The average farmer might be covered in mud and manure or dressed in engine oil-doused overalls, but most are forced to find solutions to daily problems that may defy the imagination of observers.

In an average week, the American farmer is forced to adopt the role of a grower, a livestock producer, an accountant, an engineer, an economist, a meteorologist and more. However, in addition to hours that extend from before dawn to sunset, that’s only part of the struggle.

The United States enjoys a food supply that is abundant and affordable, which is in a large part due to the efficiency and productivity of America’s farm and ranch families. Yet, the industry is currently at the mercy of the domestic and international economy, as well as the extreme and changing weather patterns, which all depend on factors beyond agricultural acreage.

Since 2013, America’s farmers and ranchers have weathered a 50% drop in net farm income, according to FarmAid.org. Additionally, farmers receive only 15 cents out of every dollar spent on their products. The rest goes for costs beyond the farm gate: wages and materials for production, processing, marketing, transportation and distribution, which is half of what they received 30 years ago, according to The American Farm Bureau.

“Right now, it’s tough times and it’s due to a combination of a lot of things,” says Greg Sandrock (pictured below), partner, The Cornerstone Agency in Tampico, Illinois. “You’re talking about an industry that sells at wholesale but buys at retail, so sometimes things can get kind of topsy turvy.”

Between 2011 and 2018, the U.S. lost more than 100,000 farms with 12,000 of those occurring between 2017 and 2018 alone, according to Time. Additionally, farm debt is at an all-time high—$416 billion—and more than half of all farmers have lost money every year since 2013.

“Their expenses haven’t changed, but the commodity prices have gone down tremendously from what it was just a handful of years ago,” Sandrock points out. “These operations are using up the equity that they built up over the last several years and they’re nervous. We’re starting to see land being given up, we’re seeing more folks retire, we’re seeing folks analyze their operations and saying, ‘we’re going to give up 25% of what we’re farming because we’re not profitable.’”

Commodity Concerns

The health of the U.S. agricultural economy and the stability of the nation’s food supply is protected by the Federal Crop Insurance Program (FCIP), providing value to the country.

About 25% of U.S. farm products by value are exported each year. In 2018, $139.6 billion worth of American agricultural products were exported around the world. The U.S. sells more food and fiber to world markets than it imports, creating a positive agricultural trade balance. Farming accounts for about 1% of the U.S. gross domestic product.

FCIP policies contain revenue protections that cover a producer’s income if the crop’s projected market value dramatically changes from the harvest price. Without this protection, a farmer could be left severely out of pocket, potentially putting them out of business. Cattle, corn and soybeans are the top three U.S. farm products, according to the American Farm Bureau, and recent events demonstrate why these mechanisms are relevant to protecting the U.S. production of these goods.

In 2012, the average price of corn was $6.89 a bushel, driving the crop’s value to $74.3 billion. But by 2013, the crop’s average price was $4.50, resulting in the value falling to $62.7 billion. Soybeans didn’t fare much better, dropping from $14.40 a bushel in 2012 to $12.70 in 2013.

Recently, U.S. agriculture and certain agricultural states have suffered from U.S.-China trade disputes, as well as the supply chain disruptions and economic and social shockwaves caused by the coronavirus pandemic. Given that China imports around 60% of U.S. soy, Illinois and Iowa—the largest soybean-producing states—have felt the impact of tumbling stock and commodity prices.

Additionally, in the past two years, shipments of U.S. soybeans, the most valuable U.S. agricultural export, to top importer China have plunged since Beijing slapped a 25% tariff on American shipments, according to Reuters. In reference to the ongoing U.S.-China trade war, the Trump Administration is “starting to try their [farmers’] patience a little bit,” admits Sandrock. But even with the FCIP and promises of additional funding to support struggling farms, “it only helps to bridge the gap between where the commodity prices should be and where they are today,” he adds. “Everybody wants to just go back to the supply and demand market.”

Natural Perils

As market forces scythe through U.S. agricultural profits, another reason that the FCIP is so vital to protecting U.S. farms is the revenue protections that insure farms against yield losses due to natural causes such as drought, excessive moisture, hail, wind, frost, insects and disease.

