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Drought: Agricultural Effects, Insurance Claims, and Beyond






Agricultural Effects, Insurance Claims, and Beyond





Table of Contents



A Brief History of Drought in the United States

Intense Drought Spreads Rapidly Record Setting Heat

The Rippling Effects of Drought Corn: First Wave in Drought’s Ripple Effect

Cattle: The Ongoing Ripple Effect Ethanol: A Modern Ripple

Drought in New Mexico: When Insurance Fails

The Nationwide Implications of Drought

Filing an Agricultural Insurance Claim Filing a Claim with the USDA- RMA

p))))))))))<>{color:#000;}. Contact your agricultural insurance agent.

p))))))))))<>{color:#1154CC;}. Schedule with an adjustor. 3. Give the adjustor a comprehensive tour of the damages.

4. Submit required supporting documents.

Farm and Ranch Experts Say: Be Proactive!

Filing a Claim with a Private Insurance Provider 1. Contact your insurance provider.

p<>{color:#000;}. Prepare your documentation.

p<>{color:#000;}. Make temporary repairs if necessary.

p<>{color:#000;}. Accompany the adjustor during his damage inspection. 5. Submit additional requested documentation.

The Basics of Claim Disputes Agricultural Insurance Fast Facts

An Innovative Agribusiness Law Firm Agricultural Markets We Serve

Appendix I – Types of Agricultural Insurance


[] A Brief History of Drought in the United States


When most Americans hear the word “drought,” they get a John Steinbeck, Hollywood-esque image of the Joad family leaving Oklahoma for California in the 1930s. In part due to such popular treatments, and in part because the twin calamities of the Great Depression and the Great Dustbowl created an indelible image on the collective American consciousness, the 1930s are popularly regarded as THE drought to reference.


While the insidious blowing dirt of 1933-1934 and 1937-1939 make the Great Dustbowl unique, the seven-year drought of the 1950s was more intense in duration and saw $61,814,600 in federal emergency aid funneled into the American Southwest.1


But, are such comparisons even valid?


The world that existed in 1930 cannot be compared to that of 1950, and neither can be held side-by-side to the complex modernity of 2012.

Now, a drought rivaling both decades is covering more than 60% of the United States, but its effects and ramifications are far more pervasive in the diverse American economy of the 21st century. Consequently, this drought is unlike any that has struck the U.S. before, and is concurrent with an historic heat wave. The trickle down effects of this drought will even touch upon our government’s efforts to encourage alternative energy over fossil fuels.








1Rana K. Williamson, PhD, “The Heat from the Forge: Aspects of the Seven Year Drought of the 1950s in Texas,” Unpublished Dissertation, Texas Christian University, December 1993, 12.


[] Intense Drought Spreads Rapidly


The USDA Economic Research Service has designated the 2012 drought as the worst in the nation’s history since the sustained seven-year drought of the 1950s. Since early July, the drought’s severity has increased rapidly, essentially doubling in one month's time. By June, 54% of the nation suffered under drought conditions, placing the month as the sixth worst on record, according to the data tracked by the National Climactic Data Center since 1895. 2


According to the Weather Channel, the percentage of land affected by the drought rose to 57.2% in July, bringing the totals in line with 1950s-era severity. 3




2 Ben Potter, “2012 Drought Officially Reaches Dust Bowl-Era Intensity,” AgWeb.com, 19 July 2012, http://bit.ly/TVKTBG


3 Nick Wiltgen, “Drought Rises in Historical Rankings,” Weather.com, 15 August 2012, http://wxch.nl/Ojpa5A


[] Record Setting Heat


As if the dry conditions were not enough, 2012 is, to date, the hottest year ever recorded in the United States, according to the National Oceanic and Atmospheric Administration, whose records date to 1895.


On June 7, NOAA released a report detailing the surpassing of four heat records in the lower 48 states:


p<>{color:#000;}. the warmest spring on record, by 2O F including the warmest March on record,

p<>{color:#000;}. the largest seasonal departure from average temperature by 5.2O F,

p<>{color:#000;}. the warmest year-to-date,

p<>{color:#000;}. and the warmest 12-month period.


Not one state among the lower 48 set a record for cooler than average.


The U.S. Climate Extremes Index tracks the highest and lowest 10% of temperature, precipitation, drought, tropical storm, and hurricane extremes over the U.S. During the period of March to May 2012, the index was 44% -- more than twice the average value.4


The heat has been so intense in some areas that vital infrastructure has suffered damage including highways buckling in Texas and subway rails bending in Washington.5

















4 “Four Major U.S. Heat Records Fall in Stunning NOAA Report,” ThinkProgress.org, 8 June 2012, http://bit.ly/ThGUC8


5 Annie Lowrey and Ron Nixon, “Severe Drought Seen as Driving Cost of Food Up,” The New York Times, 25 July 2012, http://nyti.ms/ThL3pE




[] The Rippling Effects of Drought


Consumers will feel the effect of the drought in elevated food prices in the coming year. In July, the government forecast cost hikes for 2013 of 4-5% for beef, 3.5-4.5% for dairy products, 3-4% for eggs, and 2.5-3.5% for corn.


At the same time, projections for the corn harvest itself were cut to 146 bushels an acre, the lowest since 2003. On

September 4, estimates fell to 123.5 bushels, a sad plummet from the optimistic June forecast of 166. Currently 88-90% of the nation's corn crop is rated poor to failed from a lethal combination of aridity and record-setting heat. 6


Although the effects of drought are often perceived as limited to the agricultural sphere, a drought of this severity and scope reaches every aspect of society in some way, a fact farmers and ranchers understand. Illinois farmer David Meiss, who is also the Farm Bureau director for his district, accompanied Deputy Secretary of Agriculture Kathleen Merrigan on a tour of McClean County on August 31, 2012.


