Harvesting Cash

'Farming Your Insurance'

Sunday, October 15, 2006

WHITEVILLE, N.C. -- Crop insurance helps to protect farmers against the vagaries of weather. But it can also alter the landscape of farming in a region, resulting in higher losses for taxpayers.

Consider the lowly sweet potato.

For years, it was excluded from federal crop insurance. But in the late 1990s, growers and legislators in North Carolina successfully lobbied federal officials for coverage. Soon, the number of acres planted with sweet potatoes was doubling and tripling, as were the claims filed by farmers.

In Columbus County, a low-lying area tucked away in the southern corner of the state, the number of sweet potato acres quadrupled after federal crop insurance was introduced in 1998. Almost immediately, losses also began mounting: $1.4 million in 1999, $2 million in 2000, $3.3 million in 2001. Between 1999 and 2005, sweet potato farmers paid $954,264 in premiums but collected nearly $15 million in federal insurance payments -- a return of almost $16 on every $1 in premiums.

On one level, it was a case of bad luck, growers said. Starting in 1999 with Hurricane Floyd, the county was hit with a series of storms that roared in off the coast and dumped buckets of rain on their fields during the fall harvest. A root crop, sweet potatoes are vulnerable to standing water and rot easily.

"We just seem to have had one storm after another," said Phil Gore, a crop insurance agent who also grew sweet potatoes until a few years ago.

But other growers and government officials said the large losses couldn't be explained by bad weather alone. They said some of the farmers who started growing sweet potatoes had never grown them before. Others planted in areas known to be wet. Still others didn't take care of their crops, saving money on fertilizers and other production costs, only to turn around and file insurance claims when their yields were poor -- a practice known as "farming your insurance."

"I heard some farmers plant in dark, wet soil," said Michael Shaw, a county extension agent. "Others were planting their bushes far apart, so when the adjuster came it looked like they had a bad yield."

"There was definitely a problem with the insurance," said R. Coke Gray II, a local USDA official. "Someone could go out and put nitrogen on their plants. That makes them nice and bushy . . . but produces no potatoes."

Crop insurance officials became so alarmed about the sweet potato losses that they hired a consultant. In October 2003, the consultant reported that the high losses could not be explained by weather alone and that the losses for sweet potatoes "were remarkably higher than those of other crops."

Several members of the Federal Crop Insurance Corporation, which sets policy for the insurance program, wanted to eliminate sweet potato insurance in Columbus County. After lobbying by the North Carolina congressional delegation, a revised insurance plan was introduced with higher premiums and stiff restrictions on the number of acres that farmers were allowed to plant. Growers also had to hire a "scout" to inspect their crops before harvest.

Most of the changes went into effect in 2005, with dramatic results. The number of insured acres of sweet potatoes in Columbus County plummeted to 1,548, from a high of about 6,000. The lower figure was nearly identical to the number of acres planted in 1997, the year before insurance became available. Losses also took a nosedive, to $109,265.

"After they revised the program, it wasn't as easy to collect," said George Wooten III, whose family has grown sweet potatoes here for decades. "It's almost like the guys who were in it before insurance stayed in it, and ones who weren't left."

-- Gilbert M. Gaul

© 2006 The Washington Post Company