Crop insurance explained: a safety net, not an income
Can be helpful, but premiums increase every time a farmer uses it.
LUBBOCK, Texas (KCBD) - Cotton producers need to make a good yield this year or they may be in an even tighter spot financially. Even crop insurance may not help as much as it was intended to this season.
The CEO of Plains Cotton Growers, Kody Bessent, said crop insurance is just like auto or home insurance. It’s there if needed, but it’s not something anyone wants to have to claim multiple times, especially back-to-back.
“Crop insurance is a really good risk management tool that producers have the ability to use in the event that we have catastrophic events like we saw with Mother Nature this last year,” Bessent said.
Crop insurance is meant to get a farmer out of a bind in situations like drought or hail storms. Bessent said the process is similar to claiming home insurance after damage.
“When we have catastrophic storms, they will turn in a claim just like a producer will; they will redevelop that roof just like a producer will retool that farm,” Bessent said.
Bessent said insurance can keep producers on the tractor and in business.
“But only for maybe one or two seasons,” Bessent said.
That’s because it’s just like any one other insurance: the more you use it, the more it will cost you.
“As you do that time and time again, that adds to an increase in a premium so an increase in input cost,” Bessent said.
As the premium goes up, it becomes harder for a producer to keep as much coverage.
“It makes it that much more difficult for a producer to maintain the same coverage level because that premium value, that overall input cost is going to go up,” Bessent said.
Bessent said failed crops don’t just hurt producers directly; they can hurt your pocketbook in all kinds of ways, because there’s less cash flowing in the economy.
“Without Ag in this region, the region severely suffers,” Bessent said.
With the Farm Bill expiring this year, producers are pushing for what they want to see in farm policy for the next five years.
Bessent said crop insurance has been a hot topic, including how to figure out how to mitigate some risk from disasters like drought when insurance can’t keep up. That bill is anticipated to get finalized in the fall.
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