' s’ Attitude: Toward ~ L-RISK CROP 1 SURANCE v: ' Plains of Texas Asaw UNIVERSITY p, ‘cultural Experiment Station el, Acting Director, College Station, Texas Summary The modern farmer has a major investment in his growing crops. Because of rapid advances in tech- nology and capital requirements in agriculture, select- ing financial management strategies that will reduce farm income variability and insure financial survival of the agricultural firm has become increasingly im- portant. At the farm level there is considerable variation in yield and price of agricultural commodi- ties from year to year. In recent years, legislative proposals have been enacted to eliminate price varia- bility associated with some of the principal commodi- ties through various pricing programs. However, the farmer is generally at the mercy of nature and unfore- seen events do make agricultural yields unpredictable. A form of crop insurance is one strategy, or precau- tionary measure against yield variability, that has been available to fanners in selected areas since World War II. The federal crop insurance program, as conceived, was to serve a dual purpose: to protect investment in growing crops and to help stabilize farm income. The Great Plains states are high risk areas where crop yields are extremely variable; yet fewer than one-half of the Great Plains counties participate in the Federal Crop Insurance program. Of the 67 Great Plains Texas counties, only 31 are participating in federal crop insurance; 25 of these are High Plains counties. Major progress has been made in recent years in expanding opportunities for farmers to insure their investment in growing crops. This has been accom- plished through the addition of new counties to the insurance program, the expansion of existing programs for various crops in participating counties and the development of plans for insuring new crops. If the Federal Crop Insurance Corporation is to continue expanding its program within and among the counties of ‘the various states, additional informa- tion is needed regarding possible changes in the present program. The need for this information led to a study of High Plains farmers attitudes toward crop insurance and other strategies to reduce farm income variability due to weather and /or other hazards. An attempt was made to evaluate the program on the basis of farmer response to direct questions concerning knowl- edge of the program, protective strategies against unforeseen losses, yield variability and environmental hazards, reasons for small participation and suggestions for improvement in the program. Farmers interviewed included present partici- pants, prior-participants and farmers who had never participated in the program. These farmers ranked the three insurable crops in terms of highest yield variability from year to year as wheat, cotton and grain sorghum, in the order listed. In a like manner, they consider the principal yield hazards to irrigated crops grown in the area to be hail, drouth, wind and insects. Among the various strategies employed to reduce income variability due to unforeseen crop losses, par- ticipants rely primarily upon crop insurance, cash reserves and field dispersion, in the order listed. One- fourth of the nonparticipants have no known precau- tionary measure of protection against crop losses. Although prior-participants are no longer insured with Federal Crop Insurance, as a group they still rank crop hail insurance as the principal strategy employed against crop losses, followed by field dispersion and cash reserves. The strategy ranked first by nonpartici- pants was cash reserves, with hail insurance in second place, and livestock in third position. Thus, crop insurance (including hail insurance) is prominent among all strategies to reduce farm income variability associated with crop losses in the area. The principal criticism of the Federal Crop In- surance Program concerned the level of coverage (bushels or pounds per acre) offered on the three insurable crops. As a group, farmers indicate a will- ingness to pay higher premiums if the yield guarantee could be raised to a more “realistic” level for irrigated crops in the region. The results of this study suggest several areas for improvement in the present federal crop insurance program that would encourage greater participation: (1) Establish different levels of coverage for the various soil-water resource combinations based on yield potentials and production requirements. (2) Consider the possibility of establishing one premium rate in the county for each insurable crop. All farmers would pay the same rate per $100 of insur- ance, although the maximum level of coverage could differ among farms depending upon the soil-water resource of each farm. (S) Require that all of an operator's acreage of a specific crop, within a given radius, be insured; how- ever, insurance on all acreage in the county operated by the same individual should not be mandatory. (4) Re-examine the three-stage cotton adjustment feature. In cases of total loss, a farmer should be entitled to full coverage (less harvesting expenses) after some specified date when he normally would have committed all other variable costs of production. (5) Expand educational and public relations pro- grams with an improved loss adjustment service. At present many criticisms can be attributed to a lack of knowledge of the program and its purpose. Content: Summary Introduction ....... -. Federal Crop Insurance All-risk Crop Insurance Risk Areas .... .. _ Level of Coverage .................................... Premiums I Insurance Contracts Offered by FCIC ...... .. COILIZOn _ _____ __ f Grain Sorghum ...................................... u; Wheat FCI Cost-benefit Summary ..................... _. Definitions ...... .. Method of Study >- Study Area .................................................... Sample Selection _______ __ ‘ Composition of Sample _______________________________ _ Age, Family Size and Education ......... .. Farm Experience and Special Traini Total Insurance Program .................... .. .- Background Summary ........................ ._ i Collection of Primary Data ..................... .. A Attitudinal Reactions Knowledge of FCI Program ...................... .. Source of Information .......................... .. Coverage Options Available ............... .. i5 Knowledge and Desirability of Special Features ................................ .. Protective Strategies Against if Unforeseen Crop Losses y Participation Versus Nonparticipation... f} Protective Strategies Other Than FCIC.. - Yield Variability and Environmental H - Variability of Irrigated Crop Yields....._.. i’ Yield Hazards .............................................. Future Yield Expectations ....................... .. Farmer Evaluation of FCI Program .............. .. General Attitude Toward FCI ................. Desirability of Proposed Features .......... .. Reasons for Small Participation in FC Suggested Improvements in FCI ....... .. _ Conclusions ....................................................... .. Literature Cited p i Appendices ......................................................... I s’ Attitudar T award I INCOME VARIES greatly from year to year =uncertainty of income is characteristic of p'ns agriculture. Gross income is dependent d and price of the product. Although, agri- ijprices are affected by aggregate output and with the different seasons, the various govem- 'cing programs have provided a degree of for established a price “floor” for principal ies grown in this area. However, yields are 7 variable since they are subject to all the azards associated with “high risk” farming reat Plains. if: efforts to reduce yield variability, farmers ‘j eloped extensive irrigation systems (where und water is available) and have employed -ter-saving techniques and cultural practices from research and experience. However, f- sts and weather variations continue to claim f of the High Plains crops each year. Depend- the nature of the hazard, the affected area 'despread and involve several counties; how- i. quently occurs among neighboring farmers _ individual fields on the same farm. A i, in yield lowers gross income. Since total in relatively constant, a small percentage in gross income results in a relatively larger l;- change in net income. . farmers require some minimum level of "f1 meet family living expenses and maintain p Thus, various strategies are employed to *1 uncertainty associated with price and yield l) A form of all-risk crop insurance repre- such strategy that has been available to selected areas since World War II. FEDERAL error INSURANCE i All-risk (irop Insurance idea of insuring farmers against losses due ga ‘lure by a federal agency was conceived in A y, assistant professor, USDA Southwestern Great rch Center, and associate professor, Department tural Economics and Sociology. ALL-RISK CRQP INSURANCE High Plains of Texas JOHN SHIPLEY AND J. S. WEHRLY* the mid-thirties, and the first program was offered in 1939. Originally, the program was to perform a dual purpose: protect the farmer's investment in growing crops and provide some degree of stability to farm income. Numerous changes have been made in the program during the past quarter-century, and today 21 different crop insurance plans are available, with one or more crops being insured in approximately one-third of the agricultural counties in the country. As of 1967, only 64 of the 254 Texas counties were included in this all-risk crop insurance program; 25 of these counties were located in the High Plains. In the participating counties of the High Plains, Federal Crop Insurance is restricted to irrigated acre- ages of cotton, grain sorghum and wheat, with the exception of two counties (Lipscomb and Gray) which offer a dryland wheat program. Insurance coverage may or may not be available on all three insurable crops in any one county. For example, during 1967, insurance coverage was available on irrigated cotton in 17 counties, irrigated grain sorghum in 17 counties and irrigated wheat in only 12 counties. (See Appendix A.) The maximum level of coverage per acre for any crop offered by FCI is established by one of two procedures as set forth in the Federal Crop Insurance Act. First, it shall not generally exceed the invest- ment (per acre) in the crop for the general area in which the farm is located. Secondly, it shall not exceed 75 percent of the average yield for the farm over a representative period of time [1]. Thus, the maximum level of coverage may vary in two or more areas within the same county. In addition, “rate” areas are established in which the risks of production are the prime consideration. Loss probability or crop insurance “experience” is used to delineate different rate areas for which premiums can be established. Risk Areas To avoid having separate land classifications for coverage and premium rates, the two classifications are consolidated into subareas called “risk areas.” All farms in each risk area will have the same coverage 3 and the same premium rate for a specific insurable crop. Level of Coverage The coverage level is specified in terms of guaran- teed yield per acre, that is, pounds, hundreds of pounds (cwt.) or bushels per acre. The farmer elects a price option per bushel, pound, and so on, to establish the maximum dollar coverage. Since this is an all-risk type of insurance, should his yield fall ‘below the guaranteed level (for any reason other than lack of water for irrigated crops) the farmer would expect an indemnity (loss payment) based on the price option selected. In case of total loss, he would be paid the maximum dollar coverage: the price option selected times the yield guarantee. The indemnity received from a partial loss would be the difference between actual and guaranteed yield multiplied by the price option selected. Premiums Although the premium rate per $100 of insurance would be the same for all farmers in a given risk area, the actual premuim paid per acre might differ among farmers depending on the price option selected. In additon, FCI has a premium discount feature in those cases where (1) insured acreage exceeds a specified level and (2) discounts accrue to individual farmers who have been in the program for a specified period of time with nonloss records. Insurance Contracts Offered by FCIC Cotton The FCI contract for cotton establishes a guaran- teed yield level