Following floods, lingering levee damage complicates calculus for farmers

The abnormally high levels of rainfall that caused havoc last year continue to have an impact for farmers this year.

To date, about 40 levees in Missouri have not been repaired. The exact number is difficult to determine because some are privately owned while others are operated by the U.S. Army Corps of Engineers.

The condition of levees in the state complicated decisions farmers had to make regarding crop insurance for this year’s planting cycle.

“There are several reasons why crop insurance is going to be complicated,” Raymond Massey, a professor with University of Missouri Extension, said before the March 15 crop insurance deadline. “Some of the levees have not been repaired, and therefore the land is still underwater, and therefore it is not eligible for insurance because it has to be planted.”

This applies to a fraction of the total acres dedicated to cash crops, such as corn and soybeans. Massey estimated of the 5 million potential soybean acres and 3 million corn acres available in the state, less than 100,000 of those would not be planted because of levee breaks.

However, even if farmers can plant their crops this spring, they likely paid more for crop insurance this season because of the heightened risk of flooding.

Crop insurance basics

Joshlin Yoder is in a unique position to understand the precarious situation that some farmers will face this year: He is a farmer himself and also works as a crop insurance agent. Yoder is a third-generation farmer who, along with his brother and father, works about 4,000 acres near Leonard in northeast Missouri.

“I carry crop insurance for a couple of reasons,” Yoder said. “One, the vast majority of farmers have to borrow money to buy the inputs they need to put crops in the ground. Most financial institutions today require you to carry crop insurance as part of the terms for taking a loan with them.”

Most growers purchase multi-peril crop insurance, which offers revenue guarantees for the season. They can receive insurance payments if the market price falls below a specific level. Farmers can also receive insurance payments if the amount of crop they yield per acre is less than a predetermined amount because of natural disasters.

Farmers can decide on the percentage of the yield they want to insure. Most will select between 50% and 75% of the average yield for the season. The higher the percentage, the higher the premium they pay.

Levees and insurance

The status of the levees is important because it factors into the premiums that farmers pay for the insurance they want — if they can even get any coverage at all.

Crop insurance is like any other protective product in that its price increases with risk. For example, the amount that a driver pays to insure a vehicle correlates with the likelihood they will be involved in a collision.

For crop insurance, a damaged levee increases the possibility that flooding will occur in the immediate area. With agricultural land, that levee damage increases the likelihood a farmer will not obtain the necessary yield from the land — likely triggering a claim. As that probability increases, so does the premium for the insurance.

In the most extreme case, farmers may face premiums that are three times or more than they would if a levee had not been breached in their area. In terms of cost, insurance is one of the lower expenses relative to other inputs, such as land and equipment — but it is still tangible.

There are caveats, but Yoder estimates the insurance premium for many farmers is about $10 to $15 per acre for soybeans and $20 to $25 per acre for corn, depending on the coverage level. That becomes critical in an environment in which commodity prices are low.

“It is not as expensive as any of the other inputs, but farming right now is also a very tight-margin endeavor,” Yoder said. “With the way the markets currently are, a lot of times you start working out your budget and working on your cash flows, it is fairly challenging to make those acres look profitable.”

Geography of risk

Not all farmers will be affected equally. The farmers who will experience the greatest hardships will be along the rivers. Many are in the northwestern part of the state.

“They are going to follow your main river channels in the state, so near river bottoms,” said Shane Albertson, vice president of crop insurance at FCS Financial.

The FCS Financial website identified 27 counties in Missouri where farmers may have to pay higher premiums because of breached levees. These include Boone, Callaway, Holt, and St. Louis Counties.

Thus far, there are a number of levees in different stages of disrepair — and during an interview in late February, officials from the U.S. Army Corps of Engineers were not confident the repairs could be made in time for the beginning of the planting season.

“It is hard to say, it is likely the repairs will be completed in the fall,” said Shane Simmons of the U.S. Army Corps of Engineers.

That provides little comfort to farmers who are trying to make a living on land near breached levees and had to make decisions regarding coverage by the middle of March.

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