Moneywise: Ag insurance sees global growth; ethanol production falls

February 26, 2013 07:36 PM
Moneywise: Ag insurance sees global growth; ethanol production falls

Immigration Reform Benefits Agriculture

Agriculture could benefit from comprehensive immigration reform, but some producers see it
as detrimental.

Effective reform would afford producers a stable, legal workforce of experienced workers, plus newer workers should see their operations expand, says Francisco Espinoza, coordinator of The Ohio State University’s Extension Agriculture Labor Education Program.

"Replacing the current H2A program with a more workable, less expensive, less cumbersome visa program would move things in a positive direction for agricultural producers," Espinoza says. "Reforming immigration would also address the problem of losing a producer’s workforce when they are found to be undocumented, as this is a costly experience in both profitability and legal problems."

However, some agricultural employers see potential downsides to comprehensive reform. "Nationalizing the E-Verify system claims to discover undocumented individuals in the workforce, but the agricultural community is averse to the bureaucracy of government programs and would also not want the burden of the being the enforcers," Espinoza explains. "Continued
border and immigration enforcement was emphasized as part of
any Senate immigration reform plan, but ag employers want no part of raids, racial profiling or other interruptions to their operations, seeing them as detrimental to recruiting and maintaining a much-needed workforce."

Espinoza also points out that producers still remember the Immigration Reform and Control Act of 1986, which gave amnesty to undocumented immigrants. "The Reagan amnesty resulted in the exit of farmworkers out of agriculture and into mainstream employment, once their adjusted status afforded them the opportunity. A repeat of this would not be a permanent solution (to agriculture’s labor needs)."

Realization of food insecurity results in growth

Global growth of agricultural insurance in recent years has a great deal to do with governments waking up to the threat of food insecurity and the potential benefits of supporting the agricultural sector by means of subsidized agri-insurance programs, says Julian Roberts, Willis Agri-Business and Weather Risk Division executive director.

"Subsidizing agricultural insurance offers the benefit of encouraging farmers to access credit and invest in enhanced production and achieve increased yields," Roberts explains. "These include the adoption of improved crops, technologies and risk mitigation infrastructures such as irrigation systems. But these investments can be risky, particularly for smaller growers. If farmers are able to operate more sustainably, their overall output will increase. At the top end of the scale, a government’s dependency on imports could lessen as a result."

He says the ancillary benefits of insurance in alleviating food insecurity pressures are many: 1) the promotion of civil and social stability 2) safeguarding food supply and distribution channels, 3) decreasing dependency on costly imports.

"Agricultural insurance is one component in a complex and interdependent array of measures that can stimulate and support essential rural development; it’s an opportunity for public-private partnerships to deliver a public good and achieve commercial success," Roberts says.

Ethanol Production Throttled Back

Spot prices for U.S. fuel ethanol were lower throughout most of 2012 compared to 2011. Prices were relatively stable during the first half of 2012, but they rose at mid-year because of severe drought and scorching temperatures, which reduced corn yields. This meant higher prices for corn that is used to make nearly all U.S. ethanol.

The combination of lower corn supplies, higher corn prices for ethanol producers, and weaker
gasoline demand contributed to U.S. ethanol output falling from an average of 900,000 barrels per day during the first half of 2012 to an average of 815,000 barrels per day during the latter half—about 90,000 barrels per day less than in the second half of 2011, according to U.S. Energy Information Administration.

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