-PAID GROSS INSURED LOSS YEAR WITH PREMIUM LIABILITY PREMIUM PREMIUM INDEMNITY UNDERWRITING ACRES RATIO PREMIUM GAIN

Number Million Dollars Million

2005 1,191 3,022 44,259 3,949 1,612 2,367 1,582 246 0.60 2006 1,148 2,942 49,919 4,580 1,898 3,504 1,076 242 0.77 2007 1,138 2,966 67,340 6,562 2,739 3,548 3,015 272 0.54 2008 1,149 3,023 89,897 9,851 4,160 8,680 1,171 272 0.88 2009 1,172 2,729 79,548 8,951 3,524 5,222 3,729 265 0.58 2010 1,140 2,572 78,085 7,595 2,883 4,254 3,341 256 0.56 2011 1,152 3,321 114,197 11,971 4,508 10,867 1,104 266 0.91 2012 1,174 3,444 117,129 11,113 4,136 17,438 -6,325 283 1.57 2013 1,224 3,580 123,770 11,804 4,510 12,071 -266 296 1.02 2014 1,207 3,575 109,814 10,061 3,853 8,925 1,135 294 0.89 1Data as of 4/20/2015 Source: RMA Summary of Business

Table 4. Federal Crop Insurance Program Performance, Gross Basis1


pasture, range and forage was also notable, as that plan of insurance has attracted increas-ing participation in recent years. Perhaps the better weather in 2013 and lower prices and farm incomes in 2013 and 2014 motivated the slight reduction in insured acres. Even though lower prices and price volatilities reduced premiums, the fact that the lower crop prices reduced U.S. farm cash receipts by 16 percent between 2012 and 2014, may have caused some producers to find further ways to trim their production expenses.

Iowa was the number one state in indem-nities in 2014, which were nearly double their total premiums (Table 6). Minnesota was number two, and its claims were more than

double premiums. Losses in these two states were mainly due to excess moisture and de-clines in prices. Texas, Kansas and North Dakota rounded out the top five states in to-tal claims. Among crops, corn led with $3.8 billion in indemnities, exceeding its level of premiums. Wheat, soybeans, cotton and PRF followed corn in total claims. Rice, ELS cotton and peanuts made it into the top 10 in claims, which is unusual. Rice was stressed in Missis-sippi in 2014 but losses in California account-ed for the bulk of the problems. ELS cotton losses were also mainly in California and the 2014 dry weather in Georgia accounted for the large peanut claims.

The map in Figure 14 shows the state loss

ratios as of April 13, identified by their level and similarity. Nevada had the highest loss ra-tio but premium was only $8 million. Minne-sota, which was second in claims had the sec-ond highest loss ratio at 2.11, with the top five rounded out by Oklahoma,1.90; Iowa, 1.86; and New Mexico, 1.08. The data show nine states with loss ratios over 1.0. Total indem-nities in these nine states were $4.3 billion, 49 percent of the total U.S. payout. The five low-est loss ratio states were, in order, Delaware, 0.11; Maine, 0.21; Maryland, 0.21; South Da-kota, 0.25; and Missouri, 0.27. By crop, the highest loss ratios were for ELS cotton, 2.66; olives, 2.47; macadamia nuts, 2.40; burley tobacco, 2.08, followed by pistachios and cul-

CROP 2012 2013 2014 CHANGE % CHANGE

Wheat 46,566 48,646 47,918 -728 -1.5 Corn 81,449 84,879 78,973 -5,906 -7.0 Sorghum 4,682 5,805 5,300 -505 -8.7 Soybeans 65,193 67,494 73,809 6,315 9.4 Upland Cotton 11,430 9,909 10,359 450 4.5 Pasture, Range and Forage 48,259 54,278 52,778 -1,500 -2.8 Total of above crops 257,579 271,011 269,137 -1,874 -0.7 Total of all crops 282,678 296,088 294,590 -1,498 0.5 1Data as of 4/20/2015 Source: RMA Summary of Business

Table 5. Insured Acres by Major Crop1

Figure 14. 2014 MPCI Premium and Loss Ratios All Plans Combined, as of April 13,2015

Total Loss Ratio

(0-0.25) (0.25-0.5) (0.5-0.75) (0.75-1) (1-1.25) (1.25-3)

PREM

(0-10,000,000) (10,000,000-100,000,000) (100,000,000-250,000,000) (250,000,000-750,000,000) (750,000,000-1,200,000,000)

Figure 15. California Drought Crop Insurance Experience

Data as of 4/20/2015

State Insured Crops & Area, 2014 Crops Acres, Premium Loss Mil. Mil. $ Ratio

Fruits/Trees/Nuts 2.00 276 0.78 Vegetables 0.36 19 0.59 Field Crops/Other 4.39 94 2.01 Total 6.75 389 1.06

16 MAY2015

tivated wild rice each at 1.75. The macadamia nut losses were in Hawaii and the remaining four crop losses were in California.

California’s crop insurance (Figure 15) experience during the drought in 2014 re-flects both how producers reallocated water to higher value crops and the susceptibility of crops to reductions in irrigation water alloca-tions. Areas where field crops are prevalent, such as the San Joaquin Valley, use irrigation project water and ground water. With drastic cutbacks in water project allocations, water has been shifted to higher value crops, re-ducing acreage of, and raising claims for, field crops. While the loss ratio for crops like cot-ton, wheat, rice, hay, pasture and forage was over 2.0, the loss ratios on vegetables, fruits, fruit trees and nuts was well below 1.0. Many

of these fruits and vegetables are grown in re-gions that rely on surface water and pumped ground water rather than allocations from ir-rigation projects.

Figure 16 shows loss ratios by state for the revenue plans, RP and RPHPE, and the yield plan, YP. In most states the loss ratios are comparable, although there are a few notable standouts. In the larger premium states of Cal-ifornia, Illinois and North Carolina, YP loss ratios exceeded those for the revenue plans by quite a bit. Alternatively, the revenue plan loss ratio in the larger premium state of Min-nesota was far above that for YP. Overall, the loss ratios were 0.93 for RP, 1.37 for RP-HPE and 0.82 for YP. The declines in prices with generally good yields resulted in a loss ratio of 0.41 for the Area Revenue Protection (ARP)

plan, while the Area Revenue Protection with Harvest Price Exclusion (ARP-HPE) experi-enced a loss ratio of 0.97 and the Area Yield Protection (AYP) plan had a loss ratio of zero. The highest loss ratios among plans were 1.41 for the Aquaculture Dollar Amount of Insur-ance, 1.37 for RP-HPE and 1.36 for the Actual Revenue History Plan of Insurance.

Figure 17 shows the major causes of crop losses for 2014. As is typical, moisture, either too much and/or the lack thereof, accounted for 54 percent of all losses. Excess moisture was the primary cause, being responsible for 27.7 percent of all losses, whereas drought was responsible for only 19 percent of all losses nationally. Price caused one-fifth of all claims reflecting not only the large drop in grain prices in 2014 but also the growth of revenue products and their increased impor-tance in helping to protect risk. Hail, which is discussed in greater detail in a subsequent portion of this article was the cause of 10 per-cent of losses.

[The primary information source for this section was the RMA Summary of Business.]

