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AUBURN UNIVERSITY, Ala.—Insurance companies will be busy processing claims and assessing damages, as residents affected by Hurricane Michael work to recover. Crop insurance agents and adjusters, in tandem with Extension agents and other government program agencies, will work to help producers determine losses and file crop claims.

Alabama Extension economist Max Runge said producers will assess and report damage in the coming weeks.

“USDA NASS’s October crop production report estimated Alabama should have statewide records for corn, soybean and cotton crops in 2018,” he said. “Cotton producers were looking for a great year with an estimated yield of 1,065 pounds per acre. This is nearly 100 pounds better than the previous record yield.”

Crop Insurance

Most farmers insure individually through federal crop insurance, purchased through independent agents. The 2014 Farm Bill helped to provide a safety net to help offset low commodity prices, but does not cover catastrophic losses such as those from hurricanes.

Steve Tate, a crop insurance agent owns and operates Steve Tate Crop Insurance and Tate Farms in north Alabama.

Tate said crop insurance works in levels. A producer can ensure 50 to 85 percent of their average yield. However, 75 percent coverage is the most prevalent option in the state.

“Seventy-five percent does not mean 75 percent of yield potential this year,” Tate said. “The crop insurance guarantee is calculated based on a 10-year historical average yield.”

Tate said crop insurance compensation will not come close to covering losses cotton farmers experienced since 2018 may have been a near record crop.

Tate said the 10-year average is based on the last 10 years a certain crop is produced on a particular farm. A producer may have had 10 consecutive years of cotton production, while another producer may have yields dating back 20 years because of rotations into other crops.

“Cotton’s genetic advancements have dramatically increased yield potential for farmers,” Tate said. “When you use yield numbers that may be 20 years old, there is a huge difference between those yields and current variety yields. The actual production history (APH) can often be outrun by new genetics and a higher yield potential.”

For example, if the projected yields for the 2018 crop were 1500 pounds per acre and farmers covered at 50 percent, the farmer would receive payment for 750 pounds per acre. Even so, the farmer is not paid for the 750 pounds of cotton blown on to the ground. Both Runge and Tate said crop insurance in itself is a risk, so not all farmers choose to privately insure.

Payments and Assessments

“Any time a loss like this happens it is devastating for farmers,” Runge said. “A loss like this at the end of the season is catastrophic.”

Tate agreed, pointing to the cost of seed, inputs, labor and running equipment.

“Generally in the Southeast, producers deal with drought,” Tate said. “In these instances, farmers may have little preparation time, but it is still more than a week’s notice. There is no way farmers can fully prepare for hurricane devastation.”

Producers can choose different coverage options including yield exclusion, yield adjustment and trend adjustment. Based on individual coverage, agents and specialists will help farmers assess and quantify damage. Tate said some farmers will record 100 percent losses, while others may record a yield of 80 pounds per acre.

Unfortunately, these numbers will play into the farmers’ 10-year APH. For others who opted to include yield exclusion on their crop insurance plans, there may be hope. With this option, Tate said any time the whole county makes less than 50 percent of the average county yield, the year’s yield could be eliminated—as if it was never planted. While this would be great for some producers, it is still a loss. The unprecedented yield expectations of 2018 are now an untapped opportunity for producers to increase averages on a record year because of a natural disaster.

Misconceptions and Moving Forward

Producers are focused on making damage assessments and reports as they petition state and federal government representatives for aid. They are also fighting the misconception that farmers will receive unchecked payouts. Farm policies from the past provided payments not tied to production. These dated policies gave producers a bad rap and hindered farmer productivity, as payments generally went to landowners. Now the farmer’s coverage is dependent on an APH and an individualized insurance policy to cover risk.

Congress has the power to make procedural changes because of the scope of this agricultural disaster. Past changes have allowed farmers to zero out yields in adverse conditions for a particular year. Previous provisions also included loss variances or a full payment for an entire geographical area.

Runge and Tate said it is too early to know what relief will be made available to farmers aside from crop insurance, if any. This makes it extremely important for producers to report losses and work with local agencies to ensure their voice is heard.

Runge said farm income is about half of what it was five years ago, and unfortunately this disaster will put some farmers out of business.

Report Damage

To report damage download a Damage Assessment Form. An online survey is also available.

Visit Storm Recovery for more recovery information.

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