Crop Insurance time is upon us?

By Paul Baker, NYSHS Executive Director

Very soon each of you will have to decide to invest or not in the 2017 crop insurance program. In many ways it seems unfair in that we have not even gotten a clear picture of the success or failure of the current year. I would not be honest if I told you that each year is a carbon copy of the previous. Weather is a challenge regardless of your personal views on the topic of global warming.  I want to give some fresh perspective to you as to if crop insurance is a good investment (BET) or not.

Baker
Baker

I think we first must be realistic about the current times we are living in. While the economy is not surging people are for the most part doing quite well. We certainly do not want to see anyone go hungry. I have seen many statistics that suggest that here in the USA we waste nearly 40% of the food we produce. It is either not consumed or diverted at harvest or packing times for a multitude of cosmetic reasons. So this tells me that if our food is not virtually perfect it is discarded. Very high expectations.

We live is a fast paced society that only honors the very best. Second place is only famous if you work for Avis. Here are a few examples to illustrate my point. We have played 94 World Series.

Over those 94 years 35 have gone to 7 games. So 37% of the time some team is a loser because they lost one more game over the entire season. We have played 50 Super Bowls and outside of the Buffalo Bills how many fans can tell you the teams that lost those 50 Super Bowls? If you want a non-sport example how many people can name the Presidential candidate’s name that lost in the last ten elections?

I want to take you back to baseball for the last example. If in your major league career you fail to hit safely 65% of the time you will most likely be inducted into the Hall of Fame. That works out to hitting safely at a 350 batting average. Here is where life throws you a curve. As a grower if you were only successful with 35% of your crops you would be out of business,  To produce a product that will evade that already mentioned 40% defect rate you must be striving for returns above 80%. To do less over time will mean a serious decline in your profitability.

The reality is that the bar is set very high. The reasons why a piece of fruit is discarded is enormous. I need not tell you all of them. The returns alone for the inferior product usually do not pay the variable cost of production. Here is where we need to take a fresh look at the wisdom of crop insurance.

One needs to understand that insurance is a calculated gamble. When you take out a fire insurance policy on your home you are hedging against it burning down in the next 365 days. Nearly all of us carry this insurance. Nearly every insurance company will take your policy. I looked it up. You have a .000069% chance that your home will burn down. I am not suggesting that you cancel your fire insurance. I simply want to illustrate the risk factor.

Some growers tell me that they cannot afford to have apple crop insurance. When I see the frequency that apple growers have been compensated for a “sub-par” crop, I tend to think it is a pretty good “BET”. This year for example you may have dodged early frost, hail and wind damage. Who would have thought we would experience the driest summer in 100 years. The expression “size does matter” takes on a whole new meaning.

I think if you are a commercial apple grower you need to seriously evaluate the risk you are taking to not have this insurance. The market place has virtually no interest in anything less than 100%. With so many factors out of your control I think you need to look at crop insurance in 2017 as essential as any other fundamental cost of production. If your risk of not producing that perfect crop were .000069% I would certainly agree you can skip it! The program is set up to assist you in staying in business. It is not here to get you a seat on the beach next winter. If you are serious about being a producer in this market driven economy I think you need to take advantage of this tool.

Paul Baker
NYSHS Executive Director
3568 Saunders Settlement Rd., Sanborn, NY 14132
FAX: (716) 219-4089  |  Cell: (716) 807-6827
E-Mail: pbaker.hort@roadrunner.com

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What if?

By Paul Baker, NYSHS Executive Director

Sept. 1, in my mind, marks the official beginning of our fruit harvest.

Baker
Baker

Nationally and here in New York we are expecting another large crop. For the most part Mother Nature has been rather easy on all of the primary apple regions. No weather t r a g e d y means a big crop. Supply and demand usually tells us big crops drive down our prices. The question here when dealing with supply and demand is “who are our customers and how much do they wish to consume”?

We usually look at a U.S. crop to be marketed to a U.S. customer for the most part. Today with everything still on the tree and much yet to be decided politically by end of harvest I want to play the “what if” card.

Today the U.S. population is about 325 million. Our numbers are fairly steady as our birth rates have actually deceased over the last decade. We represent about 4.4 percent of the world’s population. China for example, the largest in population, is at 1.4 billion and India is close at 1.3 billion. Indonesia is a little shy of our population. Some important bench marks to keep in mind for this discussion are that since 1970 we have doubled the world population. Second in 2005 for the first time in history the urban populations were higher than the rural on the planet. In short more and more people are dependent on commercial agriculture as populations move from the land to the city.

The second area to consider today is what direction are we headed in this nation as far as public policy shifts. If we shift to a much more aggressive global market agenda we could see us seeking to take advantage of the 95 percent of the planet that does not live within our borders. While our domestic population remains quite steady globally we see the birth rates to be over twice the death rate. Combine this with the fact that that for many reasons we all are living longer we have an increased market share every year that needs our food. The end result is the planet needs every day more calories to take care of its increasing population.

So if the planet needs food who is in the best place to provide it? The world is for the most part static as far as land. What is not static is that as urban growth continues it takes farm land and converts it to urban streets of concrete.

Combine this with land that has not been as protected against pollution as our own we see areas of the world having to scramble to find good places to produce crops. Last we know that the most limiting element in crops is water. Fresh water is in high demand everywhere.

So that is table I have set before you in this mind game. While our population domestically is flat the rest of the world is expanding. New lives mean new demands for food. Water is critically short on most regions of the world. Here in the United States we have enormous under used water resources waiting to be put to its most productive usage. If we adapt a much more enlightened public policy that actually encourages agriculture rather than seeks to over regulate it we could see unprecedented growth in our ability to be the world’s bread basket.

The ugly truth is that despite every effort to suppress American farmers they have continued to be successful in delivering record crops. If we had public policy put in place to assist agriculture in labor and production technologies there is no limit to what we could produce. Then once we have the product we establish strong export markets. In short we have the land, water and technology to help feed the planet. We are in the best position to do this over any other country.

So I remain optimistic about agriculture. Food will never be set aside as out dated. Food will never go the route of the chariot. If we as a nation can organize our efforts, I think the future is very bright. We can easily market the crops of 2016 and beyond. We must continue to educate the public and private sectors of the land as to the potential that awaits us. It would be a great tragedy if short sighted public opinions and public policy saw American agriculture be down sized. Opportunity is knocking. The question will be as a nation are we prepared to respond?

Paul Baker
NYSHS Executive Director
3568 Saunders Settlement Rd., Sanborn, NY 14132
FAX: (716) 219-4089  |  Cell: (716) 807-6827
E-Mail: pbaker.hort@roadrunner.com

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