Commenting on the spreading effects of drought, Meiss said, “We’ve been brought up to expect a year like this once in awhile. Being in small rural communities, if we don’t have the income for a year or two, we’re going to pull our wings in pretty tight . . . the ripple effect is my neighbor in town or my best friend that lives down the road that probably isn’t even involved in agriculture, that I go and buy a car from him or something . . .. We want to make sure we get that story out, too — that

6 Lowrey and Nixon, http://nyti.ms/ThL3pE

it’s not just the farms that are going to suffer off of this.”7


As the effect of drought continues to broaden, there are aspects of the crisis that become difficult to quantify, a point addressed by JP Morgan analyst Ann Duignan, in the company’s research report downgrading John Deere stock in early July 2012, cutting the target price from

$98 to $78. “Overall farmer sentiment is deteriorating,” Duignan wrote. “While mathematically cash receipts continue to rise on higher prices, farmer sentiment is driven by both prices and volumes.“8


Although sentiment is hard to measure, Duignan addressed the broad-base of the current crisis, with more than 80% of farms affected. "Farmers have been spending at an elevated level for 4-5 years," she said, "implying that they can hold off on spending [for any discretionary purchases] for a season in order to rebuild confidence and cash.” Given the extent of the crisis, crop yield decline is inevitable. 9


[] Corn: First Wave in Drought’s Ripple Effect


Perhaps no single crop more clearly illustrates the broad reach of prolonged drought and its consequences for the U.S. economy than corn. Although there are many directions an examination of the broader effects of drought could take, the case of the nation’s failed corn crop makes for a compelling “first wave” in one major outward ripple of drought’s effects. Three primary corn crops are grown in the United States:


p<>{color:#000;}. field corn for animal feed, ethanol, and processed food like corn oil and syrup

p<>{color:#000;}. sweet corn

p<>{color:#000;}. popcorn


Broken down into usage, however, corn is a:


p<>{color:#000;}. food crop for human consumption,

p<>{color:#000;}. a feed crop for animal consumption,

p<>{color:#000;}. a fuel crop tied to alternative energy efforts,

p<>{color:#000;}. and a cash crop for corn producers.

7 Jeannine Otto, “Deputy Ag Secretary Gets Firsthand Look at Drought Damage, AgriNews-Pubs.com, 31 August 2012, http://bit.ly/Q0p1CU ; Tom Doran, “Corn Prices Projected High Through First Quarter,” Agrinews-Pubs.com, 4 September 2012, http://bit.ly/Ti50N7


8 Francine Knowles, “Drought Casting Shadow on Deer, ADM’s Outlook, Chicago Sun-Times, 17 July 2012, http://bit.ly/TVHVxe ; David Kanicki, “From the Desk of Dave Kanicki,” FarmEquipment.com, 24 July 2012, http://shar.es/7Bw2p


9 Kanicki, http://shar.es/7Bw2p


The failure of the corn crop is leading analysts to predict a 10-15% dip in available consumption, which will immediately be felt by the livestock industry as less feed is available for animals.


Darrel Good, an agricultural economist at the University of Illinois, speaking at an event sponsored by Soy Capital Ag Services, said that short crops and high prices usually lead to major adjustments in the domestic livestock industry. “That’s where the bulk of the cut tends to get made. That’s where profit margins are more sensitive to the price of corn, and we are beginning to see indications of liquidation in the livestock sector,” said Good, who was quoted in a September 4 report by AgriNews Online.10


[] Cattle: The Ongoing Ripple Effect


On July 20, the USDA said the nation's cattle inventory fell to the lowest level since 1973. Nationally, the number of head stood at 97.8 million, a decrease of 2% from the previous year. In mid-July in Texas, 36,000 cattle went to auction in one week, almost three times the 13,400 sold two weeks earlier with calves selling for $120 less than two months prior. 11

10 Doran, “Corn Prices Projected High Through First Quarter,” http://bit.ly/Ti50N7


11 Roxana Hegeman, “Midwest Drought 2012: Plains Ranchers Forced to Sell Cattle,” HuffingtonPost.com, 24 July 2012, http://huff.to/QepZ4l


Ranchers do not enjoy the same federally supported crop insurance umbrella that is available to farmers. Because it is so hard to predict losses on grazing land, private insurance companies shy away from issuing policies. Various pilot programs tested by the USDA have proven too expensive with too little pay out. More times than not, the government turns to buying up meat products for federal programs to help livestock growers, a tactic the Obama administration turned to early in August when it announced a planned purchase of $170 million in pork and other meat products.12


Poor pasture conditions and high hay prices are devastating ranchers. On 70% of the pastureland in the nation, cows can't survive without supplemental feed, namely hay. But at the same time, 75% of the land used to grow hay suffers from drought. Alfalfa prices are up 5%, with all other types including abandoned corn up 20%. Additionally, feedlots started bringing in Mexican cattle during the summer of 2012. Consequently, from May to August, cow-calf returns at sale were down $100 per animal. The price of soybean meal, dried distillers grains, and corn gluten used by feedlots jumped 25% in the same period, while cattle prices dipped 15%. 13


Increasing feed costs, in combination with withering grasslands in the Great Plains and Corn Belt regions, are prompting ranchers

to downsize beef and dairy herds. Davis Anderson, a livestock economist with Texas A&M’s AgriLife Extension Service, reported,

