June 19, 2024
Commentary: Crop insurance critical for risky business of farming
Daniel Munch

 

By Daniel Munch 

 

Farming and ranching are not for the faint of heart. Taking on a substantial amount of risk is part of the business. The year starts with a farmer making extensive investments by purchasing inputs such as seed, fertilizer, equipment and its maintenance, fuel, crop protectants and pest control, which can easily total hundreds of thousands of dollars. That’s just to get a crop in the ground.

Those investments can be wiped out suddenly with a single destructive weather event, pest infestation or disease that causes a crop loss or decline in revenue. After successfully navigating Mother Nature, farmers who harvest a crop still face massive risk as price-takers in commodity markets with significant price volatility by the time that crop is ready to be sold.

Given historically slim—and often negative—profit margins, farmers are often reliant on lines of credit borrowed from financial institutions at the cost of interest. When all or nearly all of a crop is lost, farmers—who don’t have significant cash reserves to begin with—risk defaulting on their loans and losing their farm. Without some form of risk management protection in place, the liability of farming becomes impossible to maintain.

Crop insurance through the Federal Crop Insurance Program, which operates as a public-private partnership, is not merely a safety net. It is a lifeline for farm businesses, the rural communities they support and the food supply.

According to the 2024 Feeding the Economy report, U.S. food and agricultural sectors directly support nearly 24 million jobs and account for $9.6 trillion in economic activity, or 20% of total U.S. economic output. In February, the Congressional Budget Office projected that crop insurance expenses from 2024 to 2034 would total $124 billion, accounting for approximately one-tenth of 1% of total projected federal spending.

Based on calculations from the U.S. Department of Agriculture Risk Management Agency, crop insurance has cost each American on average about $2.18 per month since 2008.

Crop insurance cannot be offered by the private sector alone due to correlated risk. If I get into a car accident, it doesn’t impact my neighbor’s likelihood of getting into a car accident. However, if there is a severe drought in the West or Midwest, for example, all the farmers in the region will be impacted. This would make crop insurance products financially unattainable for farmers without government support.

Even at the highest levels of crop insurance coverage, individual crop insurance plans pay a maximum of 85% of the expected value of the crop. This means 15% of the liability of a farmer’s crop is lost as a deductible, which can equal tens of thousands of dollars even for the most expensive policy. For most farmers, selected coverage levels are closer to the 70% range, meaning farmers must experience a 30% decline in actual revenue before crop insurance comes into play.

Some farmers will purchase additional supplemental and enhanced coverage options. But critics often define crop insurance by what it doesn’t cover. There are gaps that leave producers of certain crops and in certain regions with few-to-no risk management options. Specialty crops, for example, often face higher levels of risk than crops grown at substantially higher volumes. Increased sensitivity to weather, pests and diseases, increased reliance on labor, and more uncertainty in price and the ability to find buyers all increase risks.

Significant advances have been made in providing more coverage for fruit, vegetable and nut growers. The top specialty crops covered in these policies include almonds, grapes, apples, potatoes, citrus and tomatoes.

Crop insurance stands as a cornerstone of agriculture’s resilience, providing a vital safety net for nearly 370,000 farmers amid weather, pests and market fluctuations. Despite its critical value to farmers and ranchers, it faces significant criticism. The reality is that crop insurance is an actuarially sound government program that represents a small fraction of federal spending.

It is a public-private partnership that works to secure the nation’s food supply and support farmer sustainability in a way that is not entirely dependent on taxpayer funding but instead spreads the risk of the program among farmers, private-sector crop insurance companies and taxpayers.

While acknowledging there are gaps in coverage, particularly for specialty crop growers, it’s essential to recognize the strides made in expanding coverage options and addressing these shortcomings through the farm bill and beyond.

As the U.S. navigates an increasingly uncertain future, improving and enhancing crop insurance through passage of a new five-year farm bill is essential for safeguarding the livelihoods of farmers, the stability of rural economies and the reliability of our food system.

(Daniel Munch is an economist for the American Farm Bureau Federation. This article is adapted from his Market Intel report, “Crop Insurance Provides a Critical ROI for Taxpayers,” which appears online at www.fb.org/market-intel.)

