By MEGGIE. I. FOSTER
WEST LAFAYETTE, Ind. — After an unprecedented year of crop losses spanning a drought-stricken Corn Belt, it’s no surprise 2012 crop insurance payouts reached more than $1 billion for Hoosier farmers – nearly double the previous state record.
On March 11, the USDA reported payouts for 2012 corn, soybeans and wheat losses reached an estimated $1.04 billion in Indiana.
This amount will likely grow somewhat in coming weeks as final claims are still being filed, according to Chris Hurt, Purdue University extension agricultural economist.
“These crop insurance indemnities are the primary reason the state’s farm sector income has not collapsed under drought losses,” said Hurt. “The income-stabilizing impact of crop insurance has helped keep rural communities economically healthy.”
The previous record amount of insurance indemnity payments to Hoosier farmers for corn, soybeans and wheat was $522 million, in 2008.
Of the total amount of 2012 insurance indemnities, $900 million in payments have been for corn losses. Last year corn yields averaged 99 bushels per acre, nearly 40 percent below the norm. The previous high for corn was $269 million for the 2008 crop.
Corn sales from the clearly limited crop are generating about $700 million less across the state than had been expected before the drought, Hurt said. “So, an infusion of an additional $900 million in insurance claims will bring total receipts to somewhat more than pre-drought estimates,” he added.
Because of the large losses in 2012, Hoosier corn farmers on average received $3.47 of insurance indemnity for each $1 they paid for crop insurance premiums.
Soybean crop losses accounted for the second-largest payments, at $138 million. According to Hurt, soybean yields were not affected nearly as much as corn last year because of late summer rains in some parts of the state. Final soybean yields in Indiana averaged 43.5 bushels per acre, down about 10 percent from normal.
Final soybean marketing revenues for the state are expected to be about $275 million less than had been expected before the drought, Hurt said. Crop insurance, therefore, might not fully cover reduced returns from soybean losses across Indiana.
Statewide, farmers received $1.09 of crop insurance indemnities for each $1 they paid in soybean insurance premiums.
While corn insurance indemnities were more than the losses, soybean indemnities were somewhat less than the losses. But the combination means insurance payouts covered the losses for both crops, Hurt noted, since most farmers plant both corn and soybeans in Indiana.
“With Indiana farm income expected to be in the range of $3 billion to $4 billion a year, it is clear that the recovery of more than $1 billion from crop insurance due to the 2012 drought is a significant part of that income,” said Hurt. “Unfortunately, some producers did not elect crop insurance in 2012.”
Uninsured in 2012? Not this year!
Chris Cherry of Greenfield, Ind., who sells Pioneer seed as well as NAU Country crop insurance under PHI Financial, said that of his customer base, 100 percent filed insurance claims for the 2012 corn and soy crop.
“Everyone collected on corn and only half of my customers collected on soybeans,” he said.
“They were all substantial claims based on the size of the farm.”
Cherry said his largest claim was more than $1 million, while for his smallest grower, the claim was still substantial, at $70,000. In a normal crop year, he receives claims from fewer than 20 percent of his client base.
“This year has been awful,” he said. “People who filed claims above $200,000 for one crop per county had to go through an intense review process. In that case, it’s difficult to estimate the turnaround time for payouts.”
While it’s suggested to file claims within 30 days of the final day of harvest, the drop-dead deadline for claims was in December, said Cherry.
“