for three different stages of growth. The stages are stage l, after it is too late to plant cotton until the first blooms are shed; stage II, after first bloom shed to harvest; and stage III, harvest stage. The maximum yield guarantee in pounds per acre is established for stage III. The farmer elects a price option per pound, which multiplied times yield guarantee in stage III will give the maximum dollar coverage per acre. Should a total loss occur in stage I or II, the indemnity received would be 50 percent and 80 percent, respectively, of the maximum dollar coverage indicated for stage III. For example, on a particular farm assume: Maximum yield guarantee (stage III), 330 pounds » 330 Price per pound elected by farmer X .30 Maximum dollar coverage per acre $99.00 Total loss in stage I — $99.00 >< 50 percent = $49.50 acre Total loss in stage II - $99.00 >< 80 percent = $79.20 acre In case of partial loss: assume the farmer har- vested 180 pounds per acre. The guaranteed yield (330 pounds less the actual yield 180 pounds times the 4 price per pound selected (30 cents) equals th nity paid per acre. 330 pounds -— 180 pounds = 150 c, 150 pounds >< .30 I $45.00 (inde Per Theoretically, the loss payments wo i for the various stages of growth, since inve growing crops tend to increase with crop a In 1966, the premium’ rate on cotton ' in the High Plains varied (depending on '; from $6.60 to $9.00 per $100 of insurance. Grain Sorghum _. Yield guarantees of grain sorghum are in the county actuarial table and tend to v ., counties, and within counties, depending risk area. Again, these yield levels will ing upon the cropping history of the county,3j vidual farm and the particular risk area in farm is located. The price options available I, tion by the farmer are $1.50, $1.75 and hundredweight. \ In 1964, the premium paid (depeni; county and risk area) varied from $1.40 Hg; the lowest price option to a maximum of $3. i; for the highest price selection. Wheat _ _ Federal Crop Insurance made so_ changes in the irrigated wheat insurance p ‘I the High Plains beginning with the 1967 The program was extended into four n in 1967, and five additional counties were“, for 1968. Although the price option ele -i'_ reduced to $1.25, $1.75 and $2.00, the yield7 levels in effect prior to 1967 were more ‘u, in many instances (Appendices E and However, at the time this study was i! 1964, Federal Crop Insurance Corporation p I an irrigated wheat insurance program in Q, counties of the High Plains, with yield Q ranging from 8.0 to 8.5 bushels per acre. pi indicating a partial loss, where the acreage_ harvested to ascertain the actual yield, , guarantee was increased by 1.5 bushels. "-_. options per bushel available for selection byi; were $1.50, $2.00 and $2.50. Depending) risk area, premiums paid ranged from $1._ in the lower price election to a maxim per acre in the highest price selection. FCI Cost-benefit Summary {f1 The importance of the all-risk cropr program to the High Plains of Texas is w direct cost-benefit for cotton and wheat during the 1939-61 period. During this million were paid in total premiums by i‘ famers compared to $30.9 million paid y;- these same farmers. Yet, in 1964, FCI i 3 '10 percent of the total insurable acreage in ‘.1 Plains counties where the program was ‘u ‘I E - divergence of opinion exists among farm- ‘: g the FCI program. Some farmers are in their support of the program and have each year that the program has been in A er farmers, often neighbors, and farming i' ar circumstances, have never participated. -i type of information led to a study in the i.» which investigated fanner attitudes re- ; p insurance and other strategies used to ° u income variability due to weather and / or ~ s. Definitions , terms, phrases and abbreviations appear ‘It this publication: ral Crop Insurance ‘eral Crop Insurance Corporation “t (P): Individual farmer currently partici- i; in the Federal Crop Insurance Program ‘icipant (PP): Individual farmer who partici- j in the Federal Crop Insurance program at '}time in the past but is not participating at ‘(:0 ipant (NP): Individual farmer who has p participated in the Federal Crop Insurance i. METHOD OF STUDY Study Area {study area selected included 14 adjoining 15w the High Plains (Appendix B). Farmers a contend with a semi-arid climate charac- p“ high year-to-year variability. This has led ased interest in irrigated acreage where _ d water is available. Irrigated acreage has _'pled since 1948. However, declining water parts of the area are a cause of growing con- tg farmers, business and financial interests. i ts of adjusting to declining water supplies -. ed in increased per acre investments in A, facilities and increased operating costs per é COMPOSITION OF SAMPLE BY SOIL-WATER The dominant soil series vary generally from Pullman series (hardland) in the northern counties; to fine sandy loam (mixed land) in the midcounties; to the sands (sandy land) in the southern counties. The water resource tends to follow this same delinea- tion, with the better ground water in the hardlands to the north and growing progressively weaker in the southern-most counties. However, various soil-water resource combinations can be found throughout the study area. The principal crops grown in the area are cotton, grain sorghum and wheat. Cotton is by far the lead- ing cash crop in all counties with wheat production restricted primarily to those counties in the northern half of the study area. Sample Selection For the purpose of this study it was assumed that soil type and availability of underground water would be contributing factors influencing variability of farm income; thus, soil-water resource could influence farmer attitudes about crop insurance and other pro- tective strategies. Second, the soil-water resource provided a means of grouping individual farms into comparable resource areas based on yield potentials and production requirements. A complete list of all 1963 federal crop insurance participants in the study area was obtained from the office of the state director of Federal Crop Insurance. Each participant farm was classified according to soil type and availability of underground water} The results indicated that approximately 75 percent of both federal crop insurance contracts and insured acreages could be accounted for in three major soil- water resource combinations: (l) hardlands, good water; (2) mixed lands, good water; and. mixed lands, poor water. Thus, a decision was made to restrict the sampling of participants to these three soil-water resource groups. Further, to be included in the sample, a ‘Delineation by soil and water resource was based on the latest generalized soil map of each county as compiled by SCS and Texas Agricultural Experiment Station, and the hydrologic sub- areas as reported by W. F. Hughes and A. C. Magee, Some Economic Effects of Adjusting to a Changing Water Supply, Texas High Plains, Bulletin 966, TAES, College Station, October 1960. RESOURCE AND TENURE GROUPS Soil-water resource‘ Tenure group Mixed lands, Mixed lands, Hardlands, Owner/ poor water good water good water Owner Tenant tenant Total _§‘~ 24 ‘ 15 ll l5 25 l0 50 ti? ‘pants 24 15 ll 9 23 18 50 pants 24 l5 ll 14 24 12 50 72 45 33 38 72 40 150 gt population (f .05 level). ’_ toil-water resource, composition of sample was not significantly different from that which would have been expected from TABLE 2. AVERAGE AGE, FAMILY SIZE AND EDUCATION OF SPECIFIED GROUPS OF FARMERS IN PLAINS, 1965 Participants Prio-participants Nonparticipants Tenure groups Owner- Owner- Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Owner- Owner- { Average age Average size family 3.1 Education, average number years 10.9 53.9 41.7 45.4 46.1 56.3 38.0 44.3 3.8 3.7 3.6 3.0 4.0 3.7 10.9 12.6 11.2 11.2 11.3 11.2 43.6 3.7 11.2 44.8 54.4 40.6 45.2 45.6 54.71 40.2 3.1 4.0 3.6 3.6 3.1 3.9 3.7 10.6 11.3 11.1 11.1 10.9 11.1 11.5 participant had to be an operator in 1964, derive the major part of his income from his farming operation, and have been in the Federal Crop Insurance Program at least 2 years. In accordance with these restrictions, 50 participants from the study area were selected at random. Using a cluster sampling technique and holding soil-water resource constant with participants, a corresponding prior-participant and nonparticipant were selected at random from the same community from which each of the participants had been selected. They were selected from a complete listing of all farms in each county (grouped by communities) provided by the local ASC office and a complete file of all prior- participants from the state FCIC office. The same restrictions applied (with the exception of the third one) in selecting both prior-participants and non- participants. The final sample of 150 farmers interviewed, with respect to soil-water resource and tenure group, is shown in Table 1. Composition of Sample Age, Family Size and Education The average age of all farmers interviewed was 45 years. Generally, for each 10 farmers interviewed five were between 30 and 50 years of age, four were over 50 years and one was 30 years or less. The aver- age age of owners was approximately 15 years more than tenants and l0 years more than the owner-tenant TABLE 3. FARM EXPERIENCE AND NONFARM SPECIAL TRAINING RECEIVED BY SAMPLE FARMERS IN THE HIGH PLAINS, 1965 Percent farmers Number Average of years P PP NP all farmers Farm experience Less than 5 4 2 4 3 5 - l0 14 14 6 ll ll - 15 22 32 29 28 Over 15 60 52 61 58 Total 100 100 100 100 Special training Yes 42 30 30 34 other than farming No 58 70 70 66 group. There were no significant differen among the participant, prior-participant it participant groups. This held true for edu) family size as well. The average family f" three to four individuals, and, based 0n. secondary school system, the average years for all farmers interviewed were slightly i, ll, Table 2. Slightly less than 20 percent of t; failed to progress beyond the eighth grad, a slightly larger number attended one or ~19 ters of college. Owner-operators had the centage of farmers failing to proceed beyond- grade; however, they also had the highest attending college. Part-owners had the n percentage attending college, while tenan lowest. V Farm Experience and Special Training A The average years of farm experien proximately the same for participants, w} pants and nonparticipants. Eighty-six 0‘ f farmers interviewed had been farming years, and approximately 6 of every l0 had‘_ ing more than 15 years. Only one out been farming 10 years or less. One-third of‘, possessed a skill, or had received some t - training, other than farming, Table 3. Total Insurance Program . An examination of the total insu .».