Program and Policy Developments

Implementation of the 2014 Farm Bill led the list of program and policy developments in 2014. The new Farm Bill was signed into law on February 7, 2014 and features many new products and changes for crop insurance. The new law met its budget reduction require-ments which resulted in reducing projected outlays on the farm safety net (farm programs plus crop insurance). Projected spending was reallocated away from traditional farm pro-grams, which were cut by $14.3 billion over 10 years mainly due to elimination of Direct Pay-ments, and toward crop insurance. Projected

STATE PREMIUMS STATE INDEMNITIES CROP PREMIUMS CROP INDEMNITIES

MIL.$ MIL.$ MIL.$ MIL.$

TX 979.8 IA 1,390.5 Corn 3,647.4 Corn 3,783.1 ND 913.9 MN 1,386.6 Soybean 2,259.2 Wheat 1,627.8 LA 738.16 TX 1,076.3 Wheat 1,452.0 Soybean 1,211.5 SD 717.20 KS 613.4 Cotton 722.7 Cotton 719.0 IL 679.0 ND 569.0 Grain Sorg. 210.1 PRF 178.7 KS 668.6 NE 502.5 PRF 199.2 Grain Sorg. 126.5 MN 656.8 CA 414.1 Apples 101.4 Rice 138.8 NE 576.2 OK 379.5 Pototoes 98.2 ELS 89.1 CA 389.4 WI 268.1 Rice 93.6 Peanuts 73.6 MO 380.0 IL 261.3 Dry Beans 84.9 Flue-Cured 71.1 Tobacco Total 6,699.1 Total 6,861.3 Total 8,868.7 Total 8,019.2 U.S. Share 67% U.S. Share 94% U.S. Share 88% U.S. Share 90% 1Data as of 4/20/2015 Source: RMA Summary of Business

Table 6. Top 10: Premiums & Indemnities by State and Crop, 20141 Figure 17. 2014 Causes of Loss

ExcessMoisture,

28%

Cold Wet,4%

Failure of Irrigation

Supply, 3%

All Other16% Price, 20%

Drought19%

Hail, 10%

Figure 16. State Loss Ratio for 2014

3.00

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Loss Ratio

Revenue Plans (RP, RPHPE)

Yield Plan (YP)

AL

AK

AZ

AR

CA

CO CT

DE FL GA ID IL IN IA KS

KY

LA ME

MD

MA MI

MN

MS

MO

MT

NE

NV

NH

NJ

NM NY

NC

ND

OH

OK

OR

PA RI

SC

SD

TN TX

UT

VT

VA

WA

WV WI

WY

US

Data as of 4/20/2015


funding for crop insurance was increased by $5.7 billion, primarily due to the addition of two new supplemental revenue programs, the Stacked Income Protection Plan, or STAX, and the Supplemental Coverage Option, or SCO. The new Farm Bill is another major evolutionary step toward cementing crop insurance as the key mechanism for public support of U.S. production agriculture. (For a discussion of 2014 Farm Bill implementation, see: “Finally a Farm Bill . . . So What’s Next,” Crop Insurance TODAY, September 2014, pp. 26-30.)

STAX and SCO enable a producer to buy two policies on the same insurance unit, with the idea being to provide greater protection for smaller losses that are often not covered due to the policy’s deductible. STAX is an area plan for upland cotton acreage only that be-gins in selected counties in the 2015 crop year and covers revenue losses of not less than 10 percent and not more than 30 percent. STAX may be purchased alone or on top of a tradi-tional MPCI plan. Because cotton was exclud-ed from farm programs, except for the mar-keting assistance loan program, STAX may be a popular option for many producers.

SCO is an area plan for other crop produc-ers. SCO is being offered for sale in selected counties in the 2015 crop year for corn, cot-ton, grain sorghum, rice, soybeans, spring barley, spring wheat, and winter wheat. SCO may be purchased on top of an underlying individual policy allowing indemnities to be equal to part of the deductible of the under-lying policy. SCO indemnities are triggered if losses in the area exceed 14 percent of expect-ed revenue or yield, with SCO coverage not to exceed the difference between 86 percent and the coverage level selected by the producer for the underlying policy. SCO coverage is not available for acreage covered by STAX or for crops enrolled in the Agriculture Risk Cover-age program (ARC), a supplemental revenue farm program also created by the Farm Bill. Thus, the farmer’s choice of enrolling in ARC affects the demand for SCO. As of this writ-ing the only data available for SCO sales is for 2015 winter wheat and SCO sales were limit-ed, accounting for five percent of the winter wheat policies sold, one percent of the insured liability and three percent of the premium.

RMA’s implementation of these provisions was admirable, as communication with in-

dustry and producer organizations was ample and timely. RMA provided detailed provi-sions on SCO and STAX by July and August 2014, respectively, which were implemented under existing regulatory authority. RMA had earlier issued interim regulations for most of the other provisions by July 1, 2014.

The Farm Bill also authorized many new studies; provisions; crop insurance products, including for specific crops, such as peanut revenue; and concepts, such as margin insur-ance and whole farm insurance. Readers are referred to the 2014 Farm Bill page on RMA’s website as well as to an excellent summary of the provisions prepared by the Congressio-nal Research Service (CRS) (see Shields, D., “Crop Insurance Provisions in the 2014 Farm Bill (P.L. 113-79)”, CRS, 7-5700, April 22, 2014 and available at http://nationalaglaw-center.org/wp-content/uploads/assets/crs/R43494.pdf.

An emerging Farm Bill issue in late 2014 was the implementation of the provision that allows producers to exclude any year from their insurable production (APH), if the coun-ty’s yield per planted acre for the crop in that year is at least 50 percent below the previous consecutive 10-year average of the yield per planted acre for the crop in the county. This provision, known as APH Exclusion, also ap-plies to contiguous counties and allows for the separation of irrigated and non-irrigated acres. The motivation for the provision was to avoid penalizing producers whose APH is reduced by an atypical low-yield year, thus providing them with an APH that may more accurately reflect their expected output. How-ever, there already exist limitations on APH annual reductions, including a maximum an-nual reduction (cup), a minimum level (floor) and a substitute for any low yield (plug).

The concerns with APH exclusion are that it may result in excessively high levels of cov-erage in high risk areas triggering larger and more frequent indemnities. Also, the rating method may not accurately reflect the risk, since there is no historical data on which to base rates for very high levels of coverage. These factors mean an increase in risk of loss for the program. Another issue is that the increase in coverage for high-risk producers and areas may result in smaller sales of STAX and SCO, as producers opt to cover more of their deductible by using higher individual

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18 MAY2015


S T R E N G T H S T A B I L I T Y S E R V I C E S O L U T I O N S

Farmers Mutual Hail has been securing the success of America’s farmer since 1893 with the financial strength and stability only a leader in

the industry can deliver. Our ongoing commitment and investment in crop insurance allows us to expand our superior service and

expertise to a national market. Trust in Farmers Mutual Hail for complete crop insurance solutions.

coverage with APH Exclusion rather than us-ing STAX or SCO. NCIS provided RMA with a review of its concerns about the rating and program impacts of APH Exclusion in early 2015. RMA was conducting an ongoing peer review of the rating method in early 2015.

Another rating issue that emerged in 2014 was the use of the volatility factor to establish the rate for the price risk covered by revenue plans of insurance. RMA released a contract-ed actuarial review by Sumaria Systems, dated August 8, 2014, of the use of the volatility fac-tor. The factor is an estimate of the variabil-ity of futures prices for the upcoming grow-ing season and is estimated using options premiums of put and call options and the Black-Scholes Model (BSM). The review rec-ommended continuation of the current pro-cedure with a minor change that had earlier been recommended by NCIS. NCIS submit-ted a comment on the review, concluding that the current method to estimate the volatility factor produces a factor that has done a poor job of predicting actual changes in prices over time and appears to understate the risk of large price changes. As described earlier, the volatility factor declined for all major crops for 2014 which, combined with price declines, sharply reduced premium. RMA continues to assess the role of volatility in premium rating.

