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Industry Viewpoint: California's deep freeze and crop insurance

Weeks before the Midwest, Northeast and South went through their historic early January deep freeze, the citrus industry in California's San Joaquin Valley experienced a record early cold snap — weeks before Christmas — that had many of the state's fruit and vegetable growers reeling. This was the longest cold spell California has had this early in the season in decades. The good news was the cold snap came and went in days. The bad news was that it wasn't even the first day of winter yet.

In the not-too-distant past, a freeze like this would have meant immediate and long-term economic devastation for the region's economy. In 1990 and again in 1998 there were devastating freezes in the San Joaquin Valley that not only put local citrus growers on the brink of losing their farms, but also cost many of the area's workers their jobs and caused local businesses to shutter their windows. Agriculture is the engine that drives the local economy, purchasing large amounts of goods, services and fuels. And when farmers catch a cold — as the saying goes — rural America catches pneumonia.

In 2007, yet another devastating freeze hit the valley. But this time there was no widespread scare of farm foreclosures, no downturn in the local economy and no shuttering of windows. That's because unlike the old days, California specialty crop farmers were protected by crop insurance policies, purchased with money out of their own back pockets.

For the vast majority of California's farmers who raise specialty crops — like citrus, almonds, grapes and stone fruit — crop insurance is the only tool available to help them recover from natural disasters. Crop insurance is a public-private partnership whereby farmers purchase policies that are sold by private crop insurance companies and partially discounted by the federal government.

First and foremost, crop insurance puts risk management squarely in the hands of farmers, requiring them to purchase polices in order to enjoy the relative protection that crop insurance offers. California farmers have certainly embraced crop insurance, spending nearly $100 million out of their own pockets in 2012 to purchase policies. As Senate Agriculture Chairwoman Debbie Stabenow pointed out, when a farmer signs up for crop insurance, "the farmer gets a bill, not a check."

Since crop insurance is sold, managed and delivered by the private sector, when disaster strikes, indemnity checks usually arrive less than a month after the paperwork is completed. In the past, when farmers would rely on disaster assistance from the federal government, it took months, and more than a year in some cases, for those funds to finally reach the hands of the growers who had lost everything. For a grower whose entire citrus crop has just been frozen, a year can be about 11 months too long.

Another aspect that sets crop insurance apart is that it is sold, and delivered by private sector crop insurance agents who can only differentiate themselves from other agents through the exceptional customer service they give to farmers. Talk to a popular crop insurance agent and you will find that when a freeze hits, they're working 24/7 to help make sure the farmers who purchased policies are getting back on their feet.

The growth of crop insurance from a policy that few farmers purchased a few decades ago to today's policies which in 2013 protected 90 percent of planted cropland is a testament to the efficacy and affordability of the policies and the dedication and professionalism of the private sector crop insurance agents who sell and service the plans.

Crop insurance is available for 128 different crops, and that list is expanding. In some ways, the abundance of America's farm sector seems like a miracle, but it's not. If it weren't for hard work, investment, infrastructure and crop insurance to manage some of the major risks, there might be a lot fewer consumers enjoying America's fresh fruits, nuts and vegetables.

Certainly the growers of Mandarins, oranges and lemons in the San Joaquin Valley were stressed out by the long and unusual freeze. But those who purchased crop insurance knew that when the sun rose the next day, they won't be alone, as their crop insurance agent and participating company will be there to help get them back onto their feet.

(Laurie Langstraat is vice president of public affairs for National Crop Insurance Services in Overland Park, KS)