__1 of these three groups of farmers, Table l TABLE 4. AVERAGE AMOUNT OF LIFE iNs HIGH PLAINS FARMER IN THE THREE r ; GROUPS AND PERCENT or FARMERS CARR TYPES OF INSURANCE IN 1964 PP NP 1; Type insurance P Life insurance ($1,000) 27.8 25.5 24 .5 Percentage if of each group Crop 100 32 20 with specified Fire 90 82 84 types of Hospital 70 64 60 insurance Accident 66 66 70 ‘ - '- FARMERS INSURING SPECIFIED CROPS DUR- S-YEAR PERIOD 1959-64 WITH FCI AND LCOMPANIES, INCLUDING AVERAGE NUMBER msuruzn t Prior- Non- Participants participants participants FCI Private FCI Private Private 100 32 70 42 24 2.96 2.75 1.46 2.62 3.08 l2 2 4 0 0 2.0 1.0 1.0 0.0 0.0 0.0 3.60 0.0 4 l4 0.0 3.60 0.0 3.50 3.28 1 wing 1964 22 28 34 F heat I that insure 45 14 41 ‘it a ‘xof participants carried both FCI and private insurance f in I964. ‘l; the exception of crop insurance, there were Tferences in the percentage of farmers with 'fied types of insurance during 1964. Several 'cipants and nonparticipants were carrying y- nce on one or more crops from sources other T Although the nonparticipant group had p, u it desirable to participate in the FCI i one out of every four farmers in this group ed insurance on cotton for an average of 3 ii» last 5 years, Table 5. One out of every ,: participants grew wheat, and almost half AND SUMMARIZED BY SPECIFIC GROUPS Participants Owner- Owner- Prior-participants the wheat growers (41 percent) had insured for an average of 3.28 years of the last five. ' Background Summary With the exception of crop insurance data, an analysis of specific variables such as age, family size, education, farm experience and insurance “conscious- ness” revealed no significant differences among the three groups of sample farmers. Minor differences within groups tended to remain relatively constant for all groups. Thus, based on these institutional char- acteristics, it appears that a high degree of homogeneity existed among sample farmers in this study. Collection of Primary Data Data were collected in a field survey conducted during the first quarter of 1965. Questions were designed to reflect farmer attitudes regarding Federal Crop Insurance and provide information concerning their current knowledge of the program. ATTITUDINAL REACTIONS The opinions or value judgments expressed by individual farmers in response to direct questions could have been influenced by any number of vari- ables. However, an effort was made to put each farmer at ease and obtain his cooperation before ask- ing questions. The analyses are concerned primarily with whether a consensus exists among farmers within a group regarding variables which might influence farmers’ decisions on participation in the FCI Program and with any significant differences in the opinions expressed by participants and those not participating. Knowledge of FCI Program Source of Information Each farmer interviewed was asked the source from which he had learned of the Federal Crop Insur- ance program. The answers are shown in Table 6. SOURCE OF INFORMATION REGARDING FEDERAL CROP INSURANCE AS REPORTED BY HIGH PLAINS Percent farmers Nonparticipants Tenure groups Grand total Owner- Owner- Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant All farmers i 5s 44 4o 4s 5s s9 s1 if: l Q 2o 1s i‘ 1s 44 1a 22 h 1 2o 12 9 s 7 12 1o 1o 9 11 1s s so 14 62 l4 17 25 18 39 43 45 43 43 37 33 38 34 22 25 26 36 29 25 30 l6 20 l0 16 3 7 7 6 7 17 17 14 8 8 13 9 jlnquiry, father, ASC office and meetings. \ f‘: The source of information is especially important for several reasons: l. This data can be used to evaluate the effec- tiveness of FCI dissemination media. 2. The validity of information reaching farmers often depends upon the source. 3. This data should point out the importance of FCIC’s employing competent, well-trained per- sonnel who are capable of conversing with the farmers. Salesmen, publications and other farmers were the principal sources mentioned by 85 percent of the farmers interviewed. Slightly more than two-thirds of the farmers mentioned salesmen, with 43 percent indicating salesmen as their only source of informa- tion. In the prior-participant group, 64 percent of the farmers mentioned salesmen as their principal source of information; only 18 percent of the non- participants specifically indicated this media. The prior-participants frequently claimed that the FCIC representative misrepresented or failed to explain the program fully. The relatively smaller percentage of nonparticipants indicates that they had not been called on or that they had not taken time to allow the program to be explained. Further, it should be noted that 30 percent of the nonparticipating specif- ically mentioned “other farmers.” The validity of this type of information would depend upon the in- fonnanfs knowledge of the program and his prejudices concerning insurance, FCI in particular and /or gov- ernment programs in general. Coverage Options Available To facilitate a discussion of Federal Crop Insur- ance, each farmer was provided with the necessary information from his county FCI Actuarial Table? such as risk area, guaranteed production, premium rates and alternative elections. Each farmer was then asked to select the level of coverage he had, or would have taken, with FCI on cotton, grain sorghum and wheat. ‘Appendices C through E show cotton, grain sorghum and wheat coverages, premium rates and price options available to farmers in the study area at the time this survey was made (1964) . The entire actuarial structure was revised with the 1967 program. See Appendices F through H for sample County Actuarial Tables of current program. TABLE 7A. LEVEL OF FCI COVERAGE ON IRRIGATED COTTON SELECTED BY FARMERS INTERVIEWED IN THE HIGH PLAINS, 1965 Percent farmers Average Level of coverage l" @3911 gmuP percent of per acre P PP NP all farmers Less than $70.00 2 6 4 4 $70.00 but less than $90.00 l0 12 6 9 $90.00 and over 88 82 90 87 Total 100 100 100 100 TABLE 7B. REASONS GIVEN FOR LEVEL or v‘ SELECTED ON COTTON, INCLUDING PER FARMERS MENTIONING EACH -~ Reason P PP NP Cover expenses 37 37 30 Need maximum to ‘= cover expenses and in case of loss, hope to collect some 33 29 28 If I insure, I want maximum 6 8 23 Most coverage per premium dollar 12 l2 9 Cover part of expenses 4 8 4 All other reasons 8 6 6 Total 100 100 100 Cotton options. The cotton election selected by the cotton growers (all farmers) T' marized in Table 7A. Nearly 9 out of farmers elected the maximum dollar cov missible, although this coverage entailed l“, highest premium. Reasons given by farm" ing selected a particular level of coverage marized in Table 7B. On a percentage basis, reasons were app l. the same for all three participant groups. of four nonparticipants indicated that f regarding crop insurance involved making ' choices: not insuring or taking the maxim Sixty-four percent of all farmers interviewed? that they were interested in trying to coverj Grain sorghum options. Each fa n? irrigated grain sorghum was given the yield-i for his county and / or the particular risk a "- he operated. He was asked to choose <- different election options available at the premium rates that level of coverage he had; have taken if he had insured, Table 8A. There were no significant differen groups; however, within each group an g between eight and nine farmers out of every the maximum dollar guarantee per hund - TABLE 8A. LEVEL OF FCI COVERAGE ON GRAIN SORGHUM SELECTED BY IRRIGATION.‘ INTERVIEWED IN THE HIGH PLAINS, 1965 ' Percent farmers in each group Option selected P PP NP $1.50 per 100 pounds 3 8 2 $1.75 per 100 pounds l0’ l3 8 $2.00 per 100 pounds 87 79 90 Total 100 100 100 i‘ 8B. REASONS GIVEN FOR OPTION LEVEL SE- on ON IRRIGATED GRAIN SORGHUM, INCLUDING '- T FARMERS MENTIONING EACH Average percent of * g Reasons P PP NP all farmers expenses 36 33 28 32 g imum to v expenses, and of loss, hope ‘I ~ some 23 26 26 25 F“ maximum 5 '8 26 13 erase P" f_ um dollar 15 l5 8 13 rt of expenses 5 5 5 5 -». than full g '_" don't _ to collect; ‘W premium down 5 5 0 3 y A reasons ll 8 7 9 100 100 100 100 _ 8B summarizes the reason for options selected. erage of 57 percent, or almost 6 out of every l0 i, - interviewed, indicated an interest in covering ses. Again, one out of four nonparticipants '5 w the "none 0r all" philosophy regarding crop '-IIC€. g heat options. The number of irrigation wheat f; made up a small percentage of the sample, y Included in this group were 22 percent of the ‘pants, 28 percent of the prior-participants and j cent of the nonparticipants. Although none of farmers carried FCI on wheat, an average of i of l0 indicated that they would have selected 'ghest coverage had they insured. Option selec- I and reasons given are shown in Table 9A and ummary 0f option selections. Although there no significant differences in the percentage of 'pants and the other two groups selecting maxi- f coverage on all three crops, the percentage of irticipants tended to run the highest and prior- ‘pants the lowest, with the participants between ,1 o groups. 9A. LEVEL or FCI COVERAGE ON IRRIGATED or SELECTED BY IRRIGATION FARMERS IN THE l PLAINS. 1965 Average Percent farmers percent all l‘. in ‘Each 8T0“? irrigation ‘ting for only 28 percent of all farmers inter- _ tion selected P PP NP wheat farmers apex‘ bushel o 25 1o 1s v;.per bushel l7 0 0 4 Fper bushel 83 75 90 83 i‘ a 10o 10o 10o 10o TABLE 9B. REASONS GIVEN FOR OPTION LEVEL SE- LECTED ON IRRIGATED WHEAT, INCLUDING PERCENT OF FARMERS MENTIONING EACH Average percent all irrigation Reason P PP NP wheat farmers Cover expense 60 25 50 43 Cover part of expense 20 25 l0 17 If I insure, I want maximum 0 12.5 20 13 Most coverage per premium dollar 20 12.5 _ l0 13 All other reasons 0 25 l0 14 Total 100 100 100 100 Knowledge and Desirability of Special Features The summation of opinions, as expressed by individual farmers in response to direct questions pertaining to FCI actuarial and contract data, provides an indication of group attitudes regarding various aspects of the program. Individual responses to specific questions are summarized in the following paragraphs by participant and tenure groups. Will insurance cover expenses? Each farmer was asked if the maximum insurance coverage offered on cotton, grain sorghum and wheat would cover all his production expenses. Most farmers did not grow irrigated wheat and answered the question only as it pertained to irrigated cotton and grain sorghum. The answers are shown in Table l0. Three out of every four farmers (76 percent) agreed that the maximum permissible dollar amounts of insurance per acre would be sufficient to cover average production expenses for all three crops. How- ever, several cotton growers pointed out that maximum amounts of insurance permissible on cotton were based on the third stage, which is the harvested stage. Should their crop be lost in the latter stages of maturity before the harvest stage, the crop would be considered in the second stage; as such, FCI would be liable for only 80 percent of the maximum insurance selected. These farmers agreed that in the case of a total loss in stage II, a reduction in FCI coverage can be justified on the basis of a savings to the farmer in harvesting expenses. However, a 20 percent reduction is considered excessive. As an example, for each 100 pounds of lint cotton guaranteed, a 20 percent reduc- tion in yield guarantee would be 20 pounds of lint cotton. The value of this quantity of cotton would represent the loss in indemnity that farmers must assume because harvesting expenses had not been incurred. Depending on whether the farmer selected the 20, 25 or 30 cents per pound price option, the value of the 20 pounds reduction in coverage would be $4.00, $5.00 or $6.00, respectively. Regardless of the price option per pound selected, the harvest cost would have remained constant. Approximately 440 pounds of seed cotton are required to produce 100 9 TABLE I0. RESPONSE OF HIGH PLAINS FARMERS AS TO WHETHER MAXIMUM INSURANCE COVERAGE O BY FCI ON IRRIGATED COTTON, GRAIN SORGHUM AND WHEAT WOULD COVER PRODUCTION EXPENSES‘ Percent farmers Participants Prior-participants Nonparticipants Tenure groups G » - Owner- Owner- Owner- Owner- Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant All _ Yes 80 88 60 80 67 78 77 76 79 79 66 76 76 n} 82 70 No a 1s s 20 12 22 l3 17 16 14 17 17 1s l6 12 17 Not wheat 7 l0 4 ll 9 6 7 17 6 8 3 8 vi Undecided 4 1o 4 s 2 4 2 s 5 i Total 100 100 f 100 100 100 100 I00 100 100 100 100 100 100 100 I00 I js pounds of lint, and the custom rate for stripping and almost unanimous in their opinion of what th’ haulin irri ated cotton is a roximately 75 cents r sidered an extremely unrealistic yield aran -i,_-_ g g PP P‘? _ _ . S“ .1 100 pounds of seed cotton. acre offered by FCI on irrigated wheat in 1964. guarantee per acre in the three counties in which 7' insurance was offered by FCI during the 1964 year followsza Most cotton farmers generally assume that the value of the cottonseed will defray the cost of ginning, bagging, ties and other miscellaneous expense. Thus, _ harvesting expenses, to the farmer, represent the cost Castro and Hale Cmlntles, 8-5 bushels of stripping the cotton and hauling it to the gin. In Floyd County, 8.0 bushels this case, his expenses would be approximately $3.30 In a1] Counties, this amount was to be in A per pounds Of lint CQttOn RTQdUCCd. SIIICC all L5 bushels for any acreage from 1.5 of: variable costs in cotton production (except harvest bushels per acre were harvestflL expenses) have been committed, hence are fixed costs, Am FCI premiums reasonable f0, coverage ~ with the last irrigation on or about September l, on Cotton, grain sorghum and wheat? Thei farmers contend _th_at they should be entitled to the premiums for the various levels of Coverage . maximum permissible dollar amount of insurance of these crops were discussed with each farm» selected per acre (less custom rate harvest expense) was then asked whether he considered the p if after thls data too high, too low or about right, Table ll. only: one out of five wheat growersdndlciltfad that ‘Wheat yield guarantee levels were increased in all ' the maximum dollar guarantee was