A continuing issue has been the proce-dures for acreage that is prevented from being planted. A USDA Office of Inspector General report in 2013 called for changes in the pro-cedures. Consequently, RMA contracted for an independent evaluation during 2014 of the prevented planting policy procedures and payment factors. The contractor’s report re-viewed production costs for crops eligible for prevented planting coverage and compared costs with coverage levels. The report rec-ommended certain changes to the prevented planting coverage levels. RMA decided that no changes would be implemented for the 2015 crop year and sought public comments on the report’s results by the end of the first quarter of 2015.

The effort to improve crop insurance cov-erage for specialty crops continued in 2014. The availability of the Whole-Farm Revenue Protection plan of insurance (WFRP) was announced in November 2014. WFRP com-bines the Adjusted Gross Revenue (AGR) and Adjusted Gross Revenue-Lite (AGR-Lite) pi-

lot programs and provides additional features including a range of coverage levels, coverage for replanting, coverage for expanding opera-tions, a higher maximum amount of coverage than earlier whole farm plans, and coverage for market readiness costs. The plan will cov-er up to $8.5 million in insured revenue, in-cluding farms with specialty or organic com-modities (both crops and livestock), or those marketing to local, regional, farm-identity preserved, specialty, or direct markets. Also, beginning with the 2014 crop year, a new contract price option was made available for producers who grow 11 organic crops under guaranteed contracts, allowing them to use prices established in those contracts as their “price elections” in place of the RMA-issued prices. RMA is evaluating making this option available for conventional and transitional crops that are grown under contract in future crop years, as appropriate.

In addition to the introduction of the new whole farm plan, which although mandat-ed by the Farm Bill had already been under development by RMA, other crop insurance product changes during 2014 included the introduction of the Peanut Revenue plan through the Federal Crop Insurance Corpo-ration’s (FCIC) 508(h) process (a product also mandated by the Farm Bill). The FCIC Board also terminated the Group Revenue Plan for sugarcane and cultivated clam coverage in Florida (although the coverage was made permanent in other states). In addition, the Livestock Risk Protection plan of lamb was amended to use a new pricing model.

RMA also implemented a new process in 2014 for estimating the improper payment rate in the crop insurance program, as re-

quired by the Improper Payments Elimina-tion and Recovery Act. The Office of Manage-ment and Budget determined the estimation process that had been used was not producing statistically valid estimates, and working with the industry, RMA developed a new estima-tion procedure that was being put into effect in early 2015.

[The information source for this section was the RMA Summary of Business, various RMA press releases, Managers Bulletins, Informa-tional Memorandums, minutes of FCIC Board meetings, CBO 2014 Farm Bill cost estimates and NCIS analyses.]

U.S. Crop-Hail ExperienceFor the United States, crop-hail insurance

generally refers to private policies in which direct damage from hail is the primary cause of loss. In addition to hail damage, many pol-icy forms carry endorsements for additional perils. For the most part, the added perils in-clude wind and fire, although there are excep-tions. For the purpose of this article, results will be reported for all losses on hail policies, including the experience of NCIS non-mem-ber companies not included in NCIS’ Annual Statistical Summary reports.

Premium for 2014 as currently reported to NCIS was $991.9 million, up from $953.2 million in 2013, the largest in the history of the program. The premium amount in crop-hail has been steadily increasing since 2009. Crop hail provided $39.7 billion in privately insured crop-hail insurance protection to U.S. farmers in 2014. This coverage proved valu-able in 2014 as it paid out $1.2 billion in losses (Table 7).

The program had the largest hail losses in

CROP YEAR LIABILITY PREMIUM LOSSES LOSS RATIO

Mil. $ Mil. $ Mil. $

2005 15,017 424.8 186.8 0.44 2006 15,545 405.2 203.2 0.50 2007 19,392 489.6 235.2 0.48 2008 27,540 669.4 555.1 0.83 2009 25,493 621.3 656.9 0.91 2010 27,170 682.2 460.4 0.67 2011 36,691 843.2 974.5 1.16 2012 39,407 955.8 701.3 0.74 2013 39,773 953.2 646.2 0.68 2014 39,652 991.9 1,182.9 1.19 Data for 2014 are as of March 18, 2015 Source: Adjusted Verified Totals for NCIS member companies combined with the data from non-members.

Table 7. U.S. Crop-Hail Results, All Perils

20 MAY2015

its history in 2014 (influenced by extensive hail as well as losses in production plans), and 2014 became only the third year since 1948 in which the countrywide loss ratio, defined as paid losses divided by premium written, ex-ceeded 1.00. In 2012 and 2013, the program loss ratio reverted back to below 1.00 and is estimated at 0.74 and 0.68, respectively. The loss ratio for production plans was 0.88 in 2012, 0.85 in 2013 and 1.78 in 2014, with lev-els exceeding each year’s overall loss ratio.

Large storms contributed importantly to losses for the year. In terms of statewide losses from storms on a particular day (for hail and wind perils), Nebraska took the top spot with $144.9 million on June 3. That was followed by Nebraska with $63.3 million on June 14 and Iowa with $43.1 million losses on June 30. The losses from the top ten storm days at a state level amounted to $420.2 million, which is much more severe than those in the previ-ous six years (2013 at $158.0 million, 2012 at $120.2 million, 2011 at $259.9 million, 2010 at $78.2 million, 2009 at $174.2 million and 2008 at $89.2 million). Regarding county level

losses in 2014 from major storm events on a particular day (also for hail and wind perils), Holt County in Nebraska took the top spot, which occurred on June 3, resulting in $20.8 million paid out to farmers. The second high-est one-day storm in 2014 occurred on July 23 in Whitman County, Washington, result-ing in $15.4 million paid out to farmers. The third highest one-day storm in 2014 occurred on June 3 in Cuming County, Nebraska, re-sulting in $11.7 million paid out to farmers. The next two largest county losses occurred

in Minnesota and Iowa. The total of the top five county losses amounted to $70.8 million, which was above those in 2013 by 83 percent, in 2012 by 189 percent, in 2011 by 35 percent and in 2010 by 252 percent. The next five larg-est county losses all occurred in Nebraska on either June 3 or June 14. Of the top 50 most damaging storms at the county level, 36 oc-curred in the month of June, eight in July, two in August, two in September, one in May and one in October.

Crop-hail loss ratios by state are shown in

CROP YEAR PREMIUM LOSSES NUMBER OF CLAIMS LOSS RATIO1

Mil. C$ Mil. C$

2008 289 341 29,000 1.18 2009 262 76 4,075 0.29 20102 263 155 16,000 0.59 20112 269 164 15,000 0.61 2012 341 280 21,600 0.82 2013 344 172 13,321 0.50 2014 317 265 13,741 0.84 1Loss ratios do not reflect loss adjustment costs. 2Number of claims exceeded value indicated. Source: The Hail Report, a publication sponsored by The Canadian Hail Association, which represents companies that sell crop-hail insurance in Western Canadaincluding subsequent updates.

Table 8. Canadian Crop-Hail Results, All Perils

Figure 18. 2014 Crop Hail Premium and Loss Ratios All Crops, Perls, Plans Combined, as of March 18, 2015

Total Loss Ratio (0-0.25) (0.25-0.5) (0.5-0.75) (0.75-1) (1-1.25) (1.25-3) (3-4)

State Labels: -ST Name -LR

NCIS 2000-2007

PREM

(0-1,000,000)

(1,000,000-10,000,000) (10,000,000-50,000,000) (50,000,000-100,000,000) (100,000,000-200,000,000)


Figure 18. Colors identify states with similar loss ratios, and shading is used to identify states with similar premium volume. Crop-hail insurance was written in 42 states in 2014. Of these states, 12 had a loss ratio in excess of 1.00; they are shown in dark blue, light purple and red in the map. Maryland had the highest loss ratio of 2.81, albeit with a small premium of under $80,000. Nebraska, with premium of $180.9 million, had the second highest loss ratio of 2.34. Arkansas, with $14.4 million in premium, had a loss ratio of 2.05, while Washington, with $16.5 million in premium, had a loss ratio of 1.92. Of the 42 states, 18 had loss ratios of 0.50 or less, shown in yellow and light green on the map, including South Da-kota with $61 million in premium, Wiscon-sin with $18.4 million in premium, Indiana with $25.8 million in premium and Ohio with $11.7 million in premium.

