Crop insurance payouts continue to set new records
By Sara Wyant
© Copyright Agri-Pulse Communications, Inc.
WASHINGTON, January 18, 2012 -With record floods in North Dakota and along many parts of the Missouri River basin last year, and extreme drought across much of Texas, it's not surprising that crop insurance payouts in 2011 are headed to record levels. Especially so when you consider how the program has grown in size and scope in recent years ‑ insuring everything from apiculture to oysters ‑ and the popularity of revenue-based programs.
During the 2011 crop year, private crop insurance policies valued at over $113.5 billion covered more than 264 million acres of farmland, including all major grain crops and cotton, nursery, citrus, rice, potatoes, seafood and livestock.
As of Jan. 16, the $8.89 billion in indemnities paid by crop insurance companies for the 2011 crop year losses surpassed the previous record of $8.6 billion paid in the 2008 crop year. With 20 different types of insurance plans and several pilot projects across the country, USDA's Risk Management Agency expects the numbers to continue to climb before they finalize a new year-end number in February.
Some sources expect that the federal crop insurance program will easily surpass $10 billion in indemnities for the crop year, but total government costs could climb even higher - making crop insurance a more highly visible target during farm bill deliberations this year. That's despite overwhelming support for the program from producers across the United States.
Earlier this year, the Risk Management Agency estimated over $13 billion in indemnities, based on a loss ratio of 1.12, according to USDA's Office of Inspector General review of the Federal Crop Insurance Corporation (FCIC) Financial Statements for the 2011 fiscal year which ended Sept. 30, 2011. But RMA sources say those were preliminary estimates developed several months ago and will likely represent a loss ratio closer to 1.0 when all other factors are taken into consideration.
An RMA spokesperson says the FCIC is exposed to late season severe weather events that may occur after the indemnity projections are made, or a commodity price spike or decline would impact the estimates. The actual loss ratios in the last 10 years have varied from a low of 54% to a high of 139%. The average loss ratio for the past ten years was 80%.
Original story printed in January 18, 2012 Agri-Pulse Newsletter.
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