In agriculture, uncertainty is certain

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Any farmer will tell you that with agriculture things don’t always go as planned. In fact, farmers often refer to farming as a gamble. We never know from the beginning of each growing season if our efforts will pay off in the end.

A farm, like any business, is subject to many different variables that can each be vital factors in achieving a profit. One variable that sets agriculture apart is Mother Nature. The weather, when cooperative, can be a farmer’s best friend in terms of raising successful crops and providing ample forage for livestock.

However, many times it has proven to be one of agriculture’s biggest adversaries. Both the widespread drought of 2012 and the more regional droughts during the previous year are prime examples of what a lack of moisture can do to food production.

The flip side of that extreme is too much moisture. What farmer in the Midwest could forget the Mississippi River flood of 1993, which completely covered entire fields with water, drowning 20 million acres across nine states. Other examples of the tough hand Mother Nature can deal are frost, wind and hail damage to crops and infrastructure, which can also be common occurrences on the farm.

Another uncertainty that many farmers find equally as frustrating as the weather is market fluctuations for the crops they grow. Aside from normal supply and demand pressures on the market, other influences include the state of both the global and U.S. economies, growing conditions in competing countries and even hedge fund managers, who may find agriculture commodities attractive investments one day and completely pull money from them the next.

Farmers always try to plan for a small profit after crops and livestock are sold. However, one can imagine the disappointment when something completely out of a farmer’s control causes the market to plunge. This uncertainty can make financial planning difficult for the best of farmers. This is why the phrase “farmers are price takers not price makers” is often heard amongst the people who make their living off the land.

With all the unknowns related to farming, it is extremely important that some of the risk be reduced. It is high time that our policymakers give farmers some assurance that if another bad weather year occurs, they won’t be financially ruined because of the high cost to put out a crop. If it were not for crop insurance, it would have been nearly impossible for even a debt-free family farm to survive a year like 2012.

Crop insurance allows farmers to farm for another year. If another 1993 or 2012 occurs, many farmers will be forced to sell out because they have so much invested in the crop before it is even harvested. In light of all the uncertainty of farming, farmers need Congress to pass the farm bill and save the farm when disaster strikes again.

Source: Glen Cope is a fourth-generation cattle rancher from Missouri. In 2012, he served as chairman of the American Farm Bureau Federation’s Young Farmers & Ranchers Committee.



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Chris    
Buffalo, N.Y.  |  September, 19, 2013 at 08:23 AM

Crop insurance is not the answer, though it helps. The farmer needs to compensated well enough so he can survive a bad year here or there. The problem is the processors and buyers want agricultural products dirt cheap all the time (more profit for them that way) and when a poor year comes along then farmer are left in a bind. Farmer need to make a DECENT living, not just scrape by. I know from experience, I farmed for 32 years, now semi-retired and make just as much as when farming, and a lot less work and stress.

Don    
Fairmont,MN  |  September, 19, 2013 at 08:35 AM

Crop insurance is just one of many risk management tools a farmer can use. Is it fair for the tax payer to provide this? Crop insurance will be available even if the subsidy to help pay for it goes away.There are many enterprises in agriculture where the risk management falls on the producer not the government. Eventually this is coming and we as producers should prepare for it.

RickyD    
SW Okla cotton country. Where the subsidies grow tall...  |  September, 19, 2013 at 10:54 AM

C'mon... when I read statements like this, I laugh... "If it were not for crop insurance, it would have been nearly impossible for even a debt-free family farm to survive a year like 2012." Because when I read USDA information, like this below, it brings more to focus that Farm Bureau and many other Farmer/Rancher organizations are just another lobby group that needs to go away... "USDA’s Economic Research Service released its 2012 farm income estimates, which project U.S. net farm income will total $122.2 billion in 2012 – up 3.4% from last year – and net cash income, $139 billion, both record nominal values. Inflation-adjusted net farm income is the second highest since 1970. The expected increase in income reflects large price-led gains in corn and soybean receipts in addition to crop insurance indemnities. Crop farm gains should be more than enough to offset livestock farmers' higher feed expenses and a decline in milk sales, the economists say. Farm equity is expected to increase to an all-time high of almost $2.3 trillion as farm asset growth exceeds increases in farm debt. Rising values of farm real estate and financial assets more than offset an anticipated increase in non-real estate debt. Debt repayment capacity utilization – a measure of farm exposure to financial risk – is forecast to be at its lowest since 1970. You "poor hard workin' 'merican farmers" have your hands so deep in the taxpayers pocket it's amazing. And like all groups that have come to depend on a handout as a right, you've become a drain on society and those who pay your way. But hey, it's always the other guy that's the problem, not you, huh?

Bill    
nebraksa  |  September, 19, 2013 at 11:31 AM

RickyD shows a lack of perspective on the relationship between USDA, consumer citizens, rural support structures for farming, and food and fiber processing/distribution systems. Farmers represent a vital and fragile piece of the ongoing puzzle of cheap and plentiful food. The partnership success relies on keeping farmers close to the soil, mostly happy, motivated, educated, and reasonably stable. His perspective of Farmers being entitled, having their hand out for money, or blaming someone for problems is unfortunate. Farmers are lucky that those making these decisions have a broader perspective on the role of Government in management of the extremely important short and long term management of food production and all that goes into that (not just farmers needs by any stretch of the imagination).

Randall    
SC  |  September, 21, 2013 at 03:07 PM

Of course crop insurance should exist, but only on the open market, not backed by Government! Higher cost of insurance will translate to less acres planted which will translate to higher crop prices, but not at the expense of the taxpayer! Agriculture should be like any other business! ....Where other subsidies are given they are wrong too!

Roland    
Pennsylvania  |  September, 23, 2013 at 10:22 AM

Murphy's Law says "If anything can go wrong - it will!" Murphy's Law of Farming says "If there is a profit to be made in an agricultural enterprise - the American farmer will destroy that potential in a few short seasons!" This inevitably happens when the producing population jointly overproduce the commodity, and the market-place responds with lower prices It also occurs on the individual farm when the producer over-invests in the capital assets to produce the commodity. Then the fixed costs grow to consume any profit margin which formerly existed. Unfortunately there is little chance that any insurance or government program that will ever change these basic outcomes.


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