insufficient to beginning with the 1957 “on yean See example , cover production expenses; however, the growers were arial Table, Appendix H. " TABLE ll. RESPONSE OF HIGH PLAINS FARMERS TO INQUIRY REGARDING FCI PREMIUM RATES FO INSURANCE ON SPECIFIED CROPS Percent farmers Participants Prior-participants Nonparticipants Tenure groups G A "i Owner- Owner- Owner- Owner- Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant All» i. Cotton Too high 20 8 l0 l2 ll 22 44 28 22 17 25 20 18 15 30 Too low ll 4 4 7 2 5 1 About right 80 92 90 88 78 65 56 64 64 75 67 70 74 78 67 Don't know 9 4 7 8 8 8 3 6 3 Grain sorghum Too high l3 4 l0 8 56 4 ll 16 14 8 17 12 24 6 12 Too low a About right 12 40 l4 52 28 34 29 50 50 44 1 1 37 38 Don't know 87 84 50 78 44 44 61 50 57 42 33 44 65 57 50 Wheat Too high l3 4 l0 8 4 6 4 7 8 17 l0 8 6 l0 Too low About right 12 40 14 56 4 6 14 8 25 10 13 8 20 Don't know 87 84 50 78 44 92 88 82 93 84 58 80 79 86 70 l0 l2. RESPONSE OF HIGH PLAINS FARMERS CONCERNING DESIRABILITY OF FCI CONTRACT FEATURE " G ALL IRRIGATED ACREAGE IN THE COUNTY OF A SPECIFIC CROP TO BE INSURED Percent farmers Participants Prior-participants Nonparticipants Tenure groups Grand total a Owner- Owner- Owner- Owner- _ f Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant All farmers 40 20 20 26 11 26 33 26 36 4 8 14 32 17 23 22 35 20 32 10 24 33 9 l0 14 4 6 21 15 2 13} 13 8 8 4 11 6 14 17 17 _ 16 11 10 10 10 12 10 ,8 11 9 17 12 7 17 25 16 5 12 17 12 55 27 28 60 34 45 52 39 46 29 58 50 48 31 46 48 43 i i’ u rates were considered “about right” by three of the farmers (31 percent) considered the grain sor- fevery four farmers interviewed. Only one out ghum premium “about right," while slightly more i, farmers thought the premium rate excessive. than half (57 percent) hesitated to comment. Again, criticism was not directed at the premium per this latter group was not concerned about the premium '_ insurance; it centered on the yield guarantee being too high but felt that the coverage or yield I They concluded that the probability of the guarantee was too low for irrigated grain sorghum. g. irrigated cotton falling below the guarantee Several farmers stated that they would not object to rt of a disaster, extremely remote. Thus, in paying a higher premium if the coverage could be 9' ds the premium was considered high for such raised. The remaining 12 percent indicated that the 1,11 'kely occurrence. Three-fourths of the full premium was too high for the coverage offered. i and tenants considered the cotton premium ~ tisfactory; whereas, one-third (30 percent) of ‘er-tenants thought the premium rate too high. ter farmers are the large scale operators. It i‘ the marginal cost of insurance per acre to hey objected; rather, it was the total cost of J e, since they had to insure all of their cotton county in order to participate in the program. p’ 'ty reasons, many of these farmers expressed i} - t in insuring a part of their crop and gam- Since irrigated wheat was grown by only 28 per- cent of the farmers, this accounts for 80 percent having declined to comment on the premium rates. Although only 7 percent of the farmers indicated the premium rates were too high, the FCI wheat insurance program was not acceptable to farmers in the High Plains. FCI did not have a single irrigated wheat contract among the farmers interviewed. This would indicate that it was the coverage and not the premium that was “ 1 the remainder. However, rather than incur unsausfactory‘ CXPeIISB 0f insuring all arlreage, lheY Preferred A farmer must insure all irrigated acreage in the .411" 9f the Pmgram- county of a specific crop in order to participate with l 'gated grain sorghum could be insured with FCI. Is this a desirable feature of the FCI program? iall counties surveyed; however, only 6 percent Answers to this question were arrayed, based on the farmers interviewed had carried such insurance manner and emphasis that was given in the response. , time during the previous 5 years. One-third The results are shown in Table 12. 13. RESPONSE OF HIGH PLAINS FARMERS CONCERNING KNOWLEDGE OF OWNED AND RENTED ACREAGE ADJUSTED SEPARATELY BY FCI AND THE DESIRABILITY OF THIS FEATURE Participants Prior-participants Nonparticipants Tenure groups Grand total Owner- Owner- Owner- Owner- Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant All farmers 93 82 90 87 89 91 71 84 31 46 50 43 69 72 69 71 7 18 10 13 ll 9 29 16 69 54 50 57 31 28 31 29 -4 100 79 P00 90 67 83 78 78 69 71 84 74 81 77 85 81 89 17 8 11 13 ll 12 8 8 4 5 l0 7 8 4 2 11 4 11 8 23 12 12 11 7 5 7 _ 4 11 2 17 8 10 3 6 3 4 11 TABLE l4. RESPONSE OF HIGH PLAINS FARMERS CONCERNING DESIRABILITY OF FCI CONTRACT FEAT ' a TAINING TO SEPARATE LOSS ADJUSTMENT OF OWNED FARMS 5 MILES APART MEETING MINIMUM 01. RESTRICTIONS Percent farmers Participants Owner- Owner- Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant All M Extremely desirable 80 67 90 75 67 65 89 Desirable l3 33 l0 23 22 22 ll Undecided 9 Undesirable Extremely un- desirable 7 2 ll 4 Prior-participants Nonparticipants Tenure groups G . t. Owner- Owner- w 69 75 75 74 7 3 69 85 15 l7 l7 16 l6 24 12 8 2 3 3 Slightly more than one-third (35 percent) of the farmers considered it a desirable feature. Included in this number were a few farmers who indicated that they personally would prefer not to insure all acreage but realized it was necessary to prevent other farmers from taking advantage of the program by shifting pro- duction between farms. More than half (55 percent) the farmers considered the feature undesirable, with the majority of this group considering it “extremely undesirable.” The principal objectors among the tenure groups were the larger scale owner-tenant operators. Two out of three owner-tenants (65 per- cent) considered this an undesirable feature in the FCI contract. In case of loss, did you know that owned acreage and rented acreage are adjusted separately? D0 you consider this a desirable feature in the FCI contract? Answers to these questions are shown in Table l3. Again, an effort was made to form an array of answers to the second question. Slightly more than 8 out of l0 participants and prior-participants were aware of this feature; more than half (57 percent) of the nonparticipants were not familiar with it. This was considered not only a desirable but also a necessary feature by a large major- ity (89 percent) of the farmers, since a landlord would be involved in the division of product on rented acreage. Two or more farms within a county, owned and operated by the same individual, can have losses ad- justed separately provided the farms are at least 5 miles apart and meet minimum acreage requirements. Is this a desirable feature of FCI? TABLE 15. KNOWLEDGE OF PREMIUM DISCOUNT FEATURE IN FCI CONTRACT BY HIGH PLAINS FARM, Ninety-three percent of the farmers co :~ this a desirable feature, with three out of f =f sidering it “extremely desirable,” Table l4. p of the farmers contend that hail is their princip hazard and seldom will a strip of hail, moving,‘ the Plains, exceed 5 miles in width. Thus, it is ._ tageous not to adjust losses on separate fields t; On the other hand, 5 percent of the farmers co ~ this feature “extremely undesirable.” They p’ the opinion that a 5-mile distance was insi in this section of the country, since most V‘ traveled further than 5 miles to the gin or ‘f; They insist that a lack of ethics on the part of ‘ ' farmers would result in the transfer of yie between farms; consequently, fraud would be e result, with FCI the victim. Are you aware that discounts accrue it] premiums for good (nonloss) experience? This S” edge was shared by two out of three (62 pe -, the participants and eight out of l0 (84 pe y the prior-participants; only one out of f0 participants was aware of the premium g features in the FCI contract, Table 15. This feature was more widely known amo participants than among participants. Based v view comments, this could be accounted for ~ fact that this feature was explained in an ‘it keep them in the program. ~ Are you aware that the F CI contract has 1-7, matic renewal feature? Do you consider the au renewal a desirable feature? Once a contract I made, it automatically remains in force f to year unless FCI or the insured inform u; Participants Owner- Owner- Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Percent farmers Prior-participants Nonparticipants Tenure groups Owner- Owner- Yes 73 48 80 62 89 87 78 No 27 52 20 38 ll l3 22 l4 33 l7 24 55 56 60 86 67 83 76 45 44 40 12 REPORTED BY HIGH PLAINS FARMERS s; KNOWLEDGE AND DESIRABILITY OF THE FCI AUTOMATIC RENEWAL FEATURE OF INSURANCE CON- Percent farmers Participants Prior-participants Nonparticipants Tenure groups Grand total Owner- Owner- Owner- Owner- {Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant All farmers 93 100 100 98 100 96 100 7 2 4 73 68 50 66 ll 23 18 27 32 50 34 89 77 82 Knowledge of automatic renewal Is it desirable? 36 79 50 60 74 92 85 85 64 21 50 40 26 8 15 l5 17 37 36 32 39 44 32 39 83 63 64 68 61 56 68 61 9 writing, of intentions to cancel the contract ’ cellation date (December 31) of the contract nless such communication occurs, the contract force for the following year and is binding ‘parties. Farmers were questioned concerning owledge of this feature and whether it was l, Table 16. 'cipants and prior-participants were well l the automatic renewal feature; whereas, only f; of five nonparticipants knew such a feature 'de divergence of opinion prevailed concem- idesirability of this particular contract feature. s of the participants were in favor of such while two-thirds (68 percent) of the non- ? ts were opposed. Four out of five (81 per- ; the prior-participants were opposed to auto- "newal. Several prior-participants indicated _i were forced to remain in the FCI program I. nger than they had intended because this “- d not been called to their attention. Over- f ~ out of five farmers interviewed considered matic renewal feature as undesirable, and ~ no significant differences expressed among ; oups. Is the December 31 cancellation date satisfactory? D0 you have any suggestions to make regarding a date? Two-thirds (69 percent) of the farmers concluded that this date was satisfactory provided this information was called to the attention of the participant when he came under the program. The remaining one-third of the farmers offered suggestions for establishing a different cancellation date, Table 17. Of the three tenure groups opposing the current December 31 cancellation date, tenants and owner- tenants voiced the principal opposition, with owner- tenants in the majority. Since rental contracts nor- mally expire on the last day of December, they sug- gested the date should be moved forward into the new year so landlord and tenant might have an oppor- tunity to discuss the crop insurance program together. Although they can insure separately, some tenants allow landlords to make the decision and vice versa. A landlord that was in the program the previous year may wish to consult with a new tenant before com- mitting himself for the coming year. With this in mind, 13 percent of the farmers suggested moving the cancellation date to January 15 or February l. An- other 12 percent suggested March 1 or April 1 as a satisfactory date before planting time. These farmers :17. RESPONSE OF HIGH PLAINS FARMERS REGARDING CANCELLATION DATE AND SUGGESTIONS OFFERED Percent farmers Participants Prior-participants Nonparticipants Tenure groups Grand total Owner- Owner- Owner- Owner- Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant All farmers 73 60 40 60 67 83 72 27 40 60 40 33 17 28 1s 24 so 22 4 11 1s 12 2o 14 ss 1s 11 4 2 4 Is December 31 cancellation date satisfactory? 