This morning I was greeted with a unique email from a producer with NPR’s All Things Considered program asking if livestock producers had insurance like crop growers and it not, why.
It was an odd question but one that sparked a few inquiries in my mind. Why don’t livestock producers have access to the same coverage programs crop growers do? The question has become common as the drought forces more and move livestock owners to liquidate their herds and find a new way of life. For those that have managed to keep food and water for the animals, input prices have risen and water and grass have become scarce. The drought has not ended the livestock industry but it has changed the short-term future of the industry and the long-term viability for some livestock owners.
Livestock owners face the same risk and the same loss as crop owners when Mother Nature doesn’t cooperate and conditions become too harsh to raise animals. The answer to the producer’s question of why livestock owners don’t receive the same access to crop insurance is a simple yet highly complicated one that takes understanding the different aspects of the industry to fully comprehend. While the livestock industry encompasses more than cattle, I am going to speak to the cattle industry specifically because that is what I know and understand.
The cattle industry is diversified and segmented. There are hundreds of breeds of cattle that all gain weight and thrive under different conditions. There can also be several people involved in the raising of a steer – for example. There is the family that owns the cows that gave birth to the steer then the family that backgrounds or grows that steer until they are ready to go to the feedlot for the final 120-130 day fattening period, which takes us to the final family involved in the life of that steer. Now crop insurance pays out when a crop does not meet a set production rate or does not provide a set amount of income. If a steer does not gain the pre-determine amount of weight or does not bring the pre-set price, whose fault is it? And who would receive the insurance payment?
A livestock insurance program would require too much streamlining and regulation of the livestock industry and many cattle owners are not in favor of that. Also, livestock is often much more fluid that crops. You can buy and sell a cow on a day’s notice. Crops are not the same. So, when conditions are not conducive to owning cattle, you can sell your animals. You cannot do the same with crops.
Finally, more government oversight and interference into the livestock industry would take away the free-market approach to livestock prices that many livestock owners value. By keeping the true number of livestock unknown, the market (supply and demand) determines the prices received for beef, eggs, chicken etc. during any given week. There seems to be a distrust in the packer – or final buyer – and giving them the exact number of cattle and how far along they are in the growing process could allow them to manipulate the price they pay for the animals. You can’t store a fat animal like you can crops.
There have been some disaster programs passed by Congress that have helped livestock owners. These programs do not directly affect the cattle but instead provide assistance for declining pasture conditions and other inputs involved in the livestock industry. We have received payments from these programs in the past and would likely receive a payment from any type of drought disaster program passed by Congress this year due to a substantial decline in the conditions of our pastures.
Due to the length of the NPR segment, most of my response remains on the cutting room floor. But I am thrilled that the producer took the time to ask the question and listen to my response. The segment was short but sweet and really did show case the resilience of American farmers and ranchers. You can list to the segment here: http://www.npr.org/2012/08/19/159248178/farmers-reflect-on-drought