Crop Insurance Why Do Farmers Need It
October 2nd, 2007 by David Graves
Farmers must have crop insurance for the same reason that any homeowner must have home insurance. A homeowner cannot afford the risk of being homeless because of a loss, and no one can get a mortgage without insurance. Without the availability of insurance, lenders would not make capital available to the housing market. Existing homes couldn’t be sold, and new homes couldn’t be built.
Farmers must have insurance for the same reason that any small businessman must have insurance. Farmers are in a very high risk business, which is extremely vulnerable to weather disasters—drought, floods, hail and freezes. The news has been full of several of these natural disasters this year. Without the security of crop insurance, lenders are unwilling to make farm production loans. This would be a “subprime” situation for American agriculture.