On July 11, 2011, a severe thunderstorm with straight-line winds up to 130 mph slammed through east-central Iowa and into northern Illinois during the early morning hours. The storm toppled trees, blew down power lines, ripped off roofs, knocked over grain bins and beat down the corn crop in its path.

At Calderwood Farms, Inc., Traer, Iowa, Mike Calderwood went out after storm’s end to find the family’s two, 60,000-bu. grain bins blown over, with one resting atop their semi-trailer. Despite the shock, knowing their farm was adequately insured kept him calm.

“My first reaction was that I’d better get things rolling to get those bins rebuilt, and that I was glad it wasn’t my house,” says Calderwood, who farms with his brother, David, and father, Hugh. “I was also very glad that we had good insurance and a good insurance agent to get things rebuilt in a timely manner.”

Bin repair costs

The bins were only five years old when they were destroyed, but the replacement costs had doubled during that time, says David, who handles much of the farm’s finances, including insurance. “The replacement of the steel structures for the two bins cost about as much as what both bins cost to build the first time, including the concrete work,” he says. “The first time, it cost about $100,000 apiece to do the foundation, cement and steel structure. The second time it cost $100,000 apiece just to put up the steel.”

The winds that hit the area had the force of an F2, or a significant tornado, according to the National Weather Service. However, “it wasn’t a tornado that hit; it was a derecho, or really powerful straight-line winds,” David says. “Either way, if we hadn’t had our bins or trailer insured, we’d be in a world of hurt right now.”

The semi-trailer was damaged, but not totaled. “The insurance that we had on the trailer covered it completely, so that was a pretty easy thing to take care of compared to the bins,” David points out. “What I’ve learned is to keep reviewing your assets and how much the replacement cost might be for your high-value farm items. Plus, it also helps to have a pretty good relationship with your insurance agent.”

Luckily, the bins were empty when they were destroyed, David says. “Since then, we’ve made sure our entire inventory, both grain and livestock, is covered at a high enough value that it won’t be a hardship if we lose them,” he says. “Our bins are usually covered as being at least half-full.”

Several years prior to their bin disaster, their family farm had also experienced a devastating fire at a pig finishing site, David says. “We think a fan shorted out and started the fire, which burnt it down,” he says. “If we have 1,200 pigs, and their full value is $150 each, we insure them for about $100 each. Most of our livestock facilities are now modern confinement buildings, and we try to keep them insured for a little more than their constructed value.”

Crop insurance

In 2011, Calderwood Farms also had crop revenue insurance, but their damaged corn produced well enough that the family didn’t file a claim. “Originally, the corn was bent over below the knee,” David says. “Eventually, it stood up, pollinated and yielded pretty well. We had about a 180-bu./acre average yield that year, but it was quite a challenge to pick.”

One year later, the 2012 drought also hurt the farm’s yields but, again, not enough to file a claim, David says. “We normally take out enough insurance to cover about 75 to 80% of our expected revenue for the year,” he says. “In 2012, we lucked out with being able to avoid a lot of yield loss from the drought. We have mostly good, black dirt that is able to hold moisture pretty well, and despite the dryness, we averaged 186 bu./acre last year.”

To date, the farm has proven to be more susceptible to flooding than drought. “We’ve only collected on crop insurance once since 1989, which is when I began farming, on about 200 acres,” says David. “It was during a wet year when we had too many wet spots in the fields and the soils were too saturated for too long after planting.”

Crop revenue covered

Despite its good track record on crop production, Calderwood Farms has had enough experience with disaster that it wouldn’t take the risk to go without crop revenue insurance. “The crop revenue protection helps us cover the risk of a high price and no crop, or a low price and a bumper crop,” David says. “It costs more than ordinary crop yield insurance, but it covers more risk.”

The crop revenue insurance is also tax deductible, because it is a business expense, he points out. “You always hope that you won’t need it, but it sure is a good thing to have, if you do,” he says.

The value most farmers have wrapped up in production costs for both livestock and grain would be almost insurmountable to replace if they were lost in a disaster without insurance, David adds. “We may not be able to afford 100% protection on all our assets or all our production costs for every risk, but we sure can afford to cover most of it,” he says. “The goal is be around to farm for another year even after something really bad happens to you. Any more, every year has a different turn to it that you don’t expect.”