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CROP INSURANCE OFFSETS DAIRY VOLATILITY

CHARLTON, NY, Oct 15, 2010 - The past two years have been challenging for even the most efficient northeastern dairy farmers, but Saratoga County dairy farmer David Wood has used crop insurance as a tool to reduce financial risk. “It’s helped our business because of the financial security it offers,” he said in an interview in January 2010.

David Wood New York State Dairy Farmer

Wood grows 1600 acres of corn and hay (and purchases from another 200 acres) to provide silage for a dairy herd of nearly 900, and raises his own heifers. He first signed up for catastrophic (CAT) coverage through USDA's Farm Service Agency (FSA) several years ago. Gradually he increased his coverage to 65 percent, and then 75 percent because the premium subsidy was so favorable. Wood has attended some of the educational workshops given by the NYS Dept. of Agriculture and Markets, partnering with RMA to learn how to use crop insurance to his greatest advantage.

Wood uses his knowledge of insurance premium structure and accurate recordkeeping to maximize the return on his crop insurance investment. He keeps his acreage in multiple FSA farm units, so that a loss on one unit can result in a payout, instead of being diluted by better yields on other units. About one-third of his land is his own, and the rest is rented. Yields on rented land have not been as good because of past care. Wood carefully tracks planting, and keeps logs in each of the trucks to track the harvest loads so that any losses are credited to the appropriate farm unit. An adjuster helps with estimates of silage once it’s in storage.

Unfavorable growing weather can leave a dairy farmer with a crop yield too small to support his herd, while the same weather can raise market prices for corn and soybean meal. Wood found himself in that situation in 2008, and again in 2009. He purchased 75-percent coverage. “Even though our yield was not great enough to really support the whole herd, because of the crop insurance, we can afford to purchase whatever extra feed we need,” he said, “so it was a good year to have it.”

Wood’s experience with the program has convinced him that crop insurance offers financial security which helps offset yield and price risk, and maximize profitability even in a difficult environment. “It’s worked very, very well for me,” he says.

Wood notes that it is just in the last 3 years that he learned that crop insurance could be a major piece of his long-term goal to keep profitability high. He outlined his approach to incorporating crop insurance into his operation as, “attending some meetings to learn about crop insurance, knowing the premium structure, knowing the breakdown of the farm units on your farm and keeping track of the load counts (of silage) so that you comply with the program.”

Wood encourages other dairy farmers to take advantage of crop insurance, calling it “a good way to assure a better return in farming.”

This story is a New York State Department of Agriculture and Markets (NYSDAM) publication from Federal Project Fiscal Year 2009-10. NYSDAM conducts a crop insurance and risk management education program in partnership with RMA. For more information, please see http://www.agmkt.state.ny.us/ap/cropinsurance.html.