[Information sources for this section include: NCIS’ Insured Crop Summary and claim files.]

Canadian Crop-Hail Experience

Crop-hail business in Canada is primari-ly written in the prairie provinces of Alberta, Manitoba and Saskatchewan. Denoting Ca-nadian dollars with C$, Table 8 presents the grand totals. Overall, the 2014 loss experience was significantly worse than 2013. The 2014 loss ratio was 0.84, as compared to the 2013 loss ratio of 0.50. Not only were losses high-er in 2014, but the premiums were lower. In 2014, $265 million were paid out to farmers compared to $172 million in 2013. Crop hail premiums in 2014 were $317 million com-pared to $344 million in 2013. The number of claims increased from 13,221 in 2013 to 13,741 in 2014.

Payouts per acre and per acre insurance limits have increased steadily, keeping pace with the growing size of grain farms on the Prairies. The amount of loss per claim is im-pacted by the severity and timing of storms. In 2014, there was an increase in the number and violence of storms in many areas, with several areas getting damaging hail more than once during the growing season. The average claim in 2014 was $19,283, up from $13,061 in 2013.

Saskatchewan had $182 million in premi-

um in 2014, 57 percent of the total; Alberta had $93 million, 29 percent; and Manitoba had $42 million, 13 percent. Compared with premiums in 2013, Alberta saw an increase of 9 percent; Manitoba saw a decrease of 14 percent and Saskatchewan saw a decrease of 13 percent.

Total payouts in Alberta were reported at $113 million, well ahead of the $61 million paid out in 2013. Premiums also increased slightly to $93 million, up from $85 million a year ago, while number of policies fell from 8,923 to 8,516. The loss ratio for Alberta was 121.6 per cent, up from 71.9 per cent reported in 2013. A number of severe weather events in late July and well into August caused serious damage.

The total number of claims in Manitoba was down significantly over 2013 and the loss ratio percentage was the lowest since 2011. Total payouts were also much lower in 2014 than in 2013. The three worst storms in terms of damage sustained were on July 5, August 17 and September 2. On a reported 6,984 policies written, premiums totaled just under $42 mil-lion. Payouts of just under $18 million over 1,644 claims resulted in a loss ratio of 42.1 per cent, down significantly from the 61.9 per cent loss ratio recorded for Manitoba in 2013.

In Saskatchewan payouts of $134 million over 8,411 claims resulted in a 74 per cent loss ratio, up from 38.6 per cent in 2013. Number of policies and premium dropped a bit from 2013 but remain within the five-year average. The loss ratio, however, is higher than the five-year and 10-year average, attributed to the severity of the storms this year. A much higher than normal percentage of crop was written off at a 100 per cent loss.

Early July began fairly quietly but saw many violent storms later in the month and well into August, when crops were very vul-nerable. The majority of the hail fell in north-west and southwest regions of the province. The three storms of greatest significance were on July 17, July 24 and August 8. The July storms had the highest damage on a per claim basis while the largest number of claims was filed as a result of the August 8 storm.

Overall, this has been a particularly chal-lenging year for many areas fighting excess moisture and flood conditions. Late crops and weather-related delays have resulted in a very

slow harvest across much of Western Cana-da, making things difficult for both farmers and insurers.

[The information source for this section was The Hail Report, a publication spon-sored by the Canadian Crop Hail Associ-ation, including subsequent updates. The Hail Report is produced every two weeks during the hail season.]

ConclusionAgain in 2014, crop insurance helped

farmers deal with the year’s weather and mar-ket risks. Crop insurance was singled out by legislators during the development of the new Farm Bill as the primary program supporting production agriculture and was heralded as indispensable for successful farming today. The implementation of the provisions of the Farm Bill have been an important part of the work RMA and the AIP’s were engaged in during the latter part of 2014.

The public-private partnership worked as envisioned in 2014. Famers shared in the cost of the program by paying premiums of $3.9 billion and incurring losses through deductibles before any claims were paid. Insurance companies effectively sold and serviced over 1.2 million policies, accurately determined losses and paid claims on over 441,000 policies, although experiencing an-other year of reduced returns. The Federal government provided premium support to ensure widespread coverage sufficient to avoid Congress needing to enact ad hoc di-saster assistance.

Looking to the future, the American public is assured that crop insurance will be in place to provide financial stability for the many small, family farms that comprise the core of U.S. production agriculture. Crop in-surance will ensure that when the repeated disasters of recent years strike again, as they most assuredly will, U.S. farmers will be able to bounce back to produce again at high lev-els the food, feed, fiber and energy crops on which the U.S. and world population have come to expect and depend.

22 MAY2015

CropInsurance TODAY

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The 2015 Crop Insurance Industry Annu-al Convention, sponsored by the American Association of Crop Insurers (AACI) and the National Crop Insurance Services (NCIS), was a success as industry leaders met in Bo-nita Springs, Florida. The educational ses-sions were excellent and included comments from Senator Pat Roberts and Congressman Michael Conaway on the importance of crop insurance, a discussion on the 2014 Farm Bill

and dialogue from several commodity orga-nization leaders. The meeting also provided attendees an opportunity to meet with rein-surers and network with other crop insurance professionals.

A Great Story to TellTim Weber, Chairman of the Board for

AACI and NCIS, kicked off the Convention telling attendees that it was a “great day to be

involved in agriculture as we find ourselves in the midst of what is the dawning of a new and exciting age in the industry.”

He continued by noting three pillars that are essential for the continued success of crop insurance: Keeping crop insurance affordable for producers to promote wide-scale partici-pation; making sure it is widely available for numerous crops in all geographic locations; and ensuring the viability of private-sector insurance delivery.

Weber said 2015 priorities will include working with allies and building new partner-ships, making investments in the private-sec-tor delivery system to constantly improve efficiency, and tirelessly guarding program integrity by stamping out waste, fraud and abuse.

He also said that “…those with an agenda or an anti-agriculture bent cannot be given free rein to define our industry or the poli-cies that underpin the rural economy. No one knows the virtues of crop insurance better than the men and women in this room, and

Florida HostsIndustry Leaders

Tim Weber, Chairman of AACI and NCIS, kicked off the 2015 Crop Insurance Industry Annual Convention.

24 MAY2015

I challenge us all today to leave no attack un-challenged in 2015. We have a great story to tell, and if we don’t tell it, then no one will—certainly not the way it must be told.”

Congressional Leaders Pledge Support

In separate taped videos, Sen. Pat Roberts, the chairman of the Senate Committee on Agriculture, Nutrition and Forestry, and Rep. K. Michael Conaway, the chairman of the House Committee on Agriculture, delivered parallel messages explaining how the 2014 Farm Bill made crop insurance the key risk management tool available to farmers.

“Crop insurance is the cornerstone of the farm safety net,” said Roberts. “You have my word to continue to protect, preserve, and im-prove the number one risk management tool in every farmer’s toolbox.”

They also warned about the challenges ahead and stressed the need to work as a team to stave off attacks.

“The critics of farm policy and crop in-surance are not going to go away,” explained Conaway. “Despite some $17 billion in cuts to crop insurance, some are pushing for even more. They bill it as reform, but we all know their real end game is to kill crop insurance.”

Roberts added, “Together we must be ready and willing to tell stories of the great successes” of crop insurance.

