Illinois County Relied Heavily On Crop Insurance Last Year

Farmers in the Midwest were devastated by a crippling drought in 2012. The federal crop insurance program paid out a record $17.3 billion, and in rural America, that money is still paying dividends.

Farmers in Livingston County, Ill. have received by far the biggest insurance payout in the nation. One of those farmers is Doug Wilson. On a sweltering day in mid-August, surrounded by healthy eight foot tall corn stalks, Wilson peeled back the husks to see how his corn is looking.

“I’m seeing an ear, there is probably about inch to inch and half tip on the end of where the kernels did not pollinate,” Wilson said. “Last year it wouldn’t have been unusual to see tipping back of half the ear width, three or four inches long, that just kind of shows the difference."

Last year, Wilson lost nearly half his corn to the drought – it was his worst harvest in more than 30 years of farming. But today, less than a year later, he is not suffering financially – at all.

“You carry home insurance hoping your house doesn’t burn down,” he said. “We carry crop insurance hoping our crops don’t burn down, but last year they burned down. Kind of literally.”

The burn was so severe in Livingston County that about $154 million returned to the county in crop insurance indemnities – tops in the country. Why the big payout in Livingston County? It was in the heart of the drought.

The University of Illinois’ Bruce Sherrick, who tracks such issues, said it was a “Happy accident.”

The heat baked Livingston County right at the time of pollination and a high percentage of farmers carry crop insurance there. Checking in at a local bank, they’ll tell you that $154 million has had a huge impact.

“We had individuals, without the crop insurance, they probably would have had a third of a normal year’s gross income last year, relative to them have a relatively normal year because of insurance,” said Gary Bressner, a banker who works in the county seat of Pontiac, Ill.

“They were still buying machinery and equipment because they did not get devastated like they would have done if they didn’t have their insurance coverages,” Bressner explained.

It is no surprise that in Livingston County, crop insurance is praised. Many of the folks there credited crop insurance with saving the local economy, where the jobless rate is at nine percent and where the state of Illinois closed a Women’s prison this year as part of budget cuts.

Many there recall the days when drought meant years of economic hardship.

Tim Kelly employs about 30 people at his John Deere Dealership in Pontiac. Business is a little slow this month, he said, leaning against a green combine, but not like it was when severe drought hit in 1988.

Far fewer farmers carried crop insurance. He said his dealership was empty and it took a couple of years to get back to normal

“If you can keep a farmer with money in his pocket he’s going to spend it,” Kelly said. “That’s how they always have been and always will be. So if the farmer makes a dollar, then everybody that works for the farmer, the implement dealer, the grocer everybody is benefited by if a farmer can make money.”

As Congress again tries to negotiate a farm bill, farmers and others in rural America point to this impact as the reason why crop insurance exists, and farmers do have some skin in the game.

In Livingston County, for example, farmers paid about $9 million for their share of the premiums. The government’s share, though, was close to $11 million. The government also was on the hook for a large portion of the payouts.

That large payout draws plenty of attention from government spending critics. Others fault how crop insurance influences farming decisions.

Claire O’Conner is with the Natural Resources Defense Council, an environmental group that recently released a report critical of crop insurance. O’Connor said the program should be reformed to encourage farmers to use conservation methods, something she said current crop insurance programs don’t do:

“It charges farmers using a formula that doesn’t distinguish between farmers who are degrading their soil and farmers who are re-generating their soil to be resilient,” O’Conner said. “It’s almost like a car insurance company who would charge more to a careful driver than to a reckless driver.”

Today’s subsidized policies are certainly popular with farmers.

For the 2013 crop year, more than 270 million acres are covered – continuing a steady annual increase since 2008.

What crop insurance and other farm subsidies look like in the future is an important part of the farm policy discussion in Washington. With drought so fresh in their mind, Midwestern Corn Farmers continue to tell Congress they are willing to give up other types of farm payments in exchange for the protection that crop insurance brings.

In Livingston County, banker Gary Bressner offers one key take-away from the 2012 disaster, at least for Livingston County:

“We’re going to be better off for quite some time because of last year’s safety net,” Bressner said.

The hope for many of these farmers is that some kind of clarity will emerge out of Washington this fall on the future safety net. However, there is no insurance for that.