Drought Could Spell Steep Crop Insurance Losses

NU Online News Service, July 5, 2:24 p.m EDT

WASHINGTON—Signs are emerging that severe temperatures and lack of rain may cause steep losses in the Midwest’s corn crop, but insurers remain hopeful that beneficial rains will fall and help crops in troubled areas of the country.

The potential for severe losses is ironic because the early predictions from the Department of Agriculture was that this year would result in the largest corn crop in many, many years.

Laurie Langstraat, a spokesman for the National Crop Insurance Services in Overland Park, Kan., which represents the nation’s crop insurers, cautioned that it is premature to predict a devastating season for Midwest corn farmers and the crop insurance industry.

“It’s too early to tell,” she says. “In some areas, like Indiana, the corn crop isn’t doing very well.” However, in other areas, like Minnesota, North Dakota, South Dakota and Iowa, “it’s not too bad yet,” she notes.

At the same time, she says, “the crop insurance industry is standing ready and will handle 2012 losses from drought just as they did from the losses due to flooding in 2011.”

One of the issues raised is that some farmers don’t purchase crop insurance.

Langstraat said that nationwide, approximately 83 percent of the insurable acres are covered by crop insurance. 

She says it is impossible to estimate the number of farmers involved because many have more than one policy in force because they grow different crops.

It is also impossible to estimate average crop insurance costs because these vary by county and by the level of coverage and price farmers choose, she says. 

Langstraat says that currently, there are 16 approved crop insurance providers.

A USDA official, who declined to be quoted by name because of agency policy, says the USDA is getting sporadic reports of problems in the Midwest, “but we don’t know the extent of the problem.”

Moreover, “we won’t be able to get a full handle until the crop insurers, who deal directly with the farmers on this issue, report to us,” says the official.

At the same time, the July 1 USDA crop report paints a troubling picture for certain states.

The report says that in the following states, farmers project either very poor or poor corn crop yields this year:

• In Colorado—15 percent project a “very poor” crop; 21 percent project a “poor” crop, and 30 percent a “fair” crop.

• In Indiana—19 percent project a “very poor” crop, and 31 percent project a “poor” crop.

• In Kentucky—19 percent project a “very poor” crop, and 29 percent a “poor” crop.

• In Tennessee—18 percent project a “very poor” crop; 29 percent a “poor” crop, and 34 percent a “fair” crop.

• In Kansas, 10 percent project a “very poor” crop; 21 percent project a “poor” crop, and 43 percent project a “fair” crop.

Illinois and Missouri farmers project similar concerns as the others.

However, the USDA data indicates that 63 percent of Minnesota farmers project a “good” crop.

Confirming the NCIS call for caution, the USDA said in its report that of 18 selected states participating in its survey, only 7 percent of farmers overall report dire conditions, 16 report “poor” conditions, 26 percent report “fair” conditions and 40 percent report “good’ conditions for their farm crops. 

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