Charitable Organization SelectedEach year during the Annual

Convention, AACI and NCIS selects a charitable organization involved in agriculture to highlight and encourages attendees to support financially through donations made during the convention. This year’s charity was once again Farm Rescue. Farm Rescue provides planting and harvesting assistance to farm families that have experienced a major injury, illness or natural disaster. Our mission is to help family farmers bridge crises so they have an opportunity to continue viable operations.

One of the biggest financial drains on a family is an unexpected medical injury or illness and, of course, a natural disaster. It is even more pronounced on a farm where a family’s livelihood depends on the ability to plant or harvest a crop.

Farm Rescue gives families a chance to continue their livelihood by providing the necessary equipment and manpower to plant or harvest their crop, free of charge.

Bill Gross launched Farm Rescue in 2005 and provides assistance to farm families in North Dakota, South Dakota, western Minnesota and eastern Montana. Farm Rescue has assisted more than 290 farm families in crisis since 2006.

The industry raised $5000 for Farm Rescue during the convention. If you would like to make a donation, or learn what other ways you can help Farm Rescue, please visit their website at www.FarmRescue.org.


Ag Leaders Work to Defend Crop Insurance

Representatives of various agricultur-al groups in Washington, D.C. also voiced support for crop insurance during the annu-al convention. The session was designed to give crop insurers perspective not only from Capitol Hill, but also from farmers across the country.

“We want crop insurance for all commod-ities in all states. It’s very clear every com-modity wants to have crop insurance,” said American Farm Bureau Federation’s Mary Kay Thatcher.

“Our farming members are by and large very happy with the crop insurance options in front of them,” added Bev Paul of the Ameri-can Soybean Association.

The message was consistent with a letter that more than 30 groups had sent to Con-gressional committees expressing disappoint-ment in the president’s budget proposal that undermined crop insurance. In the letter, they explained “budget levels currently in place for crop insurance ensure the affordability and availability of risk protection, while maintain-ing the viability of private-sector delivery.”

Indeed, these three tenets of affordability, availability, and viability were mentioned as the key to keeping the crop insurance system working effectively and efficiently. Another takeaway from panelists was the importance of sticking together and building alliances to make sure crop insurers can continue to offer a variety of options to farmers.

“Our focus in the years to come will be de-fending what we have,” said Robbie Minnich of the National Cotton Council of America.

Brandon Willis, Administrator of the Risk Management Agency provided an update on the 2014 Farm Bill implementation.

Host of the Golf Channel’s “Feherty,” author and former professional golfer, David

Feherty, provided great entertainment for the attendees this year. He told stories of his time as a player and commentator for PGA events and talked about his Troops First Foundation. The Foundation stages

events for wounded Special Forces, Green Berets and other U.S. heroes involving

golf, hunting, bicycling and skiing. “Losing a limb, or the ability to use a limb, is one thing,” he said. “But the dignity they lose

with it is perhaps even more important. And to be able to give them some of that dignity

back is my mission with these days.”

26 MAY2015

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Continued from page 1

coverage levels at or above 70 percent per acre, enabling farmers to cover the lion’s share of their production costs. With the combined efforts of the RMA and the private-sector de-livery system, crop insurance is now available for more than 62,000 different county/crop plans. This represents almost a three-fold increase from 1997 when there were approx-imately 22,000 such county/crop programs. So, as you can see, lots of interlocking pieces and playing well.

How Long has Crop Insurance been Playing Well?

Legos can trace its roots to wooden toys dating back to the early 1930s. Crop-hail in-surance can trace its introduction from Eu-rope into the United States to the late 1800s. In fact, Farmers Mutual Hail Insurance Com-pany of Iowa (FMH), a family owned and op-erated business, was established in 1893 and is still in existence today, operating out of West Des Moines Iowa. Compared to wooden toys, FMH agents and adjusters would ride horses and later ride bicycles to service their policy holders. Another well-known crop insurance company, the Crop Division of Great Amer-ican Insurance Group, “…has been helping generations of farmers take control of their risks since 1925.” NCIS can trace its roots back to 1915 with the formation of the West-ern Hail and Adjustment Association; an or-ganization created by crop insurance compa-nies to devise a system to adjust losses and to compile an adequate statistical base to permit actuarial analysis.

Although crop insurance has risen to re-cent stature in the 2014 Farm Bill, the crop industry itself has been in the game of agri-cultural risk management and playing it well for some time as evidenced by the longevity and commitment of companies invested in the business.

Why is it Important to Play Well?

The importance of agriculture in society: First and foremost, the crop insurance in-dustry is involved in agriculture. And how fundamental is that? A financially stable agri-culture is fundamental to a stable society. The

agricultural resource base of the United States is beyond compare. As a nation we are truly fortunate to have the climate, soils, and water resources available that provide the best qual-ity and highest yield-producing crops in the world. As a society, we are also fortunate that our forefathers made a series of long-term public investments in our agricultural infra-structure. Investments in soil conservation, investments in research and development, and investments in technology, just to name a few, have all contributed to our nation’s suc-cess in agriculture and our ability to feed our domestic population, and historically serve as a leading exporter of agricultural products.

The importance of risk management in agriculture: As fundamental as agriculture is to a stable economy and society, risk is as intrinsically inherent in agriculture. Quoting scripture “...time and chance happen to them all” (Ecclesiastes 9:11). Farmers are in the business of managing risk in every aspect of their respective operations. This publication has repeatedly provided information on how farmers can protect themselves in the five major areas of risk: production, marketing, financial, legal and human resources. Since 2008, the TODAY® magazine, including this issue, has featured a “Year in Review” article. “Year in Review” provides a comprehensive summary of the performance of the crop in-surance industry. The article – which contains information on the previous year’s significant weather events, Crop-Hail and MPCI experi-ence, indemnity payments, and market and planting conditions – covers the gamut of ag-ricultural risks farmers and insurance compa-nies face in this industry.

Crop insurance is risk management. Farm-ers meet with a state-licensed crop insurance agent to determine his or her risk exposure or liability and then select the individual risk management solution for that particular farm. With crop insurance, farmers only re-ceive an indemnity payment in the event of an insurable loss as verified by an accredited crop insurance adjuster. As Senator Stabenow is often quoted,”…with crop insurance, farmers receive a bill, not a check.”

Industry is a steward of taxpayer dollars: Lastly, in terms of playing well, it is important to recognize that the crop insurance industry is responsible for taxpayer dollars. Crop insur-ance is both a business and in a partnership

with the USDA, and as such, the private-sec-tor delivery system has a fiduciary responsibly to its shareholders and the taxpayer at large. That said, RMA and the delivery system takes their responsibility seriously and program in-tegrity is a prime consideration.

In crop insurance, companies have dollars at risk on each and every policy. There is a di-rect financial incentive to reduce fraudulent behavior and not overpay claims. The indus-try participates in extensive training and ed-ucation efforts. This includes a certified loss adjuster proficiency program which all ad-justers must complete and retain certification.

Program integrity is essential for contin-ued public support. Currently, there are nu-merous monitoring, review, audit and other oversight requirements found in the Stan-dard Reinsurance Agreement (SRA). The industry and RMA have sought to minimize fraud, waste and abuse and have implement-ed effective measures to improve program integrity. RMA and the crop insurance in-dustry have been early adopters in the use of data mining, performing thousands of reviews of industry insurance data to help ensure program integrity.

Quoting from RMA’s previous Adminis-trator William Murphy’s 2011 Congressional testimony, “RMA continues to make signifi-cant progress in preempting fraud, waste and abuse through the expanded use of data min-ing. ARPA (Agriculture Risk and Protection Act) directed RMA to employ data mining technologies to program compliance and in-tegrity efforts, and provided the funding nec-essary to support these activities.