June 12, 2024
Commentary: Farm Bureau leaders advocate on farm policy in D.C.
Rachel Nettleton

Alex Arroyo

 

By Rachel Nettleton and Alex Arroyo

 

In April, the 2024 Leadership Farm Bureau class flew to Washington, D.C., where we engaged in a series of meetings with key policymakers to advocate for the interests of California agriculture, particularly regarding the upcoming farm bill.

Throughout our time in the nation’s capital, we gained valuable insight into the complex world of agricultural policy and laid the groundwork for impactful advocacy on behalf of our farming and ranching communities back home.

Leadership Farm Bureau is the emerging leaders program for the California Farm Bureau, which represents more than 26,000 member farmers, ranchers and agricultural professionals in the Golden State. The nine members selected to the LFB class this year are participating in a 10-month educational and professional development program, which includes 250 hours of instruction.

The class provides immersion in agricultural issues, public speaking and advocacy on critical matters affecting farmers, ranchers and agricultural businesses on local, state and national levels. The LFB class learns about agriculture in different regions of the country, about government, legislation, media and communications.These experiences equip our team to represent our counties and California Farm Bureau in the future.

Central to our agenda in Washington, D.C., were legislative visits aimed at lobbying for the farm bill, cornerstone legislation that shapes the future of America’s agricultural policy and funding. Armed with research, data and firsthand accounts from our constituents, we met with many members of Congress, such as Reps. Jim Costa, D-Fresno, and Doug LaMalfa, R-Richvale, to articulate the priorities and concerns of California agriculture.

We also had the opportunity to meet with representatives from the Embassy of Canada to discuss international trade policy. They emphasized the impact of the international trade relationship with Canada, an export destination for more than $5 billion in California agricultural commodities in 2022.

These meetings provided a platform to discuss a wide range of issues, from crop insurance and conservation programs to research funding and trade policy. We emphasized the importance of maintaining robust support for specialty crops, which are a key part of California’s agricultural economy. We stressed the importance of some of the major California commodities not covered by crop insurance, which include garlic, melons, broccoli, lettuce, carrots and cauliflower.

One of the major takeaways from our discussions was the recognition of agriculture’s vital role in addressing pressing societal challenges, from food security and environmental sustainability to rural economic development. By advocating for policies that support innovation, resilience and equity within the agricultural sector, we are not only safeguarding the livelihoods of farmers and ranchers but also advancing broader goals of economic and environmental stewardship.

Our meetings with members of Congress also highlighted the importance of bipartisan collaboration in advancing agricultural policy. Despite differing political affiliations and priorities, there was a shared recognition of the significance of agriculture to the nation’s economy and well-being. By fostering dialogue and finding common ground, we can work together to craft policies that benefit all stakeholders across the agricultural value chain.

The Leadership Farm Bureau group also engaged in dialogue with several U.S. Department of Agriculture leaders, including Robert Bonnie, undersecretary for farm production and conservation. He explained the different types of programs USDA has to offer for emergency relief for farmers and conservation programs. We highlighted the importance of rapid emergency financial relief, because it is crucial to all the small farmers around the state and country.

As we reflect on our time in Washington, D.C., one thing is clear: The work of advocating for agricultural policy is ongoing and multifaceted. While our meetings with key stakeholders were a critical step in the process, they represent just one piece of the puzzle. Moving forward, we are committed to continuing our engagement with policymakers, stakeholders and the broader agricultural community to shape policies that reflect the needs and aspirations of California agriculture.

In the months ahead, as the farm bill takes shape and debates unfold on Capitol Hill, we will remain vigilant and proactive in advocating for policies that promote the sustainability of California agriculture. Our journey in Washington, D.C., may have come to an end, but our work is far from finished. Together, as leaders in our industry, we will continue to navigate the complex terrain of agricultural policy, ensuring that the voices of California’s farming and ranching communities are heard and heeded at every turn.

(Rachel Nettleton is executive director of the Kern County Farm Bureau and Alex Arroyo is general manager of King City Transplanting in the Salinas Valley. They may be contacted at kcfb@kerncfb.com and Alex@KingCityTransplanting.com. Both are members of the 2024 Leadership Farm Bureau class, www.cfbf.com/ag-programs/leadership-farm-bureau.)

