Working without a net
By Doug Rich
Alfalfa hay growers and the Flying Wallendas have something in common; they both work without a safety net. The Wallendas do it because it draws a bigger crowd, but alfalfa growers do it because they don’t have a choice.
Alfalfa acreage has been going down even though the price for hay has been going up. The National Alfalfa and Forage Alliance did a trend study last year and that acreage for alfalfa had declined 15 percent in the previous 10 years and last year alone it declined another 10 percent. Drought and acres lost to corn or soybean are part of the problem but lack of a safety net for alfalfa growers is also to blame.
“Part of the problem is that we have bankers telling farmers not to plant alfalfa and the reason for that is alfalfa does not have a safety net like the program crops,” Beth Nelson, president of the National Alfalfa and Forage Alliance, said.
Nelson said when the new farm bill was being discussed last year, legislators wanted to get rid of direct payments. Both the Senate bill that did pass and the House bill that did not pass have various shallow loss programs to replace direct payments.
“They both had versions of the shallow loss program for Title 1, which recoupled the payments to the crop that actually went into the ground,” Nelson said. “Under the old scenario if a grower planted alfalfa on his ground, he would still get a direct payment if he were eligible for direct payments. He got that payment whether or not he planted what his base acres were for or if he planted alfalfa or any other crop.”
“Now as they move away from the recoupled Title 1 payment to a program crop and alfalfa not being a program crop, it is a pretty significant disadvantage for not having a safety net,” Nelson said.
Lack of a good crop insurance program for the alfalfa and forage industry is part of the problem in providing a safety net for hay production. Nelson and several alfalfa and forage producers traveled to Kansas City, Mo., in April to visit with the Risk Management Association about this issue. Nelson said RMA agrees that some changes need to be made to the alfalfa and forage insurance program. The participation in the insurance program for alfalfa and forage is less than 10 percent. Corn, soybeans, and wheat have participation rates above 80 percent.
“Because of the lack of a safety net, both through Title 1 and the fact that the insurance program that is currently in place is inadequate, we had bankers telling people last year not to plant alfalfa,” Nelson said.
The lack of an adequate safety net directly affected Miles Lacey, an alfalfa grower from Valley Springs, S.D. The Lacey family has been growing alfalfa, grass and mixed hay for over 50 years.
In 2006 Lacey purchased a farm in north central South Dakota and seeded it to alfalfa. In the spring of 2008 the temperature reached 65 degrees in February and started all of that hay growing. Eventually, most of the alfalfa on that farm was winter killed.
“I had crop insurance, which was one of the stipulations when I bought the land,” Lacey said.
The insurance appraiser came out to take a look and agreed the alfalfa was dead, but there was a quarter section that was still alive. Lacey said this field had been cut late the previous fall and was not as mature as the rest of the crop. The appraiser said to hay it that summer and he would come back in the fall to settle up with Lacey.
“When they came back that fall to figure it up they determined there was no loss,” Lacey said. “First off there (were) no irrigated alfalfa transition yields (T-yields) in that county so they took it down to dryland rates. Secondly, nobody kept track of yields in that area so the T-yields were really low at around 1.6 tons per acre.”
Lacey said the appraiser took the production off that one-quarter section and spread it over the whole section and it still beat the T-yield by almost a ton. The result was no loss and no insurance payment for Lacey.
Darrin Unruh, an alfalfa grower from Pretty Prairie, Kan., said it is important to get the word out to producers about how important it is to keep tonnage records so accurate T-values can be set.
“I am afraid that our county averages are lower than what a lot of the producers are growing,” Unruh said. “I think it would be extremely important for everybody, if they have not done so in the past, to start keeping tonnage records this year on each individual field. That will be key to getting the right kind of safety net under us. I may be two years down the road before we get this program going and we need to start keeping records now.”
According to an article by William Edwards, Iowa State University Extension economist, T-yields are based on the 10-year historical county average yield. If at least four successive years of records are not available, a T-yield for each missing year must be used. Growers with a record for one year receive 80 percent of the T-yield for the other three years. If a grower has two years of records he will receive 90 percent of the T-yield and with three years of records he will receive 100 percent of the T-yield for the remaining year needed to calculate the Actual Production History.
Unruh was part of the group that met with RMA in Kansas City in April. He said RMA is very willing to get something done on this issue.
“We don’t want something out there that can be exploited but on the other hand we want something that will help us manage our risk on the down side,” Unruh said.
“We are trying to fix these issues and come up with a better safety net for our crop,” Nelson said.
Alfalfa is the nation’s fourth most valuable field crop behind corn, soybeans, and wheat. If you consider all hay produced, it is the third most valuable field crop coming in ahead of wheat.
High flying acts like the Wallendas put as much risk into their performances as possible. Working without a safety net provides the risk and sells tickets. Alfalfa hay producers are not interested in drawing a crowd and need a safety net to reduce their risk as much as possible.
Doug Rich can reached by phone at 785-749-5304 or by e-mail at email@example.com.