Wheat and More….or less
Remember the old saying…you can’t trust a dog to watch your
Well, in driving around the western Kansas neighborhood recently, it seems
that’s exactly what we did. We told the dog to watch our lunch…and he ate it.
For every rule, there’s someone willing to break it. And
among that crowd, there are those smooth talkers who can make it sound like a
good business decision. To them, it’s just business. Others are even cheered on
because they put one over on the government. Still others consider this a form
of innovation. But it’s wrong. And at the end of the day, everybody pays.
Over the past several years, I and others have watched a
growing trend with concern—and that is to continually push the fence on crop
The big trend here in semi arid western Kansas this past fall was to plant
“continuous wheat” immediately after harvesting dryland corn. And in many
cases, the corn itself was also a failure. I call this 5-minute fallow but the
crop insurance industry calls it continuous wheat because it will be harvested
the following year.
What happened this past fall was classic. Because of the
on-going drought, there was zero topsoil moisture and zero subsoil moisture
after the summer row crop. Almost April, much of this wheat that was planted in
these disastrous conditions has not even come up.
But why would you plant a crop that has almost l00% odds of
failure? Because you can make a heck of a lot of money doing it…off crop
insurance. Here’s how it works. My insurance agent says with a T yield of 27
bushels per acre, with 85% coverage and a wheat price of $7.15, the farmer’s
share of the premium is $45/acre. He can easily put in the wheat crop for less
than $20 giving him a total investment of just $65/acre.
Now with $165 in coverage and with high odds of failure, the
farmer will almost triple his investment—and will certainly net $100/acre. For
every quarter of ground, he’ll get an insurance check for $26,000.
But wait. The good news doesn’t stop here. We get to combine
these very generous insurance loss payments with payments from other government
programs like the Supplemental Revenue Assistance Program (SURE) or Congress’s
disaster program. In SURE, the farmer gets paid again for the identical losses
that had already been covered by crop insurance. Overall, it makes this type of
activity incredibly profitable.
So who are the winners? The farmers doing it, of course.
After they get their hefty checks, they’ll just fallow the ground and plant it
to wheat the next fall—just like everybody else was going to do. I’ve even
heard some of these farmers joke about using extremely low seeding rates to
help ensure poor stands. Then in the spring when they’re “topdressing”, they’ll
add a glug or two of Roundup herbicide to make sure the wheat gets sick and
that the crop fails.
Yet sabotage is rarely needed. KSU researcher Alan Schlegel,
Tribune Experiment Station, says this is a very risky rotation and simply
getting a stand is very difficult.
While this is irritating to me and other farmers, even
insurance agents who are selling policies to these farmers are disturbed by it.
One said these farmers are clearly taking advantage of the system. “It’s just
not right. And it’s bad for the crop insurance industry.”
I agree. The crop insurance industry is one of the
casualties—not only their actuarial integrity, but their professional
What about the integrity of the farmer. Is this ethical? A
quick acid test on ethics is to simply ask: Is anyone being hurt by these
actions? Without a doubt.
Beyond the crop insurance industry, the US taxpayers
clearly got a bloody nose. As we all know, crop insurance is heavily subsidized
with normally 65 to 75% of insurance premiums paid for by the Federal
Who else gets hurt? Neighboring farmers….big time. To cover
the losses, everybody’s rates go up and everybody’s coverage goes down. Not
only that, this type of activity reflects very badly on farmers in general. The
skeptical public really does have reason to wonder if all farmers are crooks.
And let’s not overlook the landlords. In many cases, older
out-of-state landowners have cash rented their land. But part of their equity
in the ground is their crop yield history, yield guarantees and insurance
values which these planned-failure farmers consider theirs for the taking. That
looks good on your Schedule F—screwed 80 and 90-year old landlords who trusted
In my mind, there is no question about the ethics of this.
But is this legal? Is this a crime? In trying to find an answer to that
question, I talked to a lot of people. One of them said when you sign an
insurance contract, you agree to use best management practices and to do
everything possible to make this a successful crop. That does not include
planting wheat under disastrous conditions where the crop has no chance. This
is fraud. This farmer cannot look you in the eye and say he intended to plant a
crop that would succeed.
These farmers may say with the current high price, it
justifies the risk of putting in the crop. Who knows, it could start raining
and we could get a wonderful crop out of the deal. That’s true and that’s one
of the nice things about having farmed for 35 years because I have seen that
happen. And it was one year out of 35. Those are pretty good odds—if you’re
betting on failure.
While we’re on this point, I didn’t say you couldn’t plant
the crop. If you want to run the risk, go right ahead. But I sure don’t think
the American taxpayer or your neighbor or your landlord has to share in your
The whole system is weakened by these excesses. Because of
the individuals practicing these high risk and non traditional
rotations—especially under extreme conditions where failure is almost
guaranteed—regulatory agencies are forced into more and more stringent
restrictions on coverage and rates, all of which can have a chilling effect on
legitimate farmers wanting to adopt new and innovative production practices.
All of this leaves us with one question. If USDA and the
crop insurance industry continue to allow this, do we all now have to start
using these very suspect crop production practices and rotations just so we can
remain competitive with the over zealous farmers? That’s not a world I want to
be part of.