Percy Carroll is easing along the backroads of Matagorda County in southeast Texas, taking note of a 300-acre field of green grass and weeds staggered 1’ to 2’ high. It’s a farmer’s expanded version of hell’s half acre, and inside the wooly, overgrown stand hides a skeletal corn crop, barely 6” tall with no chance of yield. Carroll, 66, gets nauseous staring at the tangled acreage as the truth sinks in: Lock, stock, and smoking barrel, the field is a financial winner.
“Pure and simple, they’ll harvest this field with a disc,” Carroll says. “No yield means big bucks. Rest assured, failure is rewarded because the Risk Management Agency (RMA) will pay up in full.”
A field of weeds can pay better than a field of corn, and costs almost nothing to produce. Plant seed, run a cultivator with a wink and a nod, and walk away. This is a skin-and-bones crop production formula where less means more. No inputs, no sweat equity, no management, no harvest, but plenty of profit in a scheme plucking millions from the pockets of U.S. taxpayers. Carroll and a growing number of Texas farmers say a crop insurance racket is hiding in plain sight.
Carroll claims growers are gaming the organic crop insurance system and pushing land rent for conventional producers.
“They plant, walk away, and let the grass take over. Come harvest time, the insurance adjustor shows up and zeroes it out. Insurance money is in the bag,” he explains.
Following the phantom harvest, the ground is worked a single time to qualify for program guidelines, and then the cycle repeats the following year.
Crop insurance is intended as a means to manage risk, but taking advantage of crop insurance rules allows for the total elimination of risk. Organic target (T) yields in Matagorda County factor as follows: corn, 64 bu. at $8.40 per bu.; soybeans, 24 bu. at $16.87 per bu.; cotton, 656 lb. at $1.22 per lb.; and rice, 4,774 lb. at $15.90 per hundred lbs.
Joe Jenkins farms 5,000 acres of corn, grain sorghum and cotton in Matagorda and Jackson counties. He says even when yields zero out, producers change entity names and reboot the abuse of the federal crop insurance program. A new year brings a different name and crop, but the same goose egg yield.
“Everybody knows this is going on and people who claim ignorance have to be lying,” Jenkins says. “The counties around Matagorda are just as bad and the tricks have been learned. They know how to delay land preparation and then collect failed acre insurance.”
While Jenkins gets $3.50 for his corn, he watches some organic producers get $8.50 while spending almost nothing on inputs, fertilizer, cultivation, ditch cutting, land leveling or any other management cost.
“There’s a difference between farming and freeloading,” Jenkins says. “Farmers have earned respect in our community, but not these crop insurance abusers.”
In 2011, RMA began offering price elections for organic crops. As organic production insurance has expanded with greater crop variety and county coverage, the frequency of abuse has grown in tandem in Matagorda County, according to Carroll. However, RMA says insurance problems are isolated.
“We don’t see organic crop insurance abuse as a growing problem. There’s always the potential for abuse in any insurance program, but we monitor in a variety of ways and any identification of possible abuse is immediately defused,” agency officials state.
“Anomalous claims in a county may just mean adjustments are needed, and would not necessarily be an indication of insurance abuse,” adds John Shea, public affairs director for RMA.
Producer Ed Gurecky cites 2016 as the worst year for organic crop insurance abuse he’s ever seen in Matagorda County, and says standard farming practices are conspicuously absent from most organic fields. Overgrown rows, yellowing crops due to fertilizer deficiency, and an absence of ditch work are consistently present in the fields observed by Gurecky.
“I’ve actually seen corn planted in the middles and not the rows. This is an open secret and it’s done on purpose,” he says.
Gurecky dealt with 15” of rain prior to cotton harvest, but hustled to pick early, yet still was hit with premature seed sprouting problems which forced him to pay an extra $5 per bale at ginning. (Many producers in his area were affected by even worse quality issues and paid an extra $25 per bale.) However, insurance pays according to yield and Gurecky grew 2-bale cotton, pushing him beyond the claim threshold.
“I was honest and cut no corners,” he explains. “Meanwhile, the insurance abusers were bringing home the money. You quickly lose respect for these guys.”
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“Where is integrity in farming when you have this type of abuse? I blame government just as I blame farmers. The government is encouraging this practice. Where is RMA? They’re supposed to protect the tax dollars of American citizens, but it’s not happening,” Gurecky says.
| “Organic insurance abuse is a virus despite the numbers sitting right in front of RMA,” says crop consultant Paul Pilsner.
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A partial solution to ending organic crop insurance abuse centers on simple receipt checks, Gurecky insists. Matagorda County soils are inherently weak and require heavy fertilization, an expense costing Gurecky up to $100 per acre. He says genuine producers have receipt proof of fertilizer purchases and documented application dates, both of which could easily be checked by RMA.
Echoing Jenkins, Gurecky also warns about entity switches when yields hit zero. “This is common knowledge in agriculture. Why hasn’t RMA checked names and figures?” he asks.
As a crop consultant working the Texas coast, Paul Pilsner began noticing heavy organic crop insurance abuse in 2014. Plain-spoken, with no hint of soft-pedaling, Pilsner brooks no tolerance for insurance abuse, and says those involved are engaged in a loophole hunt: “I don’t know how widespread this is in the U.S., but it’s happening right here in Texas and robbing millions from U.S. taxpayers.”
