For crop loss, '08 perfect storm

Dec 9, 2008      Times-Picayune, Louisiana

Farmers vulnerable when hurricanes hit<

BATON ROUGE -- Louisiana's relatively high rates for crop disaster insurance combined with an ill-timed federal Farm Bill left many farmers with insufficient coverage when three major storms had a $1 billion impact on the state's industry this year, Agriculture Commissioner Mike Strain said Monday.

The problem makes it tough for state officials to make their case in Congress for federal relief for Louisiana farmers, Strain told the Baton Rouge Press Club.

"Crop insurance is not affordable or reasonable" in Louisiana, Strain said. "That's why the farmers haven't been buying it."

Coming in rapid succession just as many fields were nearing harvest, Tropical Storm Fay and Hurricanes Gustav and Ike caused damage in every part of the state. Louisiana lost 60 percent of its cotton crop, 30 percent of its soybeans and about 13 percent of its sugar harvest this year, according to the Department of Agriculture and Forestry.

The time before harvest is a particularly vulnerable period financially for farmers, who must make commitments to buyers and processors. Bank debt is high that time of year, meaning the financial industry is also vulnerable to late-summer storms.

The situation works against maintaining a regular cash flow among the players in the industry, and its impact will be felt through next year as farmers adjust their plantings based on their financial circumstances, Strain said.

The rates for crop-loss insurance in Louisiana and other Southern states are approximately double the rates in most other farming regions of the country, said Jimmy Street, treasurer of the Street Insurance Agency in Winnsboro.

But those high rates are not justified by the claims made in Louisiana, Street said. For example, for every dollar of premium paid by farmers in Louisiana over the past 15 years, damage claims have amounted to 79 cents in losses.

Also, he said, farmers in Virginia and Georgia have much higher ratios of losses but get somewhat more favorable rates, leaving Louisiana farmers at a cost disadvantage -- and with inadequate coverage.

"The costs have gone up so much in the last two years, it's hard for them to afford a policy like they really need," Street said. "You're farming off of your own shoelaces."

A typical net coverage for farmers in Louisiana this year was for about 27 percent of their crop loss, Strain said.

The other problem is that a new federal Farm Bill was passed in May, three months after the deadline for farmers to lock in their insurance coverage for the year. Farmers bought insurance not knowing what the new federal disaster relief program was going to be, Strain said. As it turned out, the new Farm Bill had built in less relief and flexibility than the previous one, and its rules and regulations will not be adopted for several more months.

Louisiana Sens. Mary Landrieu and David Vitter have been trying to get Congress to provide money for agriculture damage. They added more than $1 billion on a bill earlier this fall that was held up by an Oklahoma senator blocking pork barrel spending.

Strain said Monday that Landrieu has placed $1.12 billion for agricultural relief into an economic stimulus package, which will probably be heard in 2009.

If approved, the money would flow through the federal Farm Service Agency under the more lenient dispersal rules that were set in 2005. It would be administered as a sort of Road Home program for farmers.

The state also is looking at the use of federal block grant money recently approved by Congress to provide relief to farmers.

Two federal programs so far have combined to offer $26 million for agricultural losses from the storms this year.

They are federal matching programs, one requiring an application fee.

Loan guarantees are also being offered, but most farmers would have to come up with a substantial amount of cash up front to participate.

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Robert Travis Scott can be reached at rscott@timespicayune.com or 225.342.4197.

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