100 62 58 71 81 68 60 69 38 42 29 19 32 40 31 Comments and suggestions on cancellation date 8 25 l0 5 12 20 l3 8 8 6 13 ll 12 12 3 1 12 8 8 4 2 3 13 point out that any date later in the year before plant- ing, would be satisfactory. They contend that since crop insurance is offered only on irrigated acreage, seasonal outlook would not necessarily be a contribut- ing factor in the decision to insure. Protective Strategies Against Unforeseen Crop Losses Participation Versus Nonparticipation As shown in Table l8, the average number of years in the FCI program for each participant inter- viewed was 3.7 years, with a loss payment (indemnity) having been received for each 6.6 years of participa- tion. This corresponded with 2.35 years in the pro- gram for each prior-participant, with an indemnity every 6.35 years. However, 58 percent and 72 percent of the participants and prior-participants, respectively, had never received an indemnity payment. Only 18 percent of the participants were critical of loss adjust- ments made by FCI; however, 44 percent of the prior- participant group contended they were “too low.” There was little criticism concerning grain sorghum loss adjustments, since the contract is quite explicit in terms of yield guarantee and price selection per hundred pounds. Most dissatisfaction, as far as adjustments were concerned, centered around the three-stage cotton pro- gram. The cotton contract establishes the yield guarantee beyond question, but the “maximum per- missible dollar amount of insurance per acre,” as it TABLE l8. NUMBER OF YEARS PARTICIPATION, INDEM- NITIES RECEIVED AND RESPONSE OF PARTICIPANTS AND PRIOR-PARTICIPANTS CONCERNING PREMIUMS AND LOSS ADJUSTMENTS Years in FCI program P PP Average years 3.7 2.35 Percent farmers l 2 38 2 52 28 3 - 5 36 26 Over 5 l0 4 Unknown 4 Indemnities Average years participation per indemnity 6.6 6.35 Indemnities received Percent farmers 0 58 72 1 30 20 2 10 4 3 or more 2 2 Unknown 2 Have premiums exceeded indemnities? Yes 78 84 No 20 14 Undecided 2 2 Opinion of loss adjustments About right 40 22 Too low 18 44 Unknown 42 34 14 Protect Investment Insure Stay In Farming Percent Part ic ipantl I) 2S 50 . t... Cheapest 81;; Insure Standard Living 6% Credit Purposes k1, A11 Other 1/ a; 1/ -' Believe in principal insurance; have more confidence in expanding operation and trying‘ to play it safe. Figure 1. Reasons offered by participants for percentage of farmers mentioning each reason. w» i pertains to the three different stages, oughly understood by some farmers at adjustments were made. partial loss occur during any stage, some 1 This false conce I ment would be made. to an idea, among a few farmers, that the F~ had been misrepresented. This misundersl primarily responsible for the comments Apparently a farmers were under the impression loss adjustments being “too low.” Reasons for using Federal Crop Reasons given by participants and prior- for having used Federal Crop Insurance Figures 1 and 2. Some farmers gave mo reason for participating; thus, all reasoni; with the percentage of farmers mentioning?! two most frequent reasons offered were A. investment” and “insure staying in f four percent of the participants and 92 prior-participants specifically mentioned, their investment. Apparently, these two a prominent place in the minds of sev since they were making an effort to operation in the face of uncertainty. In it safe, they needed to protect their inv utilize the principle of insurance. In sel ance, they had more confidence in FCI to be cheaper than other insurance p prior-participants implied that FCI hadf Percent Farmers Mentioning Bach Protect Investment D Insure Stay In Farming _ Cheapest Or Thought So Insure Standard ‘Living .A1l Other 10% §~¢ § 6r 25 22¢ 50 Figure 2. Reasons given by prior-participants forfi FCI and percentage of farmers mentioning each Percent Farmers Mentioning Each i 2s ° s- 22¢ A Chance k \ 1'41 . as . as \\\\‘ a Q W Q a 18% i! ~ r means of security; change of loss slim; in and out (try to thar from year to year); first stage loss not paid unless you A back; salesman attempted to pressure other acreage into by landlord; not interested in insurance; government ‘s a ram; had to insure all acreage in county and dislike renewal ,= Reasons given by prior-participants for having ceased te in FCI and percentage of farmers mentioning each for them and was no longer needed. Other are in and out of FCI, as they attempt to the “bad" years or when they “have several in a row.” ons for dropping or not using Federal Crop . Reasons given by prior-participants for ‘f; the FCI program are quite varied, with most Qmentioning a combination of reasons. The “W s most commonly heard were “dissatisfied ustments” and “coverage too low.” However, 3 shows, numerous other reasons were justification for having ceased to partici- :3- t half of the nonparticipants (48 percent) i)» that they “preferred to take a chance." In nces this comment was made along with t to the effect that FCI coverage was “too _' if crop insurance is not needed for survival, __t pay in the long run.” However, one out lgnonparticipants (24 percent) stated that they ilknowledge of the FCI program, Figure 4. Percent NP llentioning Bach D 2S 50 7S 100 Chance ‘ 1:81 M 22* er 30% I three-stage featixre nor automatic renewal; got hooked on insurance ' don't like adjustment procedure; premium too high; don't believe in i ance; don't like_a policy with yield guarantee; believe farmer p, in or out - I choose the latter; salesman didn't come back; l‘ complete loss slim since fields are dispersed; take out insurance ' -. agency; and government payments offer some protection - for insurance. Reasonsgiven by nonparticipants for not participating » percentage of farmers mentioning each reason. Protective Strategies Other Than F CIC Figure 5 shows the various strategies being em- ployed by prior-participants and nonparticipants along with those indicated by participants to be used should FCI cease to be offered. Participants. Thirty percent of this group indi- cated they would probably not have any protection; however, they were undecided at the time as to what strategy would be employed. Most of these farmers doubted the value of hail insurance, since they con- sidered the premiums entirely too high. On the other hand, 44 percent of the participants stated they would be forced to take hail insurance. Cash reserves and field dispersion would be relied on by 16 percent and 8 percent of the farmers, respectively. Several farmers mentioned a combination of the various strategies listed. Prior-participants. Strategies were employed to provide varying degrees of protection depending upon the individual’s assessments of the risk involved and his willingness to assume all, or a portion, of these risks. There were no known protective strategies employed by one-third (32 percent) of the prior- participants. However, one-third (34 percent) of this group used hail insurance, while the remaining one- third listed a combination of strategies which would offer some degree of protection. “Field dispersion” and “cash reserves” were included among other strate~ gies listed, with 22 percent and 18 percent, respectively, of the prior-participants mentioning each. Nonparticipants. Approximately one-fourth of the nonparticipants (24 percent) employed no known Rely On Field .22‘ 15$ 8% 8% 2% ‘*1 6% NP PP P ll 1/ Grain reserves; diversion payments and field dispersion; starting orchard for future income stability (pecan orchard); depends on indebtedness - if indebt, go to hail insurance; and do custom work. Figure 5. Comparison of strategies presently employed by prior- participants and nonparticipants as protection against unforeseen crop losses and strategies that would be employed by participants should FCI cease to be offered. 15 ‘TABLE 19. YIELD VARIABILITY COMPARISONS OF IRRIGATED CROPS IN THE HIGH PLAINS strategy to compensate or reduce the impact of crop farmers, hail insurance is the best substitute for v _ losses; a slightly larger percentage (26 percent) relied reserves. Livestock ranked third with nonpartici on cash reserves. Among the other strategies (or having been mentioned by 18 percent of this combination of strategies) livestock and field dis- as opposed to 8 percent and 2 percent of the p persion were mentioned by 18 percent and 16 percent participants and participants, respectively. For " of the nonparticipants, respectively, while 8 percent nonparticipants, livestock are used as a substitute relied on off-farm investments. crop insurance and provide some degree of stab' . to farm in ome in se of cr losses. Strategzes compared. One-fourth of the non- C Ca a fip participants, as opposed to one-third of the prior- a participants and participants, have no known precau- Yifild Variability and EIIViIOIImCIIIaI Hillard! tionary measure of protection against crop losses. The principal strategies employed by the three groups, _ based on percentage of farmers mentioning each, All farmers were asked t9 wnslder the l“ would be ranked as follows. principal irrigated crops grown in the High Pl a cotton, grain sorghum and wheat, and to rank ti, in order of yield variability from year to year. _ were to consider all of the normal yield hazards decide which crop was the most variable and the l, variable in yield over time. Yield variability parisons are shown in Table 19. *3 Variability of Irrigated Crop Yields Hail insurance Cash reserve Field dispersion Livestock Off-farm investments r-Rr-Awmwr-g v-Pw-kmooi-Irg Of the three crops, wheat was considered the M variable in yield by the majority of all farmers w viewed. There was some difference of opinion -; ing the position of grain sorghum and cotton. ever, considering all farmers interviewed, the re ranking of these three crops with reference to variability was wheat, most variable; cotton, in tween; and grain sorghum, least variable. f‘ A form of crop insurance (hail insurance) still holds a prominent position among all other strategies, being ranked as number 1 by participants and prior- participants. In both groups, hail insurance led the second place strategy by a wide margin. On the other hand, nonparticipants ranked “hail insurance” second to “cash reserves” as a precautionary measure, each having been mentioned by 26 percent and 28 percent _ of the farmers, respectively. As a strategy, cash re- Yleld Hazards serves ranked second for participants and third for Each farmer was asked what he considered V. prior-participants. Thus, with the majority of these the principal yield hazard to irrigated cotton, I Percent farmers Participants Prior-participants Nonparticipants Tenure groups Grand f’ a 1i Owner- Owner- Owner- Owner- l. Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant All fa Cotton variability compared with wheat and grain sorghum Most variable 13 20 20 18 33 48 ll 32 35 25 17 26 26 31 15 In between 27 32 50 34 45 26 39 34 29 42 50 40 32 33 45 Least variable 53 44 30 44 22 26 50 34 29 29 25 28 37 33 38 Undecided 7 4 4 7 4 8 6 5 3 2 - Wheat variability compared with cotton and grain sorghum Most variable 60 60 70 62 56 35 72 52 50 63 76 62 c 56 53 73 In between 27 16 10 18 22 56 22 38 29 29 8 24 26 33 15 Least variable 4 2 22 4 8 2 5 I 2 Undecided 13 20 20 18 9 6 6 21 8 8 12 13 13 10 Grain sorghum variability compared with wheat and cotton Most variable l3 8 8 12 13 17 14 7 8 6 11 l0 7 In between 40 48 50 46 44 22 39 32 36 25 42 32 39 32 43 Least variable 40 » 40 50 42 44 65 44 54 50 63 50 56 45 55 58 Undecided 7 4 4 7 4 8 6 5 3 2 16 20. PRINCIPAL YIELD HAZARDS OF SPECIFIC IRRIGATED CROPS AS LISTED BY HIGH PLAINS FARMERS Participants Prior-participants Nonparticipants Tenure groups Grand total Owner- Owner- Owner- Owner- Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant All farmers Cotton yield hazard number l 73 72 60 70 45 61 67 60 72 67 50 64 66 67 60 65 » 7 12 l0 l0 ll 18 ll 14 7 21 25 18 8 17 15 14 13 8 20 12 22 13 17 16 7 17 6 13 7 18 11 7 4 4 22 4 5 8 7 2 l0 2 2 5 4 l0 4 4 2 7 12 8 l0 3 7 5 5 Wheat yield hazard number 1 60 36 40 44 33 35 50 40 50 54 33 48 50 42 43 44 13 16 12 4 28 12 21 17 25 20 13 13 20 15 7 l0 4 4 6 4 7 8 25 12 5 4 12 7 ' 22 4 6 14 4 11 1 3 ' t 20 48 50 40 45 53 16 38 8 21 17 16 21 40 25 31 Grain sorghum yield hazard number 1 60 36 30 42 33 35 60 44 50 54 41 50 50 42 48 45 13 36 50 32 28 35 17 26 21 25 25 24 18 32 27 27 20 16 20 18 33 22 6 18 21 21 17 20 24 19 12 19 7 4 4 ll 4 ll 8 8 17 6 8 3 l0 6 . s 4 4 s 4 s s s j» and wheat. Answers are summarized in undecided as to which hazard influenced yield vari- 2Q ability the most. In recent years the sorghum midge has caused considerable concern among grain sorghum tton. Hail was listed as the principal yield _ growers 1n the area. to cotton by 65 percent of the farmers inter- In second place was drouth with 14 percent Wheat. Hail once again was listed as the princi- “votes; followed by wind with ll percent. Other pal yield hazard. Forty-four percent of all farmers i» included insects, diseases, excess moisture and listed hail as the major factor influencing the vari- irost. Although the discussion pertained to bility of wheat yield in the High Plains. Wind was i=1 cotton, drouth