Unless you’re a farmer, it’s hard to grasp the time and sweat involved in planting, nurturing, and harvesting thousands of acres of cropland year after year.

If you’re not a rancher, it’s difficult to imagine the sleep-deprived, frigid winter nights during calving season. Both are 24/7 lifestyles that owe much of their success, and failure, to the whims of Mother Nature.

Drought, flooding, hailstorms, fires, insects, diseases, market fluctuations, and more can wipe out a promising crop or herd. What should be a financial windfall instead turns disastrous. Without these annual profits, the average family-run operation could face years of economic hardship. Can they still make mortgage and equipment loan payments? Will their children have enough school supplies and food?

Three Tools to Help

Fortunately, there are ways to mitigate the risks. Crop insurance, risk/revenue protection for livestock, and pasture/rainfall/forage coverage are three of the most popular, affordable, and effective insurance tools to help producers during a partial or total loss of their product.

Like their names, each of these kinds of insurance protects the producer against different hazards. It’s not uncommon for a single producer to carry multiple coverage plans, especially if they are like many family operations that grow both crops and livestock.

Crop insurance protects against partial or total crop loss that would render a producer without a product to sell. Risk/revenue protection helps ranchers keep a stable income if market prices fall below a predetermined level. Pasture/rainfall/forage (PRF) coverage helps ranchers recover from loss of forage land due to floods, fires, drought, and other dangers.  

Risk Management and Stabilization

Without insurance, the operator bears the full financial burden of crop or livestock losses. A substantial loss can impact the ability to recover production costs and meet other financial obligations. And to keep running, operators may resort to taking on more debt, which can lead to a spiral of debt accumulation, stress, and ultimately the loss of the farm or ranch.  

The purpose of insurance is to provide a safety net against potential losses from one or more of the risks we listed above. If there is a claim, the insurance compensates the operator so they can maintain some continuity in their income. Sustaining their operation - paying off loans and covering living expenses - is critical to survival and planning for the next season.

Lenders and Investment
Lack of safety nets can discourage investment in new technologies or more sustainable techniques. Without insurance, operators may hesitate to expand their operations or invest in new ventures due to the increased financial risks.

If you routinely carry insurance, your bank has higher confidence in your ability to pay back loans. A bank is more likely to extend credit for new ventures when there’s a safety net in place to protect their investment. Insurance also gives producers some assurance, making them more likely to invest in modern practices and infrastructure. This also helps to build the larger agricultural sector and funnels more money into rural economic development.

Security and Sustainability
When agricultural producers are in financial distress, it affects the overall well-being of the community, including the local businesses and service providers who rely on income from agricultural producers. And without some protection against significant losses, producers may resort to questionable practices to try to maximize short-term yields. This can degrade water and soil quality over the long-term.

A stable and secure agricultural industry is good for food security. When producers make use of insurance, they have a better chance of avoiding disruptions and continuing their operations long-term, which helps to support a stable food source for everyone in the region and around the country.

Questions? Contact us today!
Insurance plays a key role in supporting farmers and ranchers, managing risks, and contributing to food security and economic growth. It is an essential tool for the modern agricultural industry to thrive and adapt to the challenges of Mother Nature.

To learn more about how crop insurance, risk/revenue protection, and PRF coverage can help you protect your livelihood, contact one of our agricultural insurance agents today