“ARPA also provided a role for FSA to assist RMA in further program compliance and integrity. RMA subsequently entered into a contract with the Center for Agribusiness Excellence (CAE) at Tarleton State Universi-ty to develop and maintain appropriate data warehousing and data mining capabilities. Annually, CAE produces a spot-check list of producers engaging in questionable behaviors which is provided to FSA for further inves-tigation. With the assistance of FSA offices, RMA and the insurance companies conduct growing season spot checks to ensure that claims for losses are legitimate.”

RMA’s current administrator, Brandon Willis has also said, “…the Federal Crop

Continued on page 40

28 MAY2015

VisitWebsiteag-risk.org

Richard “Rick” Gibson, retired, Rob-ert “Bob” Haney, Rain and Hail L.L.C., Ben Latham, retired and Steve Rutledge, retired, were each presented with a Crop Insurance Industry Lifetime Achievement Award at the 2015 Crop Insurance Industry Annual Con-vention. Tim Weber, Chairman of the Na-tional Crop Insurance Services (NCIS) Board of Directors, and Tom Zacharias, President of NCIS, presented the awards.

RICHARD GIBSONRichard “Rick” Gibson began his crop in-

surance career as a per diem crop adjuster in 1959, moving to full-time crop insurance employment in 1964 as a field representative for the Insurance Company of North Amer-ica. He fully committed his time and family to crop insurance and never looked back, eventually starting his own company. His desire to help the American farmer, coupled

with his management and entrepreneurial skills lead him to pioneer and lead one of the largest crop insurance companies in the U.S.

Rick has extensive experience in the de-velopment of revenue products and start-up companies. Over the years Rick has worked closely with Dr. Art Barnaby, Professor of Economics at Kansas State University and they developed the CRC Revenue Protec-tion Policy in the mid-1990s. Rick currently serves as Chairman and CEO of Agro Inter-national, an international consulting com-pany that developed and introduced revenue crop insurance in Brazil and crop programs in Bolivia and Paraguay with a large interna-tional grain company.

In 2008, Rick sold his second crop insur-ance company, Agro National, and recently served as a Business Consultant to NAU Country Insurance Company. During his tenure, he has remained actively involved in the negotiations and political implemen-tation of the crop insurance program and has significant involvement in the negoti-ations and implementation of SRA agree-ments with FCIC. He served as the Chair-man of both the NCIS and the AACI boards throughout his career.

Four Presented with Industry Awards

CropInsurance TODAY

Presenting Rick Gibson (center) his Lifetime Achievement Award were Tim Weber (left) and Tom Zacharias (right).

30 MAY2015

ROBERT HANEYRobert “Bob” Haney has served the crop

insurance industry for more than three de-cades. He began his career with Rain and Hail in 1983 as an adjuster and has since contrib-uted to the success of the company by hold-ing several different positions including Field Supervisor, Division Claims Manager, Inter-nal Auditor, Vice President of Claims/Qual-ity Control, and Senior Vice President. Bob is currently the Chairman of Rain and Hail Insurance Service, Inc. and has the responsi-bility of overseeing and managing eight U.S. crop division offices, one agribusiness prop-erty and casualty division office, as well as international operations in Canada.

Bob is a member of the AACI Board of Directors and the NCIS Board of Directors. He has been a champion of crop insurance both in the U.S. and internationally. In this regard, he has been involved in helping edu-cate members of Congress on the importance of crop insurance and the impacts of Farm Bill changes. Bob has also been involved in negotiating terms of the SRA on behalf of the industry since the late 1990s.

BEN LATHAMBen Latham was literally born to write

crop insurance. His grandfather, Jess Latham SR, began selling crop insurance on horse-back in the 1910’s and in 1927 founded what became ProAg in Amarillo, TX where Ben was born. After college and a stint trading commodities, Ben entered the family busi-ness in 1973. As crop-hail writer in a state known for violent hailstorms, Ben became an authority on the Texas crop-hail business. Ben, joined later by his brother Larry, began to build the family company with the goal of a national presence.

Ben understood early on the value of in-dustry relationships and leadership. Early in his career he brought his expertise to the Crop Hail Insurance Actuarial Association, the NCIS Crop-Hail Actuarial & Statistics Committee and other various industry com-mittees until 1997 when he was elected to the NCIS Board of Directors. During his many year of service Ben was elected twice to hold the position as Chairman of the NCIS Board. Ben also lent his considerable knowledge to

Presenting Bob Haney (center) his Lifetime Achievement Award were Tim Weber (left) and Tom Zacharias (right).

Presenting Ben Latham (center) his Lifetime Achievement Award were Tim Weber (left) and Tom Zacharias (right).

international crop hail organizations. In his effort to bring understanding and credibility to this insurance industry he traveled exten-sively not just in this country but Europe and Africa as well.

In 2003, Ben became CEO of ProAg. Over the next several years he oversaw the fastest

growing crop insurance company in the in-dustry. Ben ended his career in 2012 having seen and been a part of changes that would have been unimaginable to his grandfather in the 1920’s. He served on the Board of Di-rectors of ProAg until 2014 and now spends his time playing bogey golf (often times with


Accepting the Lifetime Achievement Award on behalf of his father was Shannon Rutledge (center). Presenting the award was Tim Weber (left) and Tom Zacharias (right).

many friends made in the industry) and trav-elling to visit his children and grandchildren.

STEVE RUTLEDGESteve Rutledge served in the crop insur-

ance and reinsurance industry for more than forty years. He spent the majority of his career working for Farmers Mutual Hail Insurance Company of Iowa where he served in several roles including agent, crop hail adjuster, se-nior vice president and manager of reinsur-ance, and senior vice president of MPCI.

As the senior vice president of the MPCI department Steve was instrumental in bring-ing Farmers Mutual Hail into the federal crop insurance program. During his tenure, MPCI became a viable part of the company.

In addition to his many leadership roles within Farmers Mutual Hail, Steve served in leadership roles within the crop insurance in-dustry, including past chairman of the board of NCIS and CIRB. He has been a speaker at various crop and reinsurance conferences and conventions, including speaking on crop insurance, at the request of USDA, at an In-

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for our industry. In 2012, Steve retired from Farmers Mutual Hail after a long and distin-guished career serving the company and the crop insurance industry.

32 MAY2015

Dean Benson was the recipient of the 2015 National Crop Insurance Services (NCIS) Outstanding Service Award in recognition for outstanding service and outreach to small, limited resource, and socially disad-vantaged farmers. Tim Weber, Chairman of the National Crop Insurance Services Board of Directors, and Tom Zacharias, President of NCIS, presented the award at the 2015 Crop Insurance Industry Annual Convention.

Mr. Benson has been in crop insurance for 23 years. He and his wife, Judi, started their own agency in 1999 where he worked as an agent/owner of the agency and only had three employees. In 2008, Dean sold the agency and went to work for Northwest Farm Credit Services. He is currently the Senior Vice Pres-ident of Insurance Services where he oversees 45 offices throughout Washington, Oregon, Idaho and Montana.

Dean has seen significant growth in crop insurance over the years, as it has includ-ed more crops, more coverage levels, more specific pricing, the development of AGR/AGR-Lite and now the Whole Farm Revenue Program. He has always done what he could

to promote and improve these programs for the benefit of the growers. Dean does not con-sider crop insurance agents as salesmen, but rather risk management consultants, tailoring the tools available to growers to best fit each individual situation.

Dean has also made a strong presence in the Latino community. He has been involved in Spanish speaking meetings as well as hiring Hispanic individuals who have played a huge role in the communication of crop insurance with the Spanish speaking community.

Dean Benson Receives Outstanding

Service Award

CropInsurance TODAY

Presenting the award to Dean Benson (center) was Tim Weber (left) and Tom Zacharias (right).