was listed as a factor influ- mentioned by 15 percent of the farmers and drouth ‘A yield variability. Yield expectations of most by 7 percent. Drouth was considered a relatively ‘ » in this area take into consideration normal minor hazard by most wheat growers, since the water In the weak water areas, early pumping of requirements of wheat fall at a time when there is quired during those years of less than normal little competition from other crops. Many of the results in a reduction in flow volume during farmers did not grow wheat; thus, 31 percent of the f irrigation periods later in the season. Like- farmers did not consider themselves qualified to voice If limited amount of irrigation water available an opinion. ven time must be used extensively among com- Summary of yield hazards_ High Plains fanners uses rather than mtenslvely on a partlcular consider the principal yield hazards to irrigated crops '2 Thus’ l,“ some Freas’. drouth, lsfonsldered a grown in the area to be hail, drouth, wind and insects, ~ factor Influencing yleld varlablhty of m0“ in the order listed. However, a number of farmers f“ crops’ point out that this listing may change considerably ain sorghum. Hail was the principal yield if the boll weevil insists on staying upon the Caprock. I to grain sorghum, followed by drouth and Hail received 45 percent of the votes, with Future Yield EXPeCWiiOIIS ; and insects receiving 27 percent and 19 per- All farmers were asked to comment on future (respectively. Other hazards mentioned were crop yield expectations. Will crop yields increase, d early frost, with 3 percent of the farmers decrease or remain about the same? Table 21 shows 21. RESPONSE OF HIGH PLAINS FARMERS REGARDING FUTURE YIELD EXPECTATIONS Percent farmers Participants Prior-participants Nonparticipants Tenure groups Grand Total .; Owner- Owner- Owner- Owner- Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant All farmers 7 2 9 6 6 7 16 8 12 5 8 5 7 _ 27 56 20 40 44 43 39 42 64 42 50 50 45 47 37 44 ~ I- c 66 44 80 58 56 48 55 52 29 42 42 38 50 45 58 49 17 TABLE 22. GENERAL ATTITUDE OF HIGH PLAINS FARMERS TOWARD THE FCI PROGRAM Percent farmers Participants Prior-participants N onparticipants Tenure groups Owner- Total Owner- Owner Tenant tenant Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Owner- Owner- Favorable 93 96 100 96 67 57 33 Opposed 7 4 4 33 43 61 Undecided 6 s5 75 75 7s s4 ‘ 76 6s 15 17 17 1s 1e 21 s2 s s s s 5 nonparticipants to be slightly more optimistic regard- ing higher yields; however, all farmers considered, they were about evenly divided between “higher yields” (44 percent) and yields remaining “about the same” (49 percent). There were no significant dif- ferences in the views expressed by tenure groups. Farmer Evaluation of F CI Program General Attitude Toward F CI An effort was made to determine the attitude that prevails among farmers concerning Federal Crop Insurance in the High Plains. Three-fourths of all farmers (74 percent) had a favorable attitude toward FCI; 23 percent were opposed and 3 percent un- decided or noncommital, Table 22. Wide differences of opinion existed among the three participant groups. As might be expected, 96 percent of the participants were favorable and only 4 percent were opposed. Those opposed indicated they were partici- pating because they could not find equal protection elsewhere at comparable cost. Prior-participants were about evenly divided in their attitude concerning FCI; 50 percent were favorable, 48 percent opposed and 2 percent undecided. Among the nonparticipants, 78 percent of this group had a favorable attitude toward this program; only 16 percent were definitely opposed and 6 percent undecided. Thus, a brief summary of the three participant groups indicates that almost all of the participants, three-fourths of the nonpartici- pants and one-half of the prior-participants had a favorable attitude toward the FCI program. Among TABLE 23. FCI LEVEL OF COVERAGE DESIRED BY HIGH PLAINS FARMERS the tenure groups, four out of five owners x cent) , three out of four tenants (76 percent) L out of three owner-tenants (63 percent) l ~ , the FCI program with favor. X Desirability of Proposed Features Extent of coverage. The maximum level“, age may vary in two or more areas within _ county. In addition, rate areas are esta i, which the risks of production are the prime f ation. All land in each risk area will have t_ coverage and the same premium rate. i within a particular risk area the cost of ~ i‘ ance to the farmer is based largely on the? coverage or guarantee provided for in the contract. This is especially true in the __. since a major portion of the administrative“ borne by the government. As the level off increases, the premiums will also increase. tion arises as to what level of coverage desires and would he be willing to pay » _ volved. The general relationship that exis level of coverage purchased and premiums .3 explained to each farmer, and he was askedf the level of coverage that he would like 1 offer. He was to select one of three b? (1) cover operating expenses only, (2) ~ ing and family living expenses or (3) cover ' and family living expenses, plus some profit. The levels of coverage selected are j Table 23. u. Percent farmers Participants Prior-participants Nonparticipants Tenure groups Owner- Owner- Owner- Owner- Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant I FCI should cover Operating expense only 47 40 60 46 22 39 39 Operating and family living 40 52 30 44 56 48 50 Operating, family living and profit 13 8 l0 l0 22 l3 ll 54 33 67 47 43 37 53 31 38 33 35 41 46 40 l5 29 18 16 17 7 18 24. OPINIONS OF HIGH PLAINS FARMERS CONCERNING ALTERNATIVE METHODS OF ESTABLISHING - 1 RATES FOR CROP INSURANCE Percent farmers Participants Prior-participants Nonparticipants Tenure groups Grand total _, Owner- Owner- Owner- Owner- - _Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant All farmers , . ll 74 as so s2 s4 s2 as so 4s 42 s7 49 s4 so so s4 1s 1s 1o 14 ss 22 2s 2s 2s ss 2s 29 22 24 2s 2s 1s 2s so 24 ss 2s 17 24 s1 2s s 22 24 2s 17 2s t. a percentage basis, the level of coverage by all farmers was evenly divided between a f‘ which would be sufficient to cover “operat- nses only" and one which would cover “oper- ‘l d family living expenses." Each level received port of 43 percent of the farmers. The par- _t group concurred with the average of all j in that they were about evenly divided in oice between the two coverage levels. Prior- y- ts favored the level necessary to cover “oper- ‘Y. d family living expenses”; the nonpartici- ere primarily interested in covering “operat- fih nses only.” An examination of the data by groups, reveals that owners agree with partici- t“ that they were about evenly divided between -1 levels of coverage; tenants, like prior-partici- favored a level covering “operating and family ‘expenses?’ and owner-tenants chose a level “operating expenses only,” as did non- ants. f, cmium rates. Assuming the actuary was thor- the premium rates must reflect the risks of ,9 'on. As stated, all farmers in a particular risk l'l pay the same premium rate for the same i coverage. There may be, however, two or k areas in the same county. Thus, along this g line separating the risk areas, neighboring Twill fall into different risk areas, and the will pay different premium rates for the same of coverage. Although yield variability can , 'dely within the same county, it is conceivable ] or CROPS SEPARATELY WITH FCI that premium rates could be so established that all farmers in the county pay the same rates; however, maximum levels of coverage could differ depending upon the yield history. At the other extreme, it would be possible to establish premium rates for in- dividual farms. This would entail considerable time and effort, but data should be available in most instances. In so doing, individual farms unfortunate enough to suffer several recent losses would be forced to pay excessively high premiums; the premium rates would be considerably less on farms having received minor losses. Such a differential in premium rates would tend to dispel the theory that the loss proba- bility must be at random in insurance. Each farmer was asked to give his opinion as to how the premium rates should be based for the county as a whole, for risk areas or for the individual farms. Answers are shown in Table 24. Slightly more than one-half of all farmers (54 percent) would like to see premium rates established for the county as a whole. Their contention was that all farmers recognize and tend to accept county boundary lines; many of them find it difficult to accept the imaginary lines separating the risk areas within the same county. The remaining farmers were evenly divided between risk areas (23 percent) and individual farms (23 percent). A slightly higher percentage of participants were in favor of the “county as a whole,” and a lesser percentage preferred the present practice of using “risk areas;” otherwise, there were no significant differences in the opinions of participants or tenure groups. 25. OPINIONS OF HIGH PLAINS FARMERS CONCERNING TENANT AND LANDLORD INSURING INDIVIDUAL Percent farmers Participants Prior-participants Nonparticipants Tenure groups Grand total Owner- Owner- Owner- Owner- Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant All farmers y100 9s 9o 9s 10o 10o 94 4 l0 4 6 93 96 100 96 97 97 95 97 7 4 4 3 8 5 8 19 TABLE 26. OPINIONS OF HIGH PLAINS FARMERS CONCERNING FCI PERMITTING FARMERS TO INS THAN THE ALLOTTED ACREAGE Participants Prior-participants Owner- Owner- Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Percent farmers Nonparticipants Tenure groups Owner- Owner- Yes 40 48 50 46 22 65 33 No 60 52 40 52 78 35 67 Undecided l0 2 as so 2s 4o s4 s4 as s7 so 7s ss sa ‘ 4s ss 7 2 s 2 Participation of tenant and landlord. The ques- tion arises as to whether the tenant and landlord should be permitted to insure their share of the crop separately or whether the entire crop should be in- sured in order to participate with FCI. Most farmers were aware of a possible conflict of interest that might arise where a severely damaged crop had to be left in the field for loss adjustments when only one party was insured. However, the farmers were almost unani- mous in their opinion which permitted tenant and landlord to insure their individual shares separately, Table 25. Insure more than allotted acreage. In the past, some farm programs have allowed farmers to select among various alternatives regarding participation in particular programs. Frequently, alternatives have permitted farmers to exceed their normal allotments subject to some specified penalty. In such cases, should the farmer be permitted to insure with FCI more than the allotted acreage? The farmers ex- pressed the opinions shown in Table 26. All farmers considered, a slight majority (55 per- cent) were opposed. There were no significant dif- ferences in the opinions expressed by the participant groups. However, among the tenure groups, only one-third of the owners and owner-tenants were in favor of permitting acreage in excess of allotments to be insured; one-half (54 percent) of the tenants expressed their approval. Those farmers who were opposed to permitting this excess acreage to be in- sured contend that the allotments were established in the interest of all farmers and that those who fail to comply were jeopardizing the benefits to be gained. On the opposite side, those in favor were of the opinion that» if FCI was to function as any private TABLE 27. OPINIONS OF HIGH PLAINS FARMERS CONCERNING THE DESIRABILITY OF HAVING FCI a YEARLY PREMIUMS BASED ON ACTUAL YIELD insurance company, they should accept an V‘ on which the premium was paid. ’ Variable yearly premium. Assuming premium could be established as a perk actual yield, farmers were asked to expi opinion concerning the desirability of su i The amount of premium paid would vary j yield or production. When yields were hi 1 cally, the farmer would be able to pay premium which would tend to compensar? smaller premium paid during years when =5“ was low. The opinions expressed by the if“ farmers concerning such a plan are shownli 27. Only 23 percent of the farmers were having a variable premium based on a i, Almost three-fourths of the farmers (72 pe Q opposed, with 5 percent being undecid farmers desired to know the exact cost of ~55’ ance at the beginning of the crop year. no significant differences