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EDUCATION
Investing in Crop Insurance

Agriculture Insights

March 2019

In 1985, less than 18 percent of United States farmland was insured. Now, the Federal Crop Insurance Program protects more than 70 percent of insurable farmland—282 million acres—through more than one million policies. The program provides hundreds of millions of dollars in indemnity payments to farmers each week.

Crop insurance has taken off in the past 25 years for good reason—today’s farmers must turn out more products and achieve higher yields than ever before to stay in business. Therefore, there are several reasons to carefully consider investing in crop insurance, or if you already have it, re-evaluating your current coverage.

Staying in Business

Obviously, the biggest reason to invest in crop insurance coverage is to make sure you turn a profit every year. What makes crops an especially difficult to insure is that their survival depends on a completely unpredictable factor: the weather. In any given year, you never know what perils your crops will face. Cold, frost and freezing temperatures cause an average of one-third of all recorded crop losses annually.

The question to ask is whether your farm would be able to survive if crops were completely wiped out by frost, disease, drought, excess moisture, hail, insects or other natural disasters. Just purchasing a policy is not enough, you must evaluate your risks and accurately determine whether the protection will adequately cover severe loss.

Capitalizing on Marketing Opportunity

In many ways, crop insurance allows businesses to expand by taking advantage of new opportunities. Farmers who insure their crops have the ability to engage in long-term business planning because of the relative stability of their cash flow. 

In the unpredictable agricultural business, being able to calculate your revenue even in the case of a loss is invaluable. You will have the security to market your crops and take advantage of market opportunities that uninsured farmers may miss out on.

Opening Up to Possibilities

One of the less obvious benefits to investing in crop insurance is that you are also investing in your company’s future. Crop insurance allows farmers to borrow money more easily because it proves to lenders the ability to repay loans.

The ability to borrow money opens you up to a number of possibilities that would be impossible without the security of crop insurance. Access to new technology and innovation are the greatest of these possibilities because they will open up the potential for even higher yields, better product and further growth.

Before you dismiss crop insurance as a financial burden, think of it as an investment. It gives assurance you will stay in business after a bad loss and creates the possibility of thriving well into the future.