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Jeff Meyer, Rain and Hail, L.L.C., was pre-sented with the 2015 National Crop Insur-ance Services (NCIS) Industry Leadership Award at the 2015 Crop Insurance Industry Annual Convention. This award is given to individuals who are directly involved in the crop insurance industry and who consistently serve the industry by providing outstanding leadership through NCIS committees. Tim Weber, Chairman of the National Crop Insur-ance Services (NCIS) Board of Directors, and Tom Zacharias, President of NCIS, presented the award.

Jeff Meyer is the recipient of the Crop In-surance Industry Leadership Award for his service to the NCIS Crop-Hail Policy, Pro-cedure and Loss Adjustment Committee. Jeff has been involved with the development of crop insurance for over 30 years. Since grad-uating from the University of Nebraska-Lin-coln in 1983 with a degree in Agronomy and Agricultural Economics, Jeff has worked in all facets of crop insurance. Jeff got his start as a Claims Manager for Union Insurance in Lincoln, Nebraska, and then began working at the Crop-Hail Insurance Actuarial Associ-ation, now National Crop Insurance Services where he worked as a Crop Insurance Special-ist for five years. Since 1991, Jeff has been a key part of the Rain and Hail team.

In each of these roles, Jeff has always main-tained a focus on how to better serve farm-ers and helped design and review products to meet this goal. Jeff has served on various NCIS committees and has acted as an expert reviewer of RMA products. Jeff was named to the NCIS Crop-Hail Policy, Procedure and Loss Adjustment Committee in April 2008. He has been an active member of the Committee,

missing only three conference calls since he began serving, and even then he made sure a substitute fill-in for those calls was available. Jeff brings a lot of knowledge about policy terms and conditions to the Committee and is always willing to help others understand com-plex changes and do what is best for the entire crop insurance industry.

Jeff Meyer Receives NCIS

Industry Leadership Award

CropInsurance TODAY

Presenting the award to Jeff Meyer (center) was Tim Weber (left) and Tom Zacharias (right).

The August 2015 issue of Crop Insurance TODAY® will be published in early September in anticipation of “AIGA Congress 2015 Kansas City”

conference. This issue will highlight important areas of U.S. and international crop insurance programs.

Conference registration information will be available this summer.

Private Public Partnership and New TechnologyTo Secure Food Supply

September 27-30, 2015

36 MAY2015

The August 2015 issue of Crop Insurance TODAY® will be published in early September in anticipation of “AIGA Congress 2015 Kansas City”

conference. This issue will highlight important areas of U.S. and international crop insurance programs.

Conference registration information will be available this summer.

Private Public Partnership and New TechnologyTo Secure Food Supply

September 27-30, 2015

The 2015 representatives of the 18 NCIS Regional/State Crop Insurance Committees met at NCIS in late March for training and in-struction. The committees have been around for many years, dating back to the early days of the crop insurance industry. Even though the structure and scope of the committees have changed over the years, these groups are critical to the communication flow within

NCIS Hosts Committee Leaders

CropInsurance TODAY

the industry and are organized for the pur-pose of identifying issues that need attention and making recommendations to the Board of Directors.

While the elected chairman provides lead-ership and direction, the real strength of each individual committee comes from the com-mitted participation of all its members. All companies are strongly encouraged to active-

ly participate in the committees in the states where they write business.

To ensure that these committees under-stand their role, function properly and are effective in accomplishing their responsibili-ties, NCIS hosts an annual training event to help the chairman succeed by preparing them for their official responsibilities. Specific in-struction is provided on:

By Laurie Langstraat, NCIS

PHOTO

Those attending the 2015 R/S Chairman Orientation included: Back row: Mark Zarnstorff (NCIS), Dave Hall (NCIS), Scott Altfillisch, Doug Ollenberger, Mark Askerooth, Kelly Garrett (Great American, vice chairman, Colorado/Wyoming), Jim LaPointe, Bob McPherson, Brad Veenstra, Steve Fortenberry, Bob Miller (NAU Country, Missouri), James Houx (NCIS) and Don Hutsell (NCIS). Center row: Mark Flohr (NCIS), Zach Alexander, Tim Franz, Chad Groen, Derek Raburn (Great American, vice chairman, Nebraska), Dean Strasser (NCIS), Sean Harvey (Great American, vice chairman, Kansas/Oklahoma), Sharon Shock, Michael Smith and Joey Brickhouse. Front Row: Chris Lindsay, Mollie Dvorak, Lynnette Dillon and Loretta Sobba (all NCIS).

2015 Regional/State ChairmanArizona/California/Nevada–Doug Ollenberger, AgriLogic Insurance ServicesColorado/Wyoming–Brandon Thomas, ProAg InsuranceEast–Joey Brickhouse, ProAgGulf States–Scott Altfillisch, Rain and HailIllinois/Wisconsin–Jason Gama, Rain and HailIndiana/Ohio/Michigan–Sharon Shock, Great AmericanIowa–Brad Veenstra, Great AmericanKansas/Oklahoma–Christopher Deetjen, Heartland Crop InsuranceKentucky/Tennessee–Zach Alexander, Rain and HailMinnesota–Chad Groen, Farmers Mutual HailMissouri–Jeff Dexter, Rain and HailMontana–Bob McPherson, ProAgNebraska–Chad Mixdorf, Farmers Mutual HailNorth Dakota–Mark Askerooth, ADMNorthwest–Jim LaPointe, ProAgSouth Dakota–Tim Franz, Rain and HailSoutheast–Michael Smith, Rain and HailSouthwest–Steve Fortenberry, ARMtech

• Anti-trust overview; • Importance of industry agronomic

research; • Planning and conducting effective meet-

ings and summer schools and field days; • How to make recommendations about

policies, procedures or research; and • Website training on crop sites.

To ensure that these

committees understand

their role, function prop-

erly and are effective in

accomplishing their re-

sponsibilities, NCIS hosts

an annual training event to

help the chairman succeed

by preparing them for their

official responsibilities.

A popular and important component of the session includes a round table discussion on current events, regional issues and hot topics from every area of the country. Some-times we get concerned about on our own lit-tle piece of the world and forget that crop in-surance is written in all 50 states. While states like Texas and California are struggling with drought, farmers in the Southeast can’t start planting because the fields are too wet. North Dakota’s oil boom is still wreaking havoc with the availability of rail cars to transport grain to market; Ohio and Indiana, for example, are seeing the expansion of cover crops; and, Montana is seeing an expanded interest in the new Whole Farm Revenue product. And no matter where you live, the 2014 Farm Bill’s in-troduction of supplemental products and/or expanded crop insurance options have farm-ers asking lots of questions and needing more and more information.

Some of the regional/state committees meet on a monthly basis, some quarterly and some as needed. All member companies are notified of the meetings and strongly encour-aged to attend, listen and discuss issues that may have happened or that could potentially be a concern for all companies. Each commit-tee has a NCIS liaison that they work with and is the contact point to ensure that all member

companies receive notices and minutes of the meetings. If an issue needs to be forwarded on to a NCIS standing committee, the NCIS liaison is the person to do that. Not only do the chairmen gain knowledge from the train-ing session but so does the NCIS staff by knowing what is happening out in the field.

It is a personal and professional honor to be elected as chairman of a regional/state committee. The expectations and responsibil-ities are great but so are the rewards for being selected by your peers to serve in this import-ant leadership position.

The chairmen now better understand the role of the committees, what is expected of them and are prepared to successfully fulfill their official duties. Most of the committees were represented at the training by their chairman, but in some cases where the chair-man wasn’t available, another committee member attended.

The expectations and

responsibilities are great

but so are the rewards

for being selected by

your peers to serve in

this important leadership

position.