We’ve got the fewest cattle in 60 years.”^14^


Although some rain began to fall in the Midwest around August 18, a single rain does not end a drought. When the weekly Drought Monitor released its report on August 16, the current drought was termed a “one-in-50-year” event, with no relief in sight for either livestock producers or farmers.15





12 Margaret A. Beck, “Ranchers Lose Hope Drought Aid Will Come in Time.” August 19, 2012. MercuryNews.com http://bit.ly/QBsyIo


13 Nathan Kemper, Dr. Archie Flanders, Dr. Brad Watkins, and Dr. Michael Popp, “Impact of the 2012 Drought on Field Crops and Cattle Production in Arkansas,” University of Arkansas Division of Agriculture Research & Extension, August 2012, 8. http://bit.ly/NeXPVc


14Larry Bell, “The Ethanol Mandate: Drought Only Compounds Inherent Catastrophic Consequences,” Forbes.com, 31 July 2012, http://onforb.es/NeZ7Q1


15 Sam Nelson, “Rains Too Late to Revive Drought-Stroken Crops,” August 19, 2012. The Fiscal Times. http://bit.ly/QBtTyN

[] Ethanol: A Modern Ripple


The decreased projections for the corn harvest have a direct effect on ethanol production. July was the lowest month in two years for ethanol, with the industry’s output falling from 920,000 bbl/d (barrels per day) for the week ending June 8, to just 809,000 for the week ending July 27.


In August, the Energy Information Administration adjusted its Short-Term Energy Outlook for ethanol downward. From an original opening year forecast of 900,000 bbl/d, the new estimate was 833,000 bbl/d on August 30. Ethanol output was not predicted to recover until the second half of 2013, and then only to reach an estimated average of 880,000 bbl/d.16


The effects of the drought are wreaking havoc with the federal Renewable Fuel Standard (RFS) timetable to introduce greater amounts of biofuels and corn ethanol into the nation's fuel supply on an annual basis. The target goal is 36 billion gallons in 2012. The current level of corn ethanol that qualifies as "renewable" already consumes 40% of the annual U.S. corn crop.


Increasing numbers of farmers have been turning to corn ethanol as a cash crop. The benefits of ethanol as an alternative fuel are highly debated, but it is clearly yet another arena in which growers are being hard hit. Additionally, the failure of the corn ethanol crop due to drought has spread the influence of this natural disaster well past the agricultural arena and into the national energy debate. 17


Drought in New Mexico: When Insurance Fails

A pilot program for drought insurance offered in New Mexico and seven other states by the USDA Risk Management Association uses a satellite-generated “greenness index” to determine if policyholders qualify for benefits.

All “biomass” including trees and weeds are used to arrive at the calculation, with no evaluation of their fitness for livestock grazing or forage. Additionally, the heat index for the regions observed by the satellite is not factored into the equation.

In September 2011, the largest cattle auction in the state, headquartered in Clovis, was averaging 4,500 head a week over the normal 1,500. Extreme heat and drought were causing ranchers to even sell their breeding stock.


16 “Drought Has Significant Effect on Corn Crop Condition, Projected Ethanol Production,” U.S. Energy Information Administration, EIA.gov, 30 August 2012, http://1.usa.gov/RHC6lj


17 Kemper, Flanders, Watkins, Popp, “Impact of the 2012 Drought on Field Crops and Cattle Production in Arkansas,” http://bit.ly/NeXPVc


Leon Porter, owner of the 17,000 acre Porter Ranch in Central New Mexico was one of those ranchers. He was also one of 95 livestock producers in the state to buy the drought insurance sold through private agencies, but guaranteed via the USDA.


Until 2010, Porter maintained a herd of 350 mother cows, which he initially cut to 240. In 2011, he planned to reduce the herd to 50 or 60 head, and with less than 10% of his land covered in grass, he did not foresee any chance for a calf crop. He was contemplating selling his land.


The cost of Porter’s drought insurance totaled $26,000. After government subsidies, he paid

$12,000.* At $600 a head, the first 20 cows Porter sold at auction went to pay for insurance on which he's never received a dime of benefit.


“We’re trying to figure out why it’s not helping us when we’re in the middle of the worst drought in New Mexico history,” Porter said. “In 2010 we didn’t have any vegetative growth or grass production. In 2011 we’ve been in even worse shape due to the drought. I’m going to end up probably selling about 75% of the herd.” 18


Ranchers were given a choice when they purchased the policies to pick the seasons covered. Prices varied according to that decision and by location. The RMA did not dispute that drought conditions existed in New Mexico, but insisted the real problem was that ranchers did not understand the coverage and failed to pick the right time intervals when they faced the greatest risk.


The program uses vegetation index maps or “greenness” maps produced on a weekly basis by the U.S. Geological Survey. The maps, compiled from satellite photographs, show the health and vigor of vegetation as a measure of environmental and climatic conditions. Among their many uses, the maps are a basis for agricultural assessment, grazing land management, drought monitoring, and forest fire danger assessment.19


According to the RMA, New Mexico ranchers paid $1.64 million in premiums for the insurance. As of August 20, 2011, two payouts were made through the program, for a total of $2,007.