June 5, 2024
Commentary: Balanced approach can best protect Colorado River
Mike Wade

 

By Mike Wade 

 

As the lifeblood of the arid American Southwest, the Colorado River stands as a symbol of vitality and a testament to the intricate balance between human necessity and environmental stewardship.

Flowing through seven U.S. states and Mexico, its waters sustain more than 40 million people, vast agricultural lands that feed much of America, tribal interests and a myriad of ecosystems. Yet, despite its crucial role, the Colorado River faces an unprecedented challenge: Its robust flow has dwindled, signaling a looming crisis for population centers and millions of acres of critical farmland dependent on the river.

The Upper Colorado River Basin, consisting of Wyoming, Colorado, Utah and New Mexico, and the Lower Basin, comprised of California, Arizona and Nevada, have a combined interest in solving the crisis, and everyone that relies on the river must be part of the effort to ensure its long-term viability.

Since the passage of the 1922 Colorado River Compact, the river’s supplies have been equally divided between the Upper and Lower basins, each entitled to 7.5 million acre-feet, or 15 million acre-feet in total. However, a recent study by researchers at the University of California, Los Angeles, Center for Climate Science indicated that the Colorado River has lost 10.3% of its runoff since 1880.

Solving this requires a concerted effort to reduce demand on the river. And it must be done in a way that protects farm production, which benefits Americans on a national level and sustains local economies that depend on farms and farm-related businesses. The U.S. Bureau of Reclamation, which oversees much of the river’s operation, is developing new guidelines to manage the river after 2026, when the current guidelines expire. The Upper and Lower basins submitted competing alternatives earlier this year, with distinctly different approaches to the problem.

The Upper Basin’s alternative centers on limiting releases from Lake Powell, which stretches from Southern Utah into Northern Arizona, to the Lower Basin. In other words, that means pinning the burden almost solely on the Lower Basin states should hydrological conditions worsen, while sparing Upper Basin states of additional water cuts.

In contrast, the Lower Basin’s alternative looks at managing the system as a whole, as it was designed by the bureau, which built seven dams and reservoirs—Mead, Havasu, Mohave, Powell, Navajo, Flaming Gorge and Blue Mesa—from 1931 to 1966.

For Imperial Valley farmers, the Colorado River is their sole source of water, meaning that any reductions in water supply without the benefit of conservation programs would have a devastating effect on the regional economy.

Still those farmers, who hold senior water rights to the Colorado River, have sacrificed, invested and innovated to save 7.75 million acre-feet of water during the last two decades. They have achieved water savings by largely switching to high-efficiency irrigation systems on thousands of acres of lettuce, broccoli, carrots, citrus and alfalfa.

Importantly, they have been aided in their efforts by a 2003 agreement between the Imperial Irrigation District, the Metropolitan Water District of Southern California, the Coachella Valley Water District and the San Diego County Water Authority. The landmark pact facilitated agricultural water transfers to ensure reliable supplies for communities in exchange for financial support for on-farm conservation projects to help sustain America’s leading winter vegetable region.

California, Arizona and Nevada have also committed to reducing Lower Basin water usage by up to 1.5 million acre-feet per year, more than enough to offset the 1.3 million acre-feet of structural deficit, or water lost from the system due to leaks in canals and evaporation.

The Lower Basin plan is built on operating the system as a whole and allocates additional water supply cuts, when needed, evenly across both basins triggered by the reductions in the combined storage of all seven reservoirs. These types of solutions would be an effective way to address dwindling Colorado River supplies across the Upper and Lower basins, as California has done successfully between agricultural and urban water users for more than three decades.

The ramifications of a depleted Colorado River ripple far beyond its banks, impacting communities, economies and ecosystems that rely on its waters for survival. The Lower Basin Plan and 2003 agreement stand as examples of how parties can work together.

As California Colorado River Commissioner and IID board member JB Hamby said in support of the Lower Basin alternative, “Each basin, state and sector must contribute to solving the challenges ahead. No one who benefits from the river can opt out of saving it.”

That’s the kind of common sense the Colorado River needs. And our farmers are doing their part to protect this critical resource.