Continued from page 28

Insurance Program is a central component of our nation’s farm safety net, and when one farmer takes advantage of that system, all farmers are hurt. To preserve the safety net for honest, hard-working farmers, the Risk Management Agency actively works to de-crease fraud, waste and abuse in the Federal Crop Insurance Program.”

Playing Well and “Making it Memorable”

In 2003 I had the opportunity to attend the NCAA Division I golf championship. In the field that year were several college players who have gone on to have successful profes-sional careers, including the likes of Bill Haas, Camillo Vegegas, and Hunter Mahan. As each group walked off the first tee to begin their round, the starter would call out “...Make it Memorable...”

In 2013, NCIS initiated a “Lifetime Achievement Award.” Recipients of the award are typically acknowledged during the crop insurance industry annual conven-tion. The purpose of the award is to recog-nize outstanding leadership of an individual who consistently demonstrated outstanding

leadership in the crop insurance industry. The past few years the award has been pre-

sented to: Ben Latham, Steve Rutledge, Bob Haney, Rick Gibson, Bob Parkerson, Chuck Lassey, Kent Petersen, Russell Slade, Greg Burger, Jim Deal and Linda Vickers. Many of these individuals have served on the NCIS Board of Directors. Jim Deal and Linda Vick-ers were instrumental in the early advance-ment of the industry and the increased role of the private sector. These are individuals who have both played well and “made it memora-ble.” As an industry we acknowledge the con-tribution of these who “have gone before” and “paved the way” for the rest of us. We offer a sincere and genuine appreciation from all of us at NCIS for the contribution of these indi-viduals to the crop insurance industry.

In this issue you will find the aforemen-tioned “2014 Year in Review” article. Please do not be daunted by the length of this piece as it contains an extensive review of what oc-curred in the markets, the weather and oth-er outside factors affecting the experience of the crop insurance industry in 2014. Those who received lifetime achievement and other industry awards during the 2014 annual con-vention are recognized in this issue along with

the 18 NCIS regional/state committee chair-men, who completed their annual training in late March.

Please note that our August issue of Crop Insurance TODAY® will be delayed until mid-September due to the AIAG Congress, which will meet in Kansas City in late Sep-tember. The International Association of Hail Insurers (AIAG) was founded in 1951 in Paris. Currently more than 100 member companies from 26 countries belong to the association. The group organizes an interna-tional congress every two years to exchange worldwide experiences and to study current challenges. The theme of this year’s congress is “Private Public Partnership and New Tech-nology to Secure Food Supply.”

The September issue will contain articles about the history of U.S. farm policy and crop insurance and highlight how other countries operate risk management programs for their farmers. Our decision to delay is so that we can provide timely and appropriate informa-tion for those who attend the Congress, as well as for you, our regular readers, to broaden your knowledge about international agriculture.

We hope that you enjoy this issue and have a wonderful spring!

40 MAY2015

Hudson Crop. Smart covered.Toll Free: 866 450-1445www.hudsoncrop.com

©2015 Hudson Insurance Group. All rights reserved. Hudson Insurance Group is an equal opportunity provider.

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CROP INSURANCE IN ACTION

Klodette Stroh isn’t your typical Wyo-ming farm girl.

Klodette is an Assyrian, born in Teheran, Iran, who came to the U.S. to attend college with the goal of becoming a physician and instead wound up falling in love with Wyo-ming farmer, Rick Stroh.

The couple began farming together in 1989, first purchasing some equipment and leasing land, all while hoping to one day own a farm of their own. After years of hard work, the couple finally achieved a hard-fought dream and purchased their own farmland. Today, the couple, and their two sons Rick and Paul, farm nearly 1,800 acres of malt barley, wheat, varieties of dry edible beans, corn and hay, near Powell, Wyoming.They also tend to more than 50 head of cattle.

While things on their farm and in their

lives have changed, one thing has always stayed the same: The Strohs have always pur-chased crop insurance.“We buy crop insur-ance mainly to safeguard from bad weather,” said Klodette Stroh.“Last year we had four major hail storms in a row,” said Stroh.

Stroh noted that although crop insur-ance is a yearly expense that isn’t easy on the pocketbook, they seldom have had a claim. Until 2013, that is.

“Last year was one of the worst year we have ever faced,” she noted.“After four back-to-back hail storms, the leaves of the dry edible bean plants were shattered, as were the sugar beets,” she said.“It was a real ca-tastrophe throughout this part of the state and farmers were hurting.”

Thankfully, most of Wyoming’s cropland farmers purchase crop insurance, which last year protected roughly 90 percent of plant-ed cropland in the U.S. “We made our first claim on our crop insurance policy last year and I hope we never make another claim,” she said. “But if we need to rely on our crop insurance again, it’s nice to know that the policy will be there to help us get back on our feet,” she said.

Stroh said that in addition to offering farmers some peace of mind, purchasing

Klodette and Rich Stroh, Powell, Wyoming

CropInsurance TODAY

Thankfully, most of Wyo-

ming’s cropland farmers

purchase crop insurance,

which last year protected

roughly 90 percent of plant-

ed cropland in the U.S.


Expands INDUSTRY AWARDSNCIS VisitWebsite

ag-risk.org

The NCIS industry awards were established in 2001 to honor those individuals who provide exemplary service to the industry as a whole and/or to producers. The award criteria has been changed slightly and a new award category has been added.

Outstanding Service AwardThis award is presented to a crop insurance agent or individual

outside of the industry who provides exceptional service indus-try-wide and outstanding outreach efforts to all farmers, especially limited-resource and/or socially disadvantaged farmers.

Industry Leadership AwardThis award, targeted primarily to members of the NCIS region-

al/state cop insurance and/or NCIS standing committees recognizes individuals who are directly involved in the crop insurance industry and who consistently serve the industry by providing outstanding leadership. One award may be given to a member of a regional/state crop insurance committee and/or a member of a standing committee.

Lifetime Achievement AwardThis new category of award will be given to those people who have

served or are currently serving in leadership capacities within the in-dustry who exhibit(ed) outstanding leadership, guidance and knowl-edge to and of the crop insurance industry.

Criteria for all awards are: 1. Unyielding personal and business ethics. 2. Demonstrated service above and beyond the crop insurance

industry. 3. Represents themselves, their company and the crop insurance in-

dustry well.The winners will be presented with their awards at the crop insur-

ance industry annual convention held in February of each year.All nominations must be submitted in writing to NCIS by October

15, 2015, for awards to be presented at the 2016 Annual Convention. For nomination information and forms to be submitted, please visit the NCIS website at www.ag-risk.org to download. If you have any questions regarding the criteria or whom is eligible for the awards, please contact Laurie Langstraat at NCIS at [email protected] or 913-685-2767.

crop insurance is also something that bank-ers prefer.“Bankers like to know that if you lose everything, something will be coming back to them,” she said.

“Most of the farmers around here pur-chase crop insurance as part of their basic risk management plans,” she explained. Stroh noted that farmers pushed hard for crop insurance to become the centerpiece of farm risk management in the 2014 Farm Bill.“It just makes good sense for farmers to purchase the protection they need,” she said.

Stroh also noted that the Farm Bill should be called the People’s bill. “That’s really what is it, because it not only helps farmers, but it feeds our children, feeds the poor and keeps the nation running,” she added, “since farm-ers not only raise food, but fiber and fuel for the nation and the world.”

Stroh noted that it is important that crop insurance remains universally available, af-fordable and viable for farmers. “Farmers are major economic drivers of our econ-omy, and crop insurance ensures that if disaster strikes, they have a clear pathway to recovery.”

“The cost of farming is so high that if we don’t have some kind of backstop—like crop insurance—it would be impossible for many of us to get back on our feet after disaster

strikes,” she added. “I don’t want our country to ever need to

import our food from other countries. That will cost us our independence,” she said.

44 MAY2015

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