Speaking to the Albuquerque Journal, a spokeswoman from the RMA, Michelle Bouchard, said the coverage was not drought insurance per se, but that ranchers were “insuring a decline in the vegetation/greeness index. They can be declared a drought area, but if vegetation is green enough, then it’s not enough to trigger a loss . . . it’s a very confusing, highly technical insurance product. That’s why we have disclaimers.“20


Bill Sauble, owner of a 53,000-acre ranch in Colfax County northeast of Springer spoke to the Journal as well. He paid $28,000 for his insurance policy. “It has got to rain for something to be


18 Dan Jergler, “New Mexico Drought matter of Perspective, Risk,” Insurance Journal, 16 September 2011, http://bit.ly/Qr2Eu0


19 Overview of the Greenness of the Conterminous U.S.,” U.S. Geological Survey, http://bit.ly/QkNoLY


20 Rivkela Brodsky, “Ranchers Upset with Drought Insurance,” Capital Press, 20 August 2011, http://bit.ly/QkP204



[] The Nationwide Implications of Drought


In a political climate where fiscal conservatism and budget cutting are front and center in the presidential election debate, the projected cost of the drought to the broader economy currently stands at $50 billion.21 Federal drought disaster assistance is already a political football. The House approved a relief package totaling $383 million, but Congress recessed before the Senate took action on the bill. Previously, the Senate passed an aid package, but it is tied to a highly debated five-year farm bill, which GOP House members have refused to bring to a vote because the same legislation includes an $80 billion expenditure for the food stamp program.22


“I’d like to see every one of the senators and congressmen go out into one of these widespread, drought-stricken areas

and spend a day,” said Todd Eggerling, 44, a rancher in Martell, Nebraska. “Walk around and see the effects of what’s going on. Look at the local economies and see what’s going to happen to them. Then they can go back

to Washington with a real perspective and say, ‘Hey, we need to do something.’”^23^


By mid-August, the administration estimated assistance for crop insurance premiums for 2012 had reached the $9 billion mark. In addition to the $170 million in livestock commodities purchased from ranchers by the federal government, the Agricultural Department made $30 million in financial and technical assistance available to farmers and ranchers in 19 states. This included $14 million to transport water to livestock. Grazing restrictions on federal land have been eased, and the Small Business Administration is working with farm communities to broaden access to credit and investment monies.24


The Coast Guard is working with the Army Corps of Engineers to monitor problems on rivers and waterways. This includes severely depleted reservoirs. Water levels on the Mississippi are

21 “Obama Taps Well of Federal Agencies to Help Drought-Stricken farmers” August 19, 2012. FoxNews.com http://fxn.ws/Rwq834


22 Beck, “Ranchers Lose Hope Drought Aid Will Come in Time,” http://bit.ly/QBsyIo


23 “Obama Taps Well of Federal Agencies to Help Drought-Stricken Farmers” http://fxn.ws/Rwq834


24 Ibid.

at near-historic lows from its juncture with the Ohio River at Cairo, Illinois down to New Orleans. Maritime commerce on the river is suffering, recreational use has been dramatically curtailed, and Louisiana is experiencing issues with drinking water. The Mississippi annually sees goods traffic worth $180 billion, with 500 million tons of “basic ingredients” for the U.S. economy moving up and down the river.25


The Mississippi is the major highway for the transportation of 60% of the nation's grain crop, as well as 20% of oil and gas production, and 20% of the national coal output. Sixty trailer trucks are required to carry a load equal to a single river barge and 144 eighteen-wheel tankers to move the equivalent of one petroleum barge. In order to negotiate the lower river levels, these vital barges have to carry 25 percent less to ride higher in the water.


When barges run aground, river traffic stalls in the already narrowing channel. A year ago, historic flooding altered and raised the riverbed. In some places, the Mississippi is a one-way river, with north and southbound barges waiting for passage. All of this translates to drought- related hikes in shipping costs that are ultimately passed on to the consumer. 26


The health of the Big Muddy compared to the corn crop shows a striking parallel drought gauge:


25 Ibid.; John Yang, “Drought Sends Mississippi Into Uncharted Territory,” August 15, 2012, USANews.NBCNews.com, http://nbcnews.to/P7XHoF


26 Yang, “Drought Sends Mississippi Into Uncharted Territory,” http://nbcnews.to/P7XHoF

Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. predicts the average annual increase in food prices for the nine months ending in June 2013 will be 4%. Since July, gasoline prices are up 13%. Food and fuel make up 24% of the consumer price index. Unemployment continues to hover near 8%. Consumer sentiment and confidence remain low. “Energy is hitting us now, food is going to hit us later,” Feroli said.


Federal agricultural policies in the United States for the most part date to the New Deal era when farmers raised crops and livestock side-by-side. Now, the highly specialized nature of agricultural operations has created inequities in the industry. Some analysts say that the most serious of these is the fact that large corporate farms are really the major beneficiaries of federal crop insurance, while smaller operators struggle to pay premiums and never collect benefits.


Others point to the fact that ranchers and livestock producers do not enjoy the same level of opportunity for federal insurance cover and subsidies as farmers. All decry the extent to which farm policy can and does become a political hot potato, something that has certainly happened at this juncture in national politics. Congress is sharply divided along party lines, fiscal conservatism is the rallying cry of the opposition, and a presidential election is underway.


Bring into this picture a drought that is more severe than any that has occurred since the turn of the 20th century, coupled with an historic heat wave, and a near “perfect storm” is created. This storm is not, however, just sweeping through the agricultural sector. It is touching many aspects of American society from households in Louisiana where drinking water no longer comes out of the faucet when the tap is turned, to grounded barges on the Mississippi. There are predictions for higher food prices, elevated homeowners claims for cracked foundations, and serious infrastructure damage to roads and rail lines from Washington D.C. to Texas.


