August 17, 2009
The Des Moines Register
Hubbard, Ia. - Lisle Cook examined an ear of corn with about one-third of its kernels ripped away, sheared by hail four days earlier. Then he looked over a 200-acre field and estimated an uninsured loss on about 45,000 bushels of corn destroyed by the hail.
Photo: Lisle Cook stands Thursday in a 200-acre hail-ravaged field, the hardest-hit of his fields. He has never carried hail insurance but now will recommend to his sons that they buy it. (Andrea Melendez / The Register)
Multiplied by the $3 cash price offered by Iowa elevators this week, the loss on paper would come to $135,000.
Cook will have a more exact figure by the end of the year after he has made an attempt to combine some of the more salvageable parts of the 200-acre tract that was hit hardest, and calculate the loss based on updated prices.
Like other farmers in the aftermath of a damaging hailstorm, Cook will ponder anew the necessity of carrying hail damage insurance.
"I haven't carried hail insurance in the 50 years that I've farmed, but I haven't had this kind of damage before," the 72-year-old Cook said. "You can always ask yourself that question after a storm. But I'll be OK. I've had enough good years and I'll be back farming next year."
But he added, "I'm pretty sure I'll recommend to my three sons that they buy hail insurance in the future. At their ages and stages of life, they should have it."
Sunday's hailstorm cut like a sharp knife along a 10- to 15-mile corridor from Webster to Grundy counties, through some of the most productive farmland in Iowa.
The portion of Cook's farms hit hardest have a crop suitability rating of 84, which puts it in the high end of soil productivity.
Cook said it is not unusual for such land to produce 200 bushels per acre of corn, well above the 171-bushel average for Iowa corn production in 2008, and even above the 185 bushels per acre predicted by the U.S. Department of Agriculture for this year's crop.
"At 10 a.m. Sunday, I had a corn crop that might be a record," Cook said. "By 11 a.m., it was gone."
The question of hail damage insurance is always the first to be raised after the kinds of hailstorms that hit Hardin County last weekend, and Fayette and Winneshiek counties in northeast Iowa last month.
Cook, who served in the Iowa House of Representatives as a Republican from Hardin County in 1981-83 and has long been active in farm and commodity groups, is no stumbling rube when it comes to farming.
Since beginning farming in 1960 after graduation from Iowa State University, Cook has expanded the original 200-acre farm near Hubbard, on which he grew up, to an enterprise of more than 1,000 acres and an extensive cow-calf operation.
Three of the four Cook sons have joined their father in farming, permitting Cook and his wife, Margaret, to enjoy the role of semiretired farmers.
As for insurance, Cook said: "I just never figured that I needed it. You see hail come and go around the state, and it is always very localized. The premiums are expensive. My bankers have never asked about it."
Most crop damage insurance is federally subsidized and premiums vary depending on how large a percentage of damage the farmers wants covered. A typical policy this year covering 75% of damage costs just short of $20 per acre for corn and around $12 per acre for soybeans.
A 1,000-acre farm with 60% corn and 40% soybeans, at 75%, would incur an annual hail damage insurance premium of between $16,500 and $17,000.
Hailstorms like the one that hit Iowa last weekend remain the chief caution to farmers who consider selling their crop forward in either futures or options markets.
Such an opportunity came in late May, when corn, after spending most of the winter below $4 per bushel, suddenly perked up to $4.50.
Many aggressive farmers took out futures contracts in May and June to sell this year's crop in December even before the ears had begun to develop on the cornstalks in their fields.
That strategy will be shrewd if corn prices stay near Friday's closing price of $3.26 per bushel for the December contract. But a farmer who sells his crop in advance runs the risk of losing it to natural forces and will still be required to come up with grain for delivery.
"You always worry about selling a crop forward, because something like this can happen and suddenly you're contracted to sell corn that you know won't be harvested," Cook said Thursday as he gazed around the shattered field north of Hubbard.
No hard data exists about the percentage of Iowa's 90,000 farmers who carry hail insurance, although anecdotal evidence suggests that the majority of them do primarily at the behest of their bankers.
But the cost of hail insurance premiums, which run into the thousands of dollars per year, has become pertinent in recent years with the rise in other farm input costs such as fertilizer, seeds, and diesel fuel on top of cash rents.
Against that is the spotty nature of hail damage. While a hailstorm of the kind that hit north-central Iowa a week ago makes gripping pictures, the impact on the total crop can be minor.
The storm damage failed to move the price of corn out of the $3.25-$3.40 per bushel range it has traded for most of the last month.
For corn prices, the big impact of the week wasn't the Iowa hailstorm, but rather the USDA crop yield estimate of almost 160 bushels per acre nationally and 185 bushels per acre in Iowa.
Those would be records. Absent a sudden, unexpected surge in exports or an early frost in September, corn prices are expected to remain low through the harvest season.
Cook said the options for his damaged field may be limited.
"You can think that the damaged stalks can still be good cattle feed, but I've been warned that the stalks and leaves have high nitrogen content, which makes them dangerous to feed cattle," Cook said.
"And even if the nitrogen isn't a problem, the plants still had heavy moisture content, which makes them much less desirable for feed," Cook said.
http://www.desmoinesregister.com/apps/pbcs.dll/article?AID=/20090815/BUSINESS/908150325