To protect farms in an era of unpredictable weather, such as too much or too little rainfall or snow, “our agency writes a lot of the pasture, rangeland, forage policy,” says Eric Payne, farm and ranch sales associate at Insurance Plus in Aberdeen, South Dakota.

Pasture, rangeland and forages, which cover approximately 55% of all U.S. land, according to the U.S. Department of Agriculture, is an area-based insurance program that protects against yield losses caused by low precipitation on forage produced for livestock to graze or harvesting hay to feed livestock.

The rainfall index is based on weather data collected and maintained by the National Oceanic and Atmospheric Administration’s Climate Prediction Center. Given that 800 million acres of U.S. land—which is roughly the size of India—goes toward feeding cows and other livestock, according to a Bloomberg study, it’s a vital coverage for our food’s food.

However, in 2019, South Dakota experienced an unprecedentedly wet year. Cities across the state broke their single-year record for precipitation while some cities witnessed back-to-back year-end rainfall records, which—because farmers were unable to plant their crops—resulted in an increase in “prevented planting” losses. “We were having very pleasant winters and pleasant summers but then the floodgates opened 2019,” he says. “In the Dakotas, we can go from a drought to a flood and vice versa very quickly due to our soil types.”

Meanwhile, there are certain exposures that the federal policy does not cover, such as an accidental fire, which requires a private product like hail insurance. “The federal program only covers fire to the standing crop when it’s due to lightning, not when a driver is going down the highway and throws a cigarette out the window and it burns up the whole crop,” Payne says, who grew up on a family ranch that grew livestock and small grains. “U.S. agriculture is struggling—there’s no secret there,” he admits.

Similarly, livestock can also be exposed to the elements. During the summer, “cattle are exposed to the heat and they easily overheat and can die,” says Bill Pearson, owner of Huisenga-Pearson Agency Inc. in Sibley, Iowa, while, during the winter, “severe winds or blizzard conditions can cause cattle to bolt looking for protection and often times suffocate in the blizzard.”

“Swine are usually in confinements and they’re inside,” Pearson continues. “They’re in a controlled environment with cooling fans, but if we have a big storm and those fans quit, extreme heat builds up. Lightning also takes animals every year and that’s a covered peril.”

In 2019, “excessive rain and drought at the same time played a role in limiting the crop,” says Don Heller, partner, Ag Crop Insurance Agency, Inc. in Stamford, Texas, where cotton farmers make up a mainstay of his book.

In recent years, Heller has noticed the number of farmers drop, which is in part due to the fact that the market is struggling and in part because “a lot of the farmers don’t own their land. They rent it,” he says. Recently, there have been “a lot of farmers and bankers walking around with a wild look in their eye because they couldn’t stand a loss, but they’ve made it through. We were on the brink of a really bad disaster, but insurance managed to pull them out and they’re able to go again.”

Independent agents “dance hand in hand with the farmer, the banker and USDA,” he adds. “We’re all working together trying to keep infrastructure in place so that agriculture is there, which is part of national security. Without agriculture, without a strong base for food and fiber, our nation is less secure.”

A Square Meal

In a market where the rates are set in stone, how do independent agents differentiate themselves and add value? For Pearson, the answer is simple: building a relationship, identifying risks and offering and fine-tuning coverage.

“Essentially, what we do is we bring a risk or peril to the insured, and they decide whether or not they want to buy the coverages,” he says. “There’s no cookie-cutter process for providing risk management for any producer. Each client has different needs, and it isn’t until you establish a relationship that you’re able to fine-tune the coverages that they need that fit their operation.”

While federal funding toward agriculture is not without its critics, “most policies have a minimum 15% deductible and a lot have 25%,” Pearson points out. In the event of a claim, “the farmer eats virtually all of his profit before the crop insurance kicks in, which covers his input costs and covers the banker,” he says.

“Insurance plays a huge role in protecting the agricultural industry and our food is part of national security,” Pearson adds. “And the last time I checked, most people eat three meals a day.”

Will Jones is IA managing editor.