Crop insurance and minimizing risk

One risk management tool that farmers use to keep them in business after a natural disaster like Hurricane Harvey is crop insurance that may be purchased at levels of up to eighty percent of a farmer’s average yields. They also manage risk by diversifying what they plant. Walter Vajdak farms in Burleson County.

“You have a guarantee, depending on what level of guarantee you bought. If you have a thousand pound yield and you bought fifty percent insurance, you’re guaranteed five hundred pounds. Once you go over five hundred pounds your insurance contract is met.”

Vajdak’s cotton crop weathered twenty inches of rain from Hurricane Harvey.

“If your crop is a complete washout basically, the adjuster will come out and look at it and he’ll determine a number or figure that might be out there and he’ll deduct that off your guarantee and then, of course you can collect from there up to your guarantee. If you have a total disaster, it’ll help you out. If you have a mediocre crop like this, you’ll probably meet your guarantee and then you’re stuck. Whatever happens is yours, after that.”

Aside from buying crop insurance, farmers also try to minimize their risk by planting more than one crop. Vajdak also grows corn.

“The corn, we were able to get in there and harvest it before the rain set in or anything. Anyway, we ended up with probably one of our best corn crops we’ve ever had. You never know what’s going to happen. We’ve had bad corn crops and a decent cotton crop, and we’ve had a decent corn crop and a mediocre cotton crop or a poor cotton crop and a couple of times we hit on both ends so, it happens some time.”

And that’s a farmer’s goal at the beginning of every new year.