(Mike Wade is executive director of the California Farm Water Coalition. He may be contacted at mwade@farmwater.org.)

May 22, 2024
Commentary: Why zero-emission forklift rule is costly for farmers
Colin Sueyres

 

By Colin Sueyres

 

The cost of farming and ranching operations—specifically moving hay, grain and produce—may be about to get a lot more expensive in our state.

That will be the outcome if the California Air Resources Board adopts its proposed rule to eliminate internal combustion engine, or ICE, forklifts across the state. The regulation, scheduled to be voted on June 27, would mandate that all Class IV cushion-tire combustion forklifts and the majority of Class V pneumatic-tire models be removed from existing fleets in favor of electric vehicles, namely forklifts powered by rechargeable batteries.

Forklifts are essential for many ranch and farm operations. Yet under the proposed rule, there are no exemptions for small fleets of forklifts moving goods within the agricultural sector. The rule would impact leased forklifts and force all owners and operators to purchase zero-emission forklifts by 2026—regardless of whether their current fleet of internal-combustion forklifts is still in good working condition.

The problem is exacerbated by the fact that there is not a 1:1 replacement, meaning farmers will have to purchase multiple electric forklifts to replace just one ICE forklift. This is because electric-vehicle forklifts require time to charge and cool and cannot run for 24 hours. Also, many EV forklifts cannot accommodate heavy loads like ICE forklifts can.

There will be associated infrastructure costs as electric forklifts need to be stored and charged indoors and new structures will need to be built, if not already available. Importantly, there are no exemptions for agricultural use or feasibility.

The Air Resources Board estimates that the number of impacted forklifts is approximately 95,000. However, an economic analysis by the Western Propane Gas Association found that the true number is closer to 220,000 ICE forklifts, more than half of all forklifts in the state.

The Western Propane analysis also found that, under the proposed new rule, costs to forklift owners and operators throughout the state could total up to $27 billion. These costs would include $10.2 billion for replacement of ICE forklifts even after factoring in salvage value and $4.6 billion in lost utilization costs for the premature retirement of currently functional ICE forklifts. In addition, charging station costs would exceed $6.3 billion to implement.

It is important to note that these costs do not factor in the cost of building power supply upgrades or infrastructure upgrades for the generation, transmission and delivery of electricity.

In numerous regulatory decisions across California’s history, the governmental body in charge has recognized that different regions or industries require different solutions. Unfortunately, the state Air Resource Board is moving forward with a one-size-fits-all rule that would set mandates without regard to the size of the business or the nature of the work.

Arguments regarding implementation from manufacturers, retailers, nonprofits and more have been ignored or rejected in favor of the board’s preferred technology solution.

Fortunately, there is a cheaper, more feasible and effective way to meet the state’s air-quality goals. Western Propane Gas Association has proposed an alternative pathway to compliance to ensure the state is meeting its greenhouse gas reduction goals while also protecting the goods-movement sector in critical industries across the state from untenable costs.

That alternative pathway would accomplish the following:

• Ensure that California has an accurate understanding of how forklifts are utilized within the state and how the rulemaking would affect real-world operations. Currently, there are no standardized databases within California to track actual forklift usage—leading CARB to significantly underestimate the true impact of the rule.

• Increase standards for future nitrogen oxide, or NOx, forklift emissions that recognize trends in capture technology and allow California to still meet its federally mandated emissions goals without a costly and ineffective one-size-fits-all technology mandate.

• Accelerate the phase-out of older, less efficient, higher emission pre-2011 forklifts to provide an immediate improvement in local air quality and reduce carbon intensity.

Unlike other industries such as the tech sector, which can outsource manufacturing or even relocate to more affordable states, the agricultural industry is here to stay. If you are concerned about how the California Air Resources Board rule will impact your farming operations, I encourage you to reach out to board members before the June vote.

I’m hopeful that, after hearing about real-world impacts of this regulation, the board is willing to come to the table and find a feasible and cost-effective way to meet our state’s ambitious air quality goals.

To review the analysis and see additional information regarding the impact of this rule across California, visit westernpga.org/forklift.

(Colin Sueyres is president and CEO of the Western Propane Gas Association. He can be reached at colin@westernpga.org.)