Now, more than ever before, farmers and ranchers cannot just do the things at which they excel

-- raising crops and improving their livestock. They must be sound businessmen who also understand the murky places where federal policy and insurance meet. For many this is an overwhelming process, and one that, in far too many cases, leads to claims denials. While you may think that hiring an attorney is an expense that you cannot afford, not seeking legal counsel may, in reality, be the most expensive decision. Reputable law firms work on a contingency basis, meaning they do not collect any fees until claims are satisfactorily settled.


Regardless, as an agricultural businessman, you have a responsibility to file your claim according to the rules of the “game” so that in the event of a claim dispute, adequate documentation and evidence exists to move forward. The following sections briefly outline the process of both filing and disputing agricultural insurance claims.




[] Filing an Agricultural Insurance Claim


Obviously drought conditions are placing many farmers and livestock producers in the position of filing for benefits from various agricultural insurance products. Although losses and damages in agribusiness are inevitable, current conditions are greatly increasing the volume of claims.


Tom Zacharias, President of National Crop Insurance Services offered the following advice to farmers facing weather-related disaster. If you think you have a loss on an insured crop:

p<>{color:#000;}. Notify your crop insurance agent within 72 hours of initially discovering the loss.

p<>{color:#000;}. Continue to care for the crop to protect it from further damage.

p<>{color:#000;}. Get consent from the insurance company before destroying any insured crop.

“Crop insurance is working well, and it will prove to be instrumental to agriculture’s ability to rebound this year,” said Zacharias. “As Congress debates a new Farm Bill and as the administration considers future changes, we hope they will see our impressive track record and do no harm to crop insurance.“27


It is the responsibility of the producer to initiate the claim for damages. This is an overview of the basic process:


[]Filing a Claim with the USDA-RMA


h3((<>{color:#000;}. [] *Contact your agricultural insurance* agent.


USDA-RMA policies are sold through third-party agents. Contact that person when you file a claim. Provide all the details of both the event and the damages. Document thoroughly with paperwork, photos, and videos.


h3((<>{color:#000;}. [] *Schedule with an* adjustor.


The agent will schedule an adjustor. At this early stage, you may want to engage the services of an agricultural attorney to facilitate the process. Adjustors follow guides that assign urgency to claims based on the policyholder’s perceived ability to continue earning a living.

27 “Crop Insurers Reassure Farmers As Drought Worsens,” August 21, 2012, FarmProgress.com http://bit.ly/Rwr5bD


This could affect the producer’s window of opportunity to replant or to remove damaged crops. Since the damaged crop is evidence to be used in the claim, problems can easily arise. Inform your agent of your desire to plow or to remove damaged crops and of the need to stick with a harvesting schedule.


Although you are still entitled to have an adjustor tour the property in a reasonable amount of time, do not neglect to keep all parties concerned informed about your plans regarding the damaged crop.


h3((<>{color:#000;}. [] *Give the adjustor a comprehensive tour of the* damages.


Keep the evidence in place so much as it is possible to do so. The adjustor must be able to make an accurate assessment. Be prepared if the adjustor announces his intention to visit neighboring farms to assess the condition of their crops and livestock in relation to your own. It is also likely he will examine weather records and other relevant data.


Adjustors strictly follow scientific guidelines in determining the cost of damages to your business. They do not guess, and they do not assume. You have a responsibility to provide a sample of the damage level to the adjustor, which will serve as the basis of his report.

Additionally, you must afford the adjustor ample opportunity to see for himself what has occurred and what effect the damage has on your overall ability to operate.


The claims process on agricultural insurance is always complicated. It’s best to avoid trouble before it happens by taking steps to ensure that all requirements to receive benefits are met.


h3((<>{color:#000;}. [] *Submit required supporting* documents.


Prepare any potential supporting documentation in advance. Discuss the nature of this documentation with your agent before the adjustor visits your property, and if necessary, consider hiring independent, third-party assessors to support your claim for damages.


Provide farm reports, applicable samples, weather data, photos, and videos in support of your claim of damages.


Although you are entitled to receive payment in a timely fashion, be aware that there are no set limits on what that length of time may be.

[] []Farm and Ranch Experts Say: Be Proactive!


If you participate in any agricultural endeavor, you are subject to loss. You also have the opportunity to insure yourself against loss, but do your homework and prepare. Keep records that include planting or stocking dates. Take photos before a weather event. Use services like DTN and stay abreast of conditions.


Take photos of crop and livestock progress, and document market price changes as your crops and livestock progress in yield and weight. Additionally, document the steps you have taken to secure your investment and make a record of trips to the pasture and head counts on those days.


You may also want to introduce yourself to local stockyards and elevator ownership. Introduce yourself to the local sheriff and his staff, as well as your area brand inspector. Join the local Cattle Raisers and your local Farm Bureau. Ask your insurance agent if any of his clients have been denied claims. Ask him if so, were any successful in fighting the denial and what factors influenced their success


Larry Marble, LarryMarble.com, Down on the Farm Radio


Larry Marble, host and owner of Down on the Farm Radio, began the farm and ranch news program on KKYX in 1995. It has grown from 15 minutes with two sponsors, into one hour, and forty sponsors. It is now the most popular Farm and Ranch News program in 100,000 square miles of Texas, and the flagship of Texas Farm Bureau Radio.




[] Filing a Claim with a Private Insurance Provider


Although the private insurance claims process may differ from state to state, the basic steps are as follows:


h3((<>{color:#000;}. [] *Contact your insurance* provider.


Typically private insurance companies will have a hotline or toll-free number to report or to file a claim. Many have now created methods to accomplish the bulk of the process online.