in the opinions by the participant groups; however, there W, icant difference in the opinions expressed as compared with tenants and owner-ten A; one percent of the owners were in favor plan as compared to 18 percent and l, respectively for tenants and owner-tenants l’ This difference might be explained i’ contracted indebtedness and /or returns to , in the case of owner operators and to ope I I of gross production for tenants and o Owners have an investment in the land a instances, are making annual land pa u‘ normal ownership expenses. They wouldf Participants Owner- Owner- Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant; Percent farmers Prior-participants Nonparticipants Tenure groups Owner- Own Yes 33 16 l0 20 44 l4 17 No 67 76 60 70 56 77 83 Undecided 8 30 l0 9 4s 2s 17 29 41 1s 1s s4 7s as 71 s9 7s 7s = 6 7 20 1 SURANCE '23. OPINIONS OF HIGH PLAINS FARMERS CONCERNING THE DESIRABILITY OF “BLANKET" TYPE FEDERAL Participants Owner- Owner- Prior-participants Percent farmers Nonparticipants Tenure groups Grand total Owner- Owner- Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant All farmers 33 16 20 22 9 ll 67 76 70 72 I00 91 89 8 l0 6 l4 8 17 I2 18 ll l5 l4 65 92 83 82 74 86 83 82 21 6 8 3 2 4 7 a higher premium during high production t return for a reduced premium in those years ntracted obligations approach or exceed net 1 On the other hand, tenants and owner- iprefer to view premiums as a fixed or specific ' er than a variable fluctuating with yields. ind to expect the income during “good” years _p than compensate for the low-production jThus, they do not wish to have a variable pf“ that would take an increasing portion of uct during years of above average yields. _nket” type Federal Crop Insurance. With e, an individual transfers his risks to a group g the economic burden of losses are shared by 4 ~ of the group. The premium, as contributed individual insured, is assumed to be his share verage losses of the group. [3] Other factors 4' g constant, as membership in the group in- i, premiums would be expected to reflect a it achieved through more efficient use of admin- ‘ resources. ypothetical situation was discussed with each and he was asked to express his opinion con- 1 the issue: “Suppose all farmers in a particu- H ty or risk area voted on participation in f1 Crop Insurance. If the majority was in favor, 'ers would be required to participate. If it ‘reduce premiums, would you be in favor of ket’ type of insurance?” The opinions ex- are shown in Table 28. proximately four out of five farmers (82 per- were opposed to any form of blanket type " Crop Insurance. As might be expected, a percentage of participants than prior- or non- v SURANCE CONTRACT participants were in favor of this type of participa- tion. There were no significant differences of opinion expressed by tenure groups. Most farmers were of the opinion that participation in such a pro- gram should be the decision of the individual farm operator. Multiple crop insurance. Under this insurance plan, FCI offers insurance protection on a group of crops rather than a single crop. In each county where this insurance is offered, certain specified crops are insured. His [the farmer’s] coverage for all these crops is combined and if the value of the production (based upon fixed prices) of all these crops combined is less than the combined coverage, an indemnity is due . . . since these crops are in part subject to different risks, and good production of one will off-set poor production of another, the loss on the combined crops usually is less than the sum of the losses on separate crops. For this reduc- tion in insurance risk the farmer receives a reduction in his premium for diversification of risk. [4] Essentially, this plan provides for a minimum level of income to be contributed by the insured crops. Table 29 shows the opinions expressed by High Plains farmers concerning the desirability of such a plan. Slightly more than two-thirds of. the farmers (69 percent) were opposed to a multiple crop insurance plan. Although, there were no significant differences in the opinions expressed by the participant groups, a slightly higher percentage of the prior-participants OPINIONS EXPRESSED BY HIGH PLAINS FARMERS CONCERNING THE DESIRABILITY OF A MULTIPLE Participants Prior-participants Owner- Owner- Percent farmers Nonparticipants Tenure groups Grand total Owner- Owner- Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant All farmers 27 28 20 26 44 48 ll 66 72 80 72 56 52 89 7 2 21 29 25 26 29 35 l7 29 72 67 75 70 66 64 83 69 7 4 4 5 l A 2 21 TABLE 30. OPINIONS OF HIGH PLAINS FARMERS CONCERNING FCI CONTRACT THAT WOULD COUNTY AVERAGE YIELD Percent farmers Participants Prior-participants Nonparticipants Tenure groups Owner- Owner- Owner- O r ~ Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant - -» ‘ Yes l3 36 20 26 ll l7 22 18 7 17 33 l8 ll T", 24 25 No 67 44 60 54 89 57 50 60 79 66 42 64 76 55 50 Undecided 20 20 20 20 26 28 22 l4 l7 25 18 l3 21 25 i} favored the plan than did participants and non- sample farms were taken in each cou A participants. Four out of five owner-tenants (83 there were no significant differences percent opposed this form of crop insurance. This production costs among the tenure g g group of farm operators rely largely on field disper- study. sion as a protective strategy. Thus, they contend the Prefer separate Contracts for ind- i pfObabllllilfis are such that, during any one crop year, At Present, FCI insures an acreage of the low yields of one field (or farm) will be off-set crop in the County in which the indi by ‘the better yields of a more distant field (or farm) interest Owned and rented acreage amp: whlch they W111 be operaung m the Cmlmy‘ arately with loss adjustments establishedé Guarantee county average yield. Since low cov- lions as Previously stated) bl’ taking an , combined yields of all acreage. This erage was a frequent criticism of FCI, farmers were _ _ _ Y, asked if they would prefer an insurance contract that Frmclled by man)’ fanners- Each fa " would guarantee the county average yield although If h‘? would Prefer to have separate it would Probabl)’ increase premiums. As shown in mdlvldual tracts o? Crop land’ altho “i? Table 30 only one out of every five farmers (21 per- would surely be Increased‘ Answer‘ cent) was in favor of such a contract Farmers in according to the emphasis and manner opposition expressed the opinion that a certain per- farmer responded‘ Results are Show“ I centage of farmers in the county would take advant- Eighty-three percent of all farmers; age of such a contract by merely going through the considered this a desirable feature evclii motions of farming, but relying on the indemnity miums would be increased. Over 80 M!- check. Other comments included: “good farmers of the three participant groups were in", carrying the bad” and “successful farmers can't be this particular feature. There were satisfied with group averages.” Although there were differences in the opinions expressed by no significant differences in opinions expressed by the however, a slightly higher percentage of three participant groups, a higher percentage of (88 percent) considered the feature _, owners were opposed to the use of such averages than 75 percent indicating it to be extr were tenants and owner-tenants. In general, owners Although this is one feature in particu < p consider their yield and investment in a particular would like to see included in FCI, m crop runs higher than the county average. This not hesitate to mention that meas contention can be neither confirmed nor disaproved required to prevent fraudulent loss by this survey, since a relatively small number of from a shift of yields between tracts. TABLE 31. THE DESIRABILITY OF HAVING SEPARATE FCI CONTRACTS FOR INDIVIDUAL TRACTS i: AS EXPRESSED‘ BY HIGH PLAINS FARMERS p. Percent farmers ‘ Participants Prior-participants Nonparticipants ‘ Tenure groups Owner- Owner- Owner- 0 p ~l Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant -~» Extremely desirable 54 46 70 53 56 79 82 76 84 67 67 72 65 63 Desirable 13 38 30 29 ll 4 6 6 8 l7 8 12 ll 20 Undecided 20 4 8 ll 6 4 8 4 17 8 l4 3 Undesirable 13 8 8 4 2 5 4 Extremely un- desirable 4 2 22 13 6 l2 12 8 8 5 l0 22 l; opinion that adequate precautionary meas- participants and prior-participants. Twenty-six per- ; d be devised. cent of all farmers indicated that some farmers pre- ferred to carry their own risks. Lack of knowledge of f" small PartidPathn in FCI the FCI program was mentioned by 21 percent of all _ discussing the FCI program in detail, each farmers; 18 percent of the nonparticipants mentioned “was asked what he considered the principal this reason. “Adjustments unreasonable" and “pre- _or small participation in the program. Table miums too high for coverage” were mentioned by 17 i‘ the reasons offered and the percentage of percent and 10 percent, respectively, of all farmers mentioning each. interviewed. The “adjustments unreasonable” com- ~‘ ment was directed primarily at the three-stage cotton percent of all farmers were critical of the I offered on the various crops. These farmers Contract‘ the yields were entirely too low for irrigated Among “other reasons” as shown in Table 32, , the High Plains. Among the three partici- there were at least two suggestions that deserve w ps, there was wide variation within the further comment. Although these reasons were not v tenure groups concerning coverage. For offered by an appreciable number of farmers, the y, 100 percent of the prior-participant owners discussions with these farmers indicated they may ‘tical of the low coverage as compared with 21 have more of an influence in decision-making regard- l and 33 percent, respectively, of the non- ing crop insurance than the results of the survey . tand participant owners. Nonparticipants represent. First reason is “government payments up, were less critical of coverage than were offer some protection — substitute for insurance;” REASONS OFFERED BY HIGH PLAINS FARMER FOR SMALL PARTICIPATION IN THE FCI PROGRAM Percent farmers Participants Prior-participants Nonparticipants Tenure groups Grand total _ Owner- Owner- Owner- Owner- ; Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant All farmers V‘ l 33 68 70 58 100 52 39 56 21 46 33 36 45 56 45 50 33 12 20 20 l l 35 1 1 22 64 29 17 36 39 25 15 26 40 30 36 13 6 8 l4 12 33 18 l8 22 20 21 12 l0 l0 ll 17 28 20 21 29 20 13 20 14 17 4 8 13 22 l4 7 l2 8 ll l0 l0 l0 4 4 ll 9 ll l0 5 4 5 5 4 2 ll 6 4 8 8 6 3 4 5 4 12 30 20 ll 17 22 18 14 12 l7 14 18 14 22 17 p -_» is interpreted in Zterms of yield guarantee per acre, i.e., yield guarantee per acre is too low. ‘a reasons: Government payments offer some protection-substitute for insurance; need to insure for drouth in this area; when to put crop back in-should draw full coverage; ill feeling spread by farmers that couldn't cancel out after cancellation on’t like automatic renewal feature; can get higher coverage from hail—and hail is principal cause of loss; misunderstand- V; ers think they want more than this program offers . . . but . . . would they be willing to pay the pricei‘; compulsory replant j~ no need for crop insurance; does not pay at time of loss; yield guarantee no good-should be on dollar basis; federal 1m competing with private enterprise; previous experience wtih insurance company was bad; lending agencies often sell oe~more or less required to purchase there; having to insure all the crop in the county; and don't want federal insurance. 