Pilsner says organic insurance farmers plow and plant late, hoping for parched ground. Beyond planting, a cultivator might make a single pass, but more often, the work season is already finished. The result? Scrawny corn and buff weeds.
The predominant organic acreage in Matagorda County derives from pasture passed from traditional rice ground, according to Pilsner. Simply, last resort ground is organic heaven. Lease the pasture; plow the land; plant the seed; close up shop; and get paid. Most conventional corn growers hit around 100 bu. per acre to 150 bu. per acre in Pilsner’s work area, yet he says organic insurance abusers are intentionally shooting blanks, making sure corn and other crops are strangled from the get-go.
“All RMA has to do is push a key and organic yield numbers are right on the screen,” Pilsner says. “The numbers should be damning. The fix is in.”
Over the past five years in multiple counties along the coast, Pilsner has experienced no weather-related crop failures on any of his consulting acreage. In addition, crop yields (particularly in corn) have alternated between above-average and record levels. “RMA has all the numbers, but they don’t want to even get close to rooting out fraud,” he notes. “Organic insurance abuse is a virus despite the numbers sitting right in front of RMA.”
Manipulation of the crop insurance program ultimately costs legitimate growers who pay in to the system under the assumption that production records are monitored. Yet, Pilsner says RMA has essentially turned a blind eye to organic crop insurance abuse, and doubled down by not taking appropriate measures to end abuse: “Why don’t these guys have to prove viability of organic crops? If it’s acceptable to take taxpayer money with no intention to harvest, why don’t all farmers do it?”
| “Everybody knows this is going on and people who claim ignorance have to be lying,” says producer Joe Jenkins.
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Over a 43-year stretch, Carroll has grown conventional cotton, grain sorghum, rice and soybeans, but says he’s never encountered the widespread insurance malpractice ushered in through organic production: “This really jumped on my radar after the new farm bill.”
In early 2014, Carroll initially reported his concerns about organic insurance abuse in Jackson, Matagorda and Wharton counties to RMA officials, but was told no rules or guidelines were broken. In May of 2016, he sent a letter to USDA’s Office of Inspector General (OIG), asking for an investigation, and followed with a second letter to OIG in August. (Carroll has yet to hear from the OIG, but was given a case number.) However, when Carroll knocked on the door of Congressman Blake Farenthold (Texas’ 27th District), the U.S. representative’s office sent a letter of inquiry to RMA.
“Suddenly I got a call from RMA,” Carroll says. “They say the numbers will be reviewed for 2018, but can’t be changed for 2017. The only way I got action was to go through a congressional office.”
Carroll stops short of throwing fraud accusations at particular farmers associated with crop insurance abuse, but RMA doesn’t necessarily make the distinction. If a crop insurance policy holder purposefully acts in a manner contrary to proper crop production, RMA can technically impose penalties.
“Intentional disregard of appropriate farming technique is grounds for penalty and an avenue for sanctions,” Shea explains.
Will RMA act in 2018 to address T-yield discrepancies? Carroll hopes for a reversal, but is highly skeptical of genuine change. Carroll buys crop insurance according to his proven yields, and unless realistic T-yields are implemented for organic production, he sees slim chances of meaningful RMA action: “The T-yields are a fantasy. Cut the T-yields from conventional levels and these boys will stop abusing organic insurance or farm their land right.”
“Drop the T-yields to an organic level,” Pilsner agrees. “Whoever thought up these yield levels is either scheming or ignorant.”
Matagorda County organic acreage hit 16,550 acres in 2016, split between corn, cotton, rice and soybeans, according to the Matagorda County FSA. Carroll, Jenkins, Gurecky and Pilsner are in one accord: Not all organic producers in the area are involved in insurance abuse. “It’s not everybody around here in organic farming,” Carroll says, “but anyone with eyes can see what’s going on.”
RMA and its insurance providers oversee 1.2 million crop insurance policies nationwide. A recent report from Mercaris tallied 4.1 million organic U.S. acres in 2016, a jump of 11% since 2014. California, Montana, Wisconsin, New York, North Dakota, Oregon and Texas round out the top seven states in organic acreage. Alfalfa/hay, wheat, corn and soybeans are the top organic acreage crops.
“Farmers across this country should take note and be upset because this abuse factors into their overall insurance costs,” Pilsner states. “Legitimate growers are burned up over this because they see guys getting paid for doing nothing while RMA oversees the whole deal.”
Gurecky believes a lesson of incentivized crop abandonment is being observed by young farmers. “What does this type of abuse teach our children? You can make more money taking advantage of the system. It’s emblematic of our country wanting to get something for nothing,” he says.
| “Where is integrity in farming when you have this type of abuse?” asks producer Ed Gurecky.
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Carroll takes an equally dim view of organic crop insurance abuse, and points toward the culpability of farmers and feds.
“I don’t tolerate a farmer who plans a disaster,” he adds. “RMA let this deal get way out of hand. If the American taxpayer really knew what was going on, there would be hell to pay.”
