August 4, 2000

Crop insurance for hay?

By Mike Barnett
Editor

Crop insurance for hay? Yes and no. It depends upon what kind of hay producer you are.

Speaking recently at the Texas Farm Bureau Summer Commodity Conference, TFB Research and Policy Development Director Glen Jones said there’s a good chance a program will be put together for commercial hay producers...i.e., those who produce hay strictly to sell. For cow/calf producers who produce hay to feed their own cows, the outlook’s not quite as good.

Bringing that cow/calf producer to the forefront was an emphasis of Jones and members of the TFB Hay Advisory Committee when they met last year with representatives of the Risk Management Agency, the government entity that oversees crop insurance.

“Basically, what we told them, is we have two classes of hay producers in Texas,” Jones recalled. “We have the commercial producer who has actual production history, and sells the hay he produces. He’s trying to make money off it.

“Then you have your cow/calf operator who will sell hay, but he’s primarily producing hay for his own herd. And he’s the person who ends up really hurting in times of drought. He’ll have to go out and buy $50 round bales and then end up selling his cattle, eventually, at a low price.”

The Risk Management people don’t have a problem in developing a program for the commercial hay producer.

“The reason for that is they have records and they have a quality factor they can use on commercial producers,” Jones said. “They’ve been dealing with that over the past few years. So probably, there will be an insurance program that will handle your commercial producer who sells hay.”

However, Jones said, Risk Management is stumped when it comes to putting together a program for the cow/calf producer who grows his own hay.

“They do not have records, they keep telling me, on actual planted acres,” Jones said. “They always have harvested acres, but they do not have records of planted acres for the cow/calf producer. And that throws them into a bind of not knowing how much is planted and how much is actually baled.”

Two options studied
However, Risk Management is looking at a couple of options. One, Jones said, is remote sensing by satellite. With satellite images, they would take a look at what was planted and what was baled at harvest time. That way they could determine whether production was high or low.

“They (Risk Management) thought that the ranchers and farmers would not accept that,” Jones said, “because you would not have anything to counter what information they had.”

A program Jones said Risk Management might pilot is a “rainfall guarantee” on hay.

Under this program, a normal rainfall amount for the growing season would be established in an area. They would then have tamper-proof rain gauges scattered around that same area.

“Then, at the end of the growing season,” Jones explained, “they’d say you ended up with 8 inches of rain. You were guaranteed 12, then they’d pay you for the difference.”

In the end though, Jones thinks Risk Management will probably devise some type of program to insure the producer’s cows.

“Ultimately, the price of the cows that he sells brings him less money,” Jones said. “And they think that probably they will come up with some type of program that would insure cattle. And that way, indirectly, they would insure your hay.”

The recent reform of crop insurance included a pilot program for insuring cattle. Details have yet to be worked out, however.