Credit: AP
WASHINGTON (Reuters) - Crop insurers have paid a record $11.6 billion to U.S. growers in compensation for losses due largely to widespread drought in 2012, the first money-losing year for the industry in a decade, the government said on Tuesday.
The U.S. Agriculture Department said in a weekly update of business done through the federally subsidized crop insurance program said indemnities topped $11.58 billion.
Some analysts expect indemnities to reach $20 billion this year, nearly double the old record of $10.84 billion that was paid last year for the 2011 crop.
Insurers collected $11.06 billion in premiums, so payments already are 5 percent larger than premiums with more claims expected. The most recent year in which payments exceeded premiums was 2002.
Fifteen companies sold crop policies in 2012. They ranged from privately held companies to subsidiaries of mammoth corporations such as Deere and Co., Archer Daniels Midland Co.,Wells Fargo and ACE Limited .
The government pays 62 cents of each $1 in premium and shares the burden of losses when bad weather hits. Experts say the USDA could pay three-fourth of the underwriting losses on 2012 crops, which are indemnities that exceed premiums.
Crop insurance is the largest U.S. farm support. Soaring commodity prices have made traditional subsidies irrelevant.
Some 85 percent of eligible farm land, 281 million acres, was covered by $116 billion worth of policies in 2012, setting a high for coverage.