Before you contact your provider, have your policy on hand and be familiar with what is covered in relation to the event that has occurred. This may be anything from crop loss, to damages to farm structures.


You will be asked to provide information verifying your identity and coverage. When you are supplying information about the claim, be as detailed as possible about the nature of the damage and itemize any equipment or machinery involved.

If it is necessary for quick repairs or debris removal to occur, inform the agent of this fact so the adjustor can be apprised of the actions you will be taking. This is especially important if you will be immediately replanting a crop.


h3((<>{color:#000;}. [] *Prepare your* documentation.


An adjustor will be assigned to assess the damage to your property, and will contact you regarding date and time. Provide as many photographs of the incident as possible before anything is removed or cleaned up.


If necessary, hire third-party consultants to document and verify the damage and to submit written reports of their findings. If the damages have impeded your ability to earn a living, have documentation of those effects as well.


Have a third-party estimate of repair and replacement costs of anything damaged.


h3((<>{color:#000;}. [] *Make temporary repairs if* necessary.


Although it is important to preserve the evidence after an incident on which you will be filing a claim, you are also responsible for containing the damage and preventing more from occurring. This may mean you have to pay for temporary repairs. Keep accurate records including receipts of all such activity so you can be reimbursed. Document all original damage before any such repairs are made.


h3((<>{color:#000;}. [] *Accompany the adjustor during his damage* inspection.


Always accompany the adjustor on his inspection. Have your documentation on hand, including the policy itself, and copies of any photos you have taken.


Observe the adjustor to make sure he is thoroughly and methodically assessing the damage. Make notes about your conversation, and any information you have supplied.


h3((<>{color:#000;}. [] *Submit additional requested* documentation.


If the insurance company asks for any additional documentation, provide the material promptly to prevent a slowdown in the processing of your claim.


Regardless of the source of your insurance, if your claim is denied or if the benefit you receive is undervalued, you have the option to dispute the claim.

[] The Basics of Claim Disputes


If you find it necessary to dispute a denied or undervalued agricultural insurance claim, you will be facing a difficult and convoluted case best handled by a qualified insurance lawyer. This is a highly specialized field, particularly where federal crop insurance laws and provisions are involved. It is also beneficial to work with an attorney who actually understands farming practices and the agricultural industry itself.


Your case will proceed in one of three ways:


p<>{color:#000;}. mediation

p<>{color:#000;}. arbitration

p<>{color:#000;}. litigation


Both mediation and arbitration are negotiation processes involving trained, third-party professionals. Mediation is non-binding, but in arbitration there is a “winner.” These kinds of assisted settlements are often favored by insurance companies over outright litigation in a court of law.


In litigation, however, the plaintiff -- you -- have greater control on how the evidence is presented. Additionally, the courts can take avenues to arrive at compromise decisions so that both parties "win" to a degree. The only way to determine which process is best suited to your personal tolerance and to the particulars of your case is to hire an attorney.


All methods of claim settlement will involve the presentation of your evidence, a response by the insurance company, some form of meeting or hearing, a decision, and a waiting period for any settlement to be awarded. This is not an “instant” process, and will take a period of months.


Should you opt for litigation, it is possible that the expenses you incur during the disputation process could be covered by any settlement you receive. If you expect to incur additional expenses directly related to the denied claim, discuss this fact fully with your attorney, and be prepared to keep careful records.

[] Agricultural Insurance Fast Facts


p)))<>{color:#000;}. A farm policy is one of the most complex policies in the market. It requires the most extensive interview with the insured, an inspection of the property, and review of the farmer’s inventory and the farmer’s potential loss of income.


p)))<>{color:#000;}. A farm policy is basically a homeowners policy with business insurance attached. Therefore, all of the questions associated with a home policy, plus those questions relating to a for-profit operation must be covered with the insured.


p)<>{color:#000;}. A comprehensive inventory of all of the farm’s equipment, including its values, must be established. This list will establish a limit of insurance and the actual cash value of the equipment.


p))<>{color:#000;}. A rebuild estimate should be calculated on each of the farm’s outbuildings. A value for full replacement cost, functional value, or actual cash value will be established. Our experts can determine which of these values meets our client’s needs, and insurance budget.


p<>{color:#000;}. If a building insurance limit is too low compared to its actual value, then a policyholder can be subject to what is called a coinsurance penalty. Simply put, it gives the insurance company the right to pay less of your claim if you do not insure your building to the value they specify. Most insureds are not aware of this very important clause in their policy.


p)<>{color:#000;}. The potential for loss of income and extra expense will be established by our experts. An insurance proposal for loss of income and extra expense is generally offered by your insurance carrier. For example, a dairy farmer, who loses his milking parlor and/or barn will not only suffer a loss of income, but also an extra expense to rent equipment. This is generally insurable.


p<>{color:#000;}. Liability needs are immediately identified and assessed by our attorneys and experts. In today’s economy, many farms have turned to supplementing their farm’s income by branching out into other endeavors. For example: repairing machinery, custom farming, and sale of fertilizer or seed are not automatically covered by a farm policy, but are beginning to be a mainstay on many of today’s farms.


p)<>{color:#000;}. Many farms have utilized pastureland and buildings in horse boarding operations. There are many liability issues related to this type of operation, and very little, if any, coverage comes from a typical farm policy. Horse boarding operations, for example, are a specialty product that might be offered by your carrier.




[] An Innovative Agribusiness Law Firm


The Voss Law Firm, P.C. has been working with ranchers and farmers for years, and continues to offer aggressive representation with little to no risk on the part of our clients.


We do this by representing our clients on a contingency fee basis. Our clients pay us nothing unless we recover damages on their behalf.


