Al, Host:	Managing farm risk is always a problem. There have been some changes in the Risk Management Association…can you summarize what is coming up?
Ken:	The biggest thing…crop insurance is available on more crops at more levels with more choices than ever before. Farmers are using it now more than ever before. Also, this year we have a 25% premium discount for farmers who choose the buy up levels of coverage. We hope that farmers take advantage of it…we think it will be a good buy this year.
Al:	Okay, you indicate it is available on more crops. Now, I know corn, soybeans and that….how about some of the lesser crops…peanuts, rice and some of the others.
Ken:	Most people don"t think about it because agriculture is so different around the country. People in Georgia are used to using crop insurance on peanuts, tobacco, cotton and even fruits and vegetables. We have 138 different crop insurance policies covering almost all of the major crops…something like 80% of the value of crops produced in America today. We still have a lot to go….but most of the larger crops are covered…and we are adding about 10-12 new crops every year.
Al:	The idea is to be able to affordable offer crop protection to the farmers.
Ken:	We have revenue and production coverage…we have choices at the buy-up level, catastrophic level, limited buy-up level, plus other add-ons. We have a new product called adjusted gross income…farm coverage in 4 or 5 parts of the country…you get a guarantee based on your tax records. Your history of gross income. That is new.
John:	The minute you insure all farmers to some certain level…you will raise it back to risk level that we are comfortable with by either bidding up land or rent prices. Raise the safety net and you simply move the high wire up to where you are starting to get scared again. This is just a natural problem that happens with insurance. But I must admit…we are taking about a wider array of products that for even skeptics, such as myself, who have never bought hail insurance let alone any kind of crop insurance…and for my part of the country it hasn"t been a big sale at all. However, recently…I am being forced into learning about this and struggling and coping with some of the enormous volatility I am seeing. Largely, I am being driven by looking at post holes that are dry all the way down to 8 feet. This dawns on me that I have significant production risk. Now, whether I look at production risk products or CRC revenue type products…it's now a new learning curve. And we have to learn to do it in order to compete.
Program Break
Al:	When we left you, Ken Ackerman was just ready to respond to John Phipps…comparing crop insurance to fire insurance. And your comments were going to be Ken?
Ken:	Oh, my comment was very simple. There is a comparison. If you know in Illinois that you have a drought once every ten years or a flood once every 15 years the new have to design our products so that we charge you the right amount of money that makes it a good buy. And when you look at the numbers, in fact Illinois does have losses…there were a lot of losses in Illinois in 1988 with the big drought, in 1993 with the big flood…sometime that is going to happen again.
John:	Well, my experience…25 years I"ve never been below 73%. I checked that before I came on the show so I could…of my trend line yields. So it has really been a tough sell. And that's why our ground is more expensive. Now all these things even out economically…I don"t have a quarrel with this. But I think what is important here is that we have a real research problem or at least effort that needs to be made by all farmers everywhere. Crop insurance is not your dad's crop insurance anymore. And there are some things you can do to help. I found the country companies and the Illinois Farm Bureau have a web site that is exceptionally good at..sitting down for me…people like me who are sales…who would prefer to sit down and cram some numbers through on our own. Good speed sheets, good analysis there. And also the Anderson's has a grain company, that's a great program that will help you analyze some of those things. If you"ve never done it before you need to start learning.
Al:	Was there an opportunity a couple of years ago of coupling crop insurance with participation in the farm program…that is that if you were going to participate in the farm program you had to be insured and that was to do away with the disaster relief?
Ken:	Crop insurance was mandatory for one year. In order to get a payment from the USDA you had to buy crop insurance. The Congress repealed that…farmers don"t like being told what to do.
John:	It was a never paid policy.
Ken:	Yeah, a lot of farmers just got the catastrophic level policy and frankly the people who buy CAT coverage are our most dissatisfied customers because when they do have a disaster it doesn"t pay…just like what you are saying. But what's happening now…
Al:	So wait, how can he beat that…your insurance has got to be good or you wouldn"t be in business.
Ken:	What's happening is that over the last three or four years farmers, more and more, are learning how to use crop insurance and now, even thought it's not mandatory, it's totally voluntary, we have record numbers of people today that are using crop insurance who haven"t used it before. We now insure 200 million acres and the reason is because we have choices and farmers are learning. Farmers are using crop insurance not standing alone, not in isolation of everything else but in combination of marketing plans, with financial plans, with sitting down with a financial advisor and making crop insurance fit in with their farm operation…not simply something you buy on the side.
John:	Okay, good risk management or some kind of insurance, what I"m looking at is some way to add more options to my marketing plan that I think…the key to that is to have the marketing plan in place first then go to find an insurance product that will dovetail into that. But, you have to start with having some recognizable marketing plan.
Al:	Now, there are a lot of people that can help you with your marketing plan. Are those same people qualified to help you with your insurance or do you need to go someplace?
John:	Sometimes not, and I think they are both very particular instruments. I would be leery of having those two people become one. There are some real conflicts of interest there.
Ken:	Let's say, more and more you are finding cases in local areas of a crop insurance agent and a local financial analyst or a local futures broker or a local banker working together and that's something that is new in the last couple of years.
Al:	So your prediction is that we are going to insure what percent of agriculture by the year 2005?
Ken:	Well, it will depend on what the economy…we"d like to go to all of it. It will all depend on what Congress does with crop reform insurance legislation currently before the Senate Agriculture Committee. We"ve proposed a bill that would make crop insurance more affordable and deal with some of the particular problems with it. If that passes and we keep on the trend we are on…I wouldn"t be surprised to see 80%-90% soon. We are already seeing something like 70% of eligible acres being insured by farmers.
Al:	Okay, is that true in your area John?
John:	No, it's not, we"re a pocket of non…and it's typical of the eastern corn belt. And it's also one reason why Senator Lugar in Indiana will be a difficult sell because this involves the allocation of money to agriculture. We put it into crop insurance that traditional 95% of the North Dakota farmers have used to..as a resolve…and the Georgia farmers…or the congressmen in Indiana, Illinois and Ohio whose participation levels are in the 40% or 30% or something like that….or in my area in the low single digits. The political well is going to have a shape on how we get these risk management products delivered to us.
Al:	To sum this up…you are looking harder at insurance this year?
John:	Yeah, for the first time and I"m not happy about it. It's one more chore I have to do…but I"m doing it.