23 second, “lending agencies often sell insurance-more or less required to purchase there.” No doubt gov- ernment payments do offer some degree of security and most farmers are recipients in varying degrees. Several of the farmers who carried private insurance admitted taking it through the lending agency. The extent to which they were coerced into purchasing the private insurance remains unknown. Suggested Improvements in FCI The suggestions offered by farmers in Table 33 are in addition to the specific and proposed FCI con- tract features previously discussed. One-half of the farmers (48 percent) suggested higher coverage for all crops. This corresponds to the percentage of farmers (50 percent) who had indicated low coverage as a principal reason for small participation. Of the three participant groups, prior-participants were the strong- est in this recommendation, with 62 percent of the farmers in the group concurring. Likewise, 52 percent of the participants and 30 percent of the nonpartici- pants suggested higher coverage. On a percentage basis, there were no significant differences among the tenure groups, as from 45 percent to 51 percent of each group favored this recommendation. FCI should improve service, education and public relations. This suggestion was made by 27 percent of all farmers, with approximately one out of three participants and prior-participants in agreement. Non- participants were not as familiar with the FCI pro- gram; however, l2 percent of this group concurred in the recommendation. TABLE 33. SUGGESTED IMPROVEMENTS IN FCI PROGRAM AS EXPRESSED BY HIGH PLAINS FARMERS .; Participants Prior-participants Owner- Owner- Percent farmers Eighteen percent of the farmers i»; vision of the cotton three-stage adjustmelr This was of special interest to prior-parti' evidenced by 28 percent of the group menti_ feature. a Nine percent of the fanners, principal] suggested setting a county replant date i“ rather than looking to the actions of 0th“, in the community in arriving at a decision to Eight percent of the farmers suggested. the farmer full coverage on cotton rega e <5; time of loss, not 50 percent and 80 percent - in stage l and 2. They suggested in " premium accordingly but allow full cov -;_l recommendations are shown in Table 33. i CONCLUSIONS The Federal Crop Insurance program, . i operating in the High Plains, is basically program capable of serving the needs of "i farmers. However, as of this date, partii; the program has been relatively light. Inf an attempt was made to determine the reasons for lack of participation and, whe i to offer suggestions for program improv u; results of this research suggest several a ~51‘ provement, including changes or modifij might be incorporated in the present -- ‘County replant dates for all crops in all counties ha I established. ‘ -. (I j. ‘ Nonparticipants Tenure groups Owner- Owne Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenant Total Owner Tenant tenan ,‘ Higher coverage‘ 53 48 60 52 67 74 44 Improve service, education and public relations-simplify and make knowledge available-select good agents and adjusters 47 36 20 36 33 22 50 Revise 3-stage cotton adjustment feature (can't get to 3rd stage) 20 12 l0 14 22 26 33 Set county replant date—after that date give farmer choice: 1) Leave cotton, settle at harvest; 2) release land to anything except cotton-settle for full coverage 27, 4 l0 33 13 6 Even if premiums increase-let farmers pay and get full coverage regardless of time of loss (not S-stage) do away with l clause 7 12 8 22 4 ll Base production guarantee on actual yield of individual farms 7 4 l0 6 33 9 6 Release damaged land to farmers rather than hold for adjust- ment 13 . 4 6 4 ll A 21 33 33 30 45 51 45 7 12 17 12 29 24 32 21 8 8 12 21 15 20 8 2 18 6 5 7 8 6 ll 8 5 12 6 ll 8 5 s 2 s s 7 ' ‘I ‘Yield guarantee per acre—not dollars per acre. Other suggestions included: Yield basis o.k.—just raise guarantee and change premium accordingly. Possibly rates could be lowered if FCI did away with discount feature. Look into multiple crop insurance. FCI carry farmers during bad years when can't pay premiums. If insured for $100, should gross $100. Go to hail insurance rather than all-risk insurance. 24 program which would encourage greater Von. The principal criticism voiced by the farmers 0'; Plains concerned the level of coverage. 'sm was not directed at the maximum dollar of insurance permissible per acre; instead, Q the maximum yield guarantee. The among the farmers seemed to indicate that if d prefer to pay a higher premium if the f could be raised to a more realistic level. ‘Y: indicate that additional data were needed IC actuarial division in order to establish verage, based on soil-water resource combi- f’ d premium rates that reflect yield potentials Piassociated with an irrigated agriculture in Plains. o be equitable, premium rates must reflect fiof production. At present, some counties ‘*1 into two or more “risk areas,” and all __ aparticular risk area pay the same premium ~ same level of coverage. Although the yield if can differ widely within the same county, i! 'gated crop it is conceivable that premium Th be so established that all farmers in the the same rate per $100 of insurance. How- j- maximum level of coverage for each farm I; t nd upon the soil-water resource and /or . Thus, for the High Plains area where ted crops can be insured, the actuarial divi- 71d consider the possibility of establishing ‘Cum rate in the county for each insurable l‘ farmers tend to accept county boundaries. upon how thoroughly the actuary per- J's job, this suggestion may be less equitable i-‘fanners than the present procedure used in g “risk areas.” Since few farmers consider iiums excessive, the differential should not be z VQThe trend in recent years has been toward farm size and an increase in total farms and ted by part-owners. For security reasons, these farmers would prefer to insure a part Iriacreage; however, rather than incur the ex- j-insuring all acreage in the county, they rely on field dispersion and stay out of the program. In the interest of expanding participation in Federal Crop Insurance, the program must meet the needs and be acceptable to this increasing number of part-owner operators. Federal Crop Insurance should consider the possibility of requiring that all of an operator's acreage of a specific crop, within a given radius, be insured; however, insurance on all acreage in the county operated by the same individual should not be mandatory. (4) The three-stage cotton adjustment feature should be re-examined. According to the present contract, should a total loss occur the day before harvest, Federal Crop insurance is liable for only 80 percent of the maximum coverage. Although a reduction in coverage can be justified on the basis of a savings in harvesting expenses in the case of total loss, a 20 percent reduction in coverage appears ex- cessive, since a major portion of the harvest expenses would have been defrayed by revenue from the cotton- seed. Thus, in case of total loss, the farmer should be entitled to full coverage (less custom rate harvesting expenses) after some specified date when he normally would have committed all other variable costs of production. For irrigation cotton farmers in the High Plains, this date would follow the last irrigation, which normally is applied on or before September l. (5) Finally, this research points out the need for an expanded educational and public relations program with an- improved loss adjustment service. Many of the criticisms of FCI can be attributed to a lack of knowledge of the program and the purpose for which it was intended. LITERATURE CITED 1. Federal Crop Insurance-A Description, PA-408, USDA, fourth revision, October 1959, p. 11. 2. W. F. Hughes and A. C. Magee, Some Economic Effects of Adjusting to a Changing Water Supply, Texas High Plains, Tex. Agr. Exp. Sta. Bulletin 966, October 1960. 3. James L. Athearn, Risk and Insurance, New York: Appleton- Century-Crofts, Inc., 1962, p. 51. 4. Federal iCrop Insurance—A Description, PA-408, USDA, fourth revision, October 1959, p. 30. Appendices I Wheat - ma» Grain Sorghum .- ~- I Iii l I'M i: T21 nu- — unan- u.» un- \-u;@-u 1.1.. ’%% H: High Plains counties to be i-Mluaed 1n F61 program for irrigated wheit and grain sorghum in 1969. Appendix B. The shaded counties were included in " area. Appendix A. Texas counties participating in all-risk crop insur- ance, July 1968. APPENDIX C Cotton (Irrigated) FCI Crop Insurance Available in Study Area, 1964' Premium Rate‘ Guaranteed Production Per $100 Amo I g Per Acre By Stages Area of Insurance in; County Number First Stage Second Stage Third Stage the Third Stage; (Pounds) (Pounds) (Pounds) (Dollars) Bailey 1 145 232 290 9.00 2 165 264 330 8.00 Castro 1 140 224 280 8.50 2 I40 224 280 9.00 Crosby l 155 248 310 7.50 Dawson 1 165 264 330 - 7.50 Floyd 1 180 288 360 7.50 Hale 1 170 272 340 7.50 Hockley 1 145 232 290 7 .50 Lamb ~ 1 160 256 320 7 .50 Lubbock 1 170 272 340 6.60 Lynn 1 155 248 310 7.50 Parmer 1 165 264 330 8.30 Swisher 1 145 232 290 8.30 Terry 1 160 256 320 7 .50 ‘Beginning with the 1967 crop year, the county actuarial table for irrigated cotton was changed in all counties. See w‘ 1967 actuarial table for Hale County, Appendix F. ‘ 26 < ‘ APPENDIX D Grain Sorghum (Irrigated) FCI Crop Insurance Available in Study Area, 1964' Area Cwt. Guarantee Prices Per Cwt., One of Which Number Per Acre‘ Shall Be Elected By Insured’ $1.50 $1.75 $2.00 1 20.0 1.50 1.80 2.00 2 29.0 2.20 2.50 2.90 1 29.0 2.20 2.50 2.90 2 29.0 2.20 2.50 2.90 1 20.0 1.50 1.80 2.00 2 28.0 2.10 . 2.50 2.80 1 25.0 1.90 2.20 2.50 2 29.0 2.20 . 2.50 2.90 1 28.0 2.10 2.50 2.80 1 19.0 1.40 1.70 1.90 1 20.0 1 .50 1.80 2.00 2 26.0 2.00 2.30 2.60 - l 20.0 1.50 1.80 2.00 2 22.5 1.7 0 2.00 2.30 3 27.0 2.00 2.40 2.70 1 29.5 220 2.60 3.00 1 30.0 2.30 2.60 3.00 _ guarantee will be increased 2.0 Cwt. for any acreage from which 2.0 or more cwt. per acre are thrashed. WV- of $1.75 per Cwt. will be applicable to any contract where an election has not been made by the insured or the price not one shown hereon. with the 1968 crop year, the county actuarial table for irrigated grain sorghum was changed in all counties. See example {actuarial table for Hale County, Appendix G. APPENDIX E Wheat (Irrigated) FCI Crop Insurance Available in Study Area, 1964 f Area Bushel Guarantee Prices Per Bushel, One of ty Number. Per Acre‘ Which Shall Be Elected By Insured” $1.50 $2.00 $2.50 Premium Rate Per Acre f — — — — — — — Dollars — — — — — — - fg . 1 (Irri.) 8.5 2.50 3.40 4.20 1 ifllrri.) 8.0 1.60 2.10 2.70 1 P(Irri.) 8.5 2.00 2.60 3.30 el guarantee will be increased 1.5 bushels for any acreage from which 1.5 or more bushels per acre are harvested. h: ‘oe of $2.00 per bushel will be applicable to any contract where an election has not been made by the insured or the prioe ,-is not one shown hereon. g Sig with the 1967 crop year, the county actuarial table for irrigated wheat was changed for those counties offering wheat See example county actuarial table for Hale County, Appendix H. 27 APPENDIX F Form FCI-35 9-23-65 UNITED STATES DEPARTMENT OF AGRICULTURE State Texas‘ FEDERAL CROP INSURANCE CORPORATION p. County Hale COUNTY ACTUARIAL TABLE i. 1967 AND SUCCEEDING CROP YEARS Crop Cotton? Applicable to Irrigated Practice Only ._ The grade and staple length to be used in accordance with Section 7 (d) of the cotton endorsement to adjust the produ“ of damaged cotton shall be: Strict low middling 15/16 inch A " 1 ~ i - Prices per pound, one of which shall be elected by insured‘ I“ Area or farm Pound guarantee per acre by stages 20¢ 25¢ classifimtion First stage Second stage Third stage Premium rate per acre ., — — — — —-Pounds—--—-—-— ———-—-—Dollars-—-——-' 1 130 208 260 5.20 6.50 “¥ 2 15o 240 s00 520 6.50 71 3 175 280 350 5.20 6.50 p a . 4 .200 320 400 5.60 7.00 l 5 230 368 460 6.00 7.50 i. ‘The price of 30¢ per pound will be applicable to any contract where a price election has is not one shown hereon. APPENDIX G Form FC-35 State Texas 74 1-10-62 County Hale 095 Crop Grain Sorghum Practice Irrigated UNITED STATES DEPARTMENT OF AGRICULTURE FEDERAL CROP INSURANCE CORPORATION COUNTY ACTUARIAL TABLE 1968 AND SUCCEEDING CROP YEARS I Prices per cwt., one of which CWL shall be elected by insured’ Area guarantee $159 31-75 32-00 number per acre‘ Premium rate per acre —-—Dollars—-—— 1 25.0 2.10 2.50 2.80 2 30.0 2.10 2.50 2.80 3 31.0 2.10 2.50 2.80 ‘The cwt. guarantee will be increased 2.0 cwt. for any acreage from which 2.0 or more cwt. per acre are threshed. ‘The price of $1.75 per cwt. will be applicable to any contract where an election has not been made by the insured or the price elected is not one shown hereon. 28 ‘x not been made or where the APPENDIX H Form FCI-35 State Texas 74 1-10-62 County Hale 095 Crop Wheat UNITED STATES DEPARTMENT OF AGRICUL FEDERAL CROP INSURANCE CORPORATI COUNTY ACTUARIAL TABLE I 1967 AND SUCCEEDING CROP YEARS Prices per bushel, - i p Bushe] shall be elected by i; Area guarantee $125 31-75 i Practice number per acre‘ Premium rate - - - Dollars Irrigated l 18.0 2.20 3.00 ‘The bushel guarantee will be increased 1.5 .-r»»fi acreage from which 1.5 or more bushels per acre are A ‘The price of $2.00 per bushel will be applicable to j where an election has not been made by the .. . ' price elected is not one shown hereon.