The Voss Law Firm, P.C. is one of only a few law firms in the country

with expertise in Agricultural Insurance Claims.


Agricultural Markets We Serve



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p<>{color:#000;}. Family Farms and Ranches

p<>{color:#000;}. Gentleman and Estate Farms

p<>{color:#000;}. Horse Farms, including Equine Mortality

p))<>{color:#000;}. Large Commercial Growers and Packers of Agricultural Products

p<>{color:#000;}. Vineyards

p<>{color:#000;}. Wineries, including Tasting Rooms

p<>{color:#000;}. Grain and Field Crop Growers

p<>{color:#000;}. Citrus Growers

p<>{color:#000;}. Cotton Growers

|<>. * p<>{color:#000;}. Wholesale Nurseries

p)<>{color:#000;}. Livestock, Primarily Cattle & Sheep

p)))))<>{color:#000;}. Equine and Alpaca Operations

p)))<>{color:#000;}. Small to mid-sized Hog Confinements

p<>{color:#000;}. Dairy Farms

p<>{color:#000;}. Cattle Farms

p))<>{color:#000;}. Vegetable, Fruit and Nut Operations

p<>{color:#000;}. Grain and Field Crop Farms

p<>{color:#000;}. Hay Operations

p<>{color:#000;}. Hobby Farms





For a free, no obligation, confidential consultation, plus contacts us via our website:

www.DeniedClaim.com , by phone at 866-276-6179, or by email [email protected]


The Voss Law Firm, P.C. represents clients on a local, national and international basis. We proudly serve companies and individuals along the Gulf Coast and around the globe on a contingency fee basis.


Appendix I – Types of Agricultural Insurance


Agricultural insurance is an essential aspect of modern agribusiness in the United States. As an insurance genre, the coverage is both comprehensive and confusing. While not intended as an exhaustive treatment, the follow material offers an overview of the major types of coverage available. (For more information see: USDA Risk Management Agency: Crop Policies and Pilots at rma.usda.gov.)


Crop Insurance


Crop insurance is primarily a risk management tool. In its most basic form, this coverage pays an indemnity if the inventory value or revenue of farm production is less than the amount guaranteed by the policy.


The policy will also outline what events or specific “perils” are to be covered. Since crops have no defense against severe weather, the elements, and “acts of God,” some policies also address the unpredictable effects of these occurrences.


(Because this is high-risk coverage, many of these programs are offered by private insurance companies approved by the government and are attached to some form of subsidized premium arrangement through the USDA.)


Other policies address market losses for individuals and businesses that rely on produce for their livelihood, and some coverage is specific to given crops only.


Some of the most common forms of crop insurance available in the United States include:


Actual Production History (APH)


These policies protect farmers against shortages and yield losses caused by natural events including, but not limited to, drought, hail, moisture, frost, and disease. Producers choose the amount of average yield that will be insured. In some instances, this can amount to as much as 85% of the producer’s recorded average yield.


The producer will also choose the percentage of the predicted price to insure. The USDA’s Risk Management Agency annually determines predicted prices based on a formula of socio-economic and environmental factors. Producers can opt to insure as much as 100% of their production based on the prices set by the RMA.

Should the amount harvested fall short of the amount of insured yield, the producer may file a claim for an indemnity payout. The amount actually received is figured as the difference between the amount insured and the actual crop yield.


Actual Revenue History (ARH)


This type of coverage is very similar to an APH policy, but is based on historical revenues and reflects a percentage of total revenue for the given crop. The producer and the insurance provider negotiate terms on the revenue history of the crop among other factors. An ARH policy is a protection against diminished seasonal revenue from low prices, low yield, or low quality.


Adjusted Growth Revenue (AGR)


An AGR policy insures the revenue for the whole farm, not a given crop. The coverage may include agricultural yields, livestock, and aquaculture products. This coverage is only available in selected counties in 10 states, and state-wide in an additional eight.


Both the producer’s tax history with the IRS and an annual farm report are used as the basis for this coverage. Both the premium rate and the percentage of coverage are tied to the number of produced commodities.




This coverage is available in 35 states and is based on the producer’s five-year average historic farm revenue as per their IRS tax returns and an annual farm report. It is a smaller scale version of AGR and can be used in conjunction with other insurance policies, but not with AGR. Crops, livestock, and aquaculture can be insured. Coverage percentage and premium rates are calculated by the number of commodities produced. With these policies, however, the maximum income that can be insured is significantly lower than with an AGR policy.


Combined Insurance


This level of coverage addresses revenue loss originating from crop damage tied to environmental events including drought, crop disease, pests, and excessive moisture. In most cases, producers must apply for the policy before planting their crops, and can choose to have either yield or revenue protection, or both.




Crop-Hail coverage is not included in the Federal Crop Insurance Program (FCIP) but is offered by private insurance companies only. Application may be made at any time of

the year, even after planting. Damages may be claimed for only those parts of the field specifically harmed by hail, so that the whole crop does not have to be declared a loss.


Other types of insurance covers specific crops against stipulated perils and events. Variations of FCIP policies differ by state, and are designed to meet the needs of farmers in that region.

Some producers obtain the best coverage by combining both private and FCIP policies.


Livestock Insurance


Insurance coverage may also be obtained for cattle, swine, poultry, and dairy cows. The USDA Risk Management Agency offers two major types of livestock insurance.


Livestock Risk Protection (LRP)


This coverage protects against price fluctuations during the life of the policy. If livestock prices fall below the insured amount, the policyholder’s payment will be based on the difference between the insured price and the ending value or price published by the corresponding agency for the livestock type in question.


For example, if the insured animals are cattle, the ending value will be tied to the Chicago Mercantile (CME) Feeder Cattle Cash Price Index (not prevailing market prices in the producer’s geographic area). The coverage is aimed specifically at making up for price differences, and does not address the entire value of the herd.


(Also note that the CME Feeder Cattle Cash Price Index applies in 12 states only. Additional agencies and indices for benefit calculation are listed in the LRP coverage.)


The same concepts apply to other LRP variations with the principle difference lying in the values and formulas used to calculate the benefits.


Livestock eligible for this coverage include: feeder cattle, fed cattle, lamb, and swine.


Livestock Gross Margin (LGM)


The gross margin is defined as the difference between the actual market value of the livestock product minus the feeding costs for the animal. LGM applies to cattle, dairy, and swine and is designed to protect minimum income over feed costs (IOFC).


The producer estimates the gross margin, which is most often used with dairy herds. Since both dairy products and cattle feed prices are unstable, dairy farmers commonly invest in this coverage. At the end of the coverage term, if the insured gross margin exceeds the producer’s actual gross margin, an indemnity is paid.

Livestock Indemnity Program (LIP)


This coverage, administered by the USDA Farm Service Agency, provides protection against catastrophic events that can cause the death of an entire herd. Covered events include floods, hurricanes, tornadoes, or cattle diseases.


It is not necessary for the covered farms to be located in a county designated as natural disaster areas by the Department of Agriculture or by an executive order from the President of the United States. The covered livestock, however, must be maintained for commercial purposes only, or used as farming implements. A wide variety of animal types are eligible including poultry, swine, cattle, alpacas, horses, and llamas.


The number of eligible livestock that perished in a qualifying weather or natural event are multiplied with a national payment rate to determine the amount of the indemnity paid.


Private agriculture insurance companies also offer livestock insurance. Producers may choose to use options available to them via this means to complement federal insurance and maximize their coverage protection.


Other Types of Agricultural Insurance


In each state, agricultural insurance coverage is available through private channels for assets other than crops and livestock. In larger agricultural states, some of the most common of these policies include:




p<>{color:#000;}. homeowners insurance policies that extend coverage to barns or outbuildings

p<>{color:#000;}. comprehensive barn/farm insurance policies covering farming equipment, manufacturing equipment, tractors, grains, and implements




p<>{color:#000;}. agricultural insurance for hobbyist farmers

p<>{color:#000;}. coverage for off-road vehicles, boats, equipment

p<>{color:#000;}. personal liability against injuries within the property boundaries




p)<>{color:#000;}. coverage for family-owned farms, including farming structures connected to the home, farming implements, equipment

p<>{color:#000;}. can include coverage for the main dwelling and additional living expenses

North Carolina


p<>{color:#000;}. umbrella policies for the home and farm structures, including barns and silos

p<>{color:#000;}. coverage for farm hands and other personnel against accidents and injuries




p<>{color:#000;}. coverage for farm equipment, homes and farm structures, and business risks




p<>{color:#000;}. coverage for farm products (grain, feed, seeds, and fertilizer)

p<>{color:#000;}. policies for farm buildings including silos, fencing

p<>{color:#000;}. protection for building materials, machinery, and supplies


Drought: Agricultural Effects, Insurance Claims, and Beyond

If you are a farmer affected by the drought, this free guide is for you! It provides critical information to help you file your claim with either the USDA-RMA or a private insurance company. In addition, it provides you with essential information about agricultural claim disputes that will help you protect your interests and obtain the best possible outcome when submitting your insurance claim. Complete this form now to get a FREE copy of the report! It is quick and easy and there are no obligations. As insurance claim lawyers, we know that times are hard and you need every penny you can get when you have incurred serious losses due to the drought. We do not want to see insurance companies take advantage of hardworking farmers and ranchers by undervaluing or denying claims. We want to help make sure you get as much as possible from the insurer during this severe drought. In this handbook, you will learn how to document your losses due to the drought and file an effective claim that outlines the costs to your operation. Following are some of the points to include: -Corn crop losses affect the food supply for humans and animals as well as alternative energy sources. -Ranchers are downsizing cattle herds due to poor pasture conditions, rising feed costs, and depressed cattle prices. -Reduced ethanol production increases the price of gasoline and decreases the nation’s overall fuel supply. -Increased food and fuel prices are passed on to U.S. consumers. The drought has hurt many in the agricultural business, whether they are growing corn for human consumption, animal consumption, or as a component of alternative fuel. If you are a rancher or farmer negatively impacted by the drought, you owe it to yourself to read this FREE book. Inside, you will find everything you need to know about filing an agricultural insurance claim including: -Understanding the differences between filing a claim with the USDA-RMA and a private insurance provider. -Knowing when to file a crop insurance claim. -How to initiate an effective agricultural insurance claim. -Understanding the agricultural insurance claim process. -How agricultural insurance claim disputes work. If the insurance company denies or undervalues your agricultural insurance claim, you need the services of a law firm that understands the agricultural industry and federal crop insurance laws. At the Voss Law Firm, we regularly help farmers and ranchers who have experienced severe crop losses due to the drought and we can help you too. Call one of our Texas insurance claim attorneys today at 888-614-7730 for a prompt and free consultation.

  • Author: Bill Voss
  • Published: 2016-08-15 18:35:55
  • Words: 7562
Drought: Agricultural Effects, Insurance Claims, and Beyond Drought: Agricultural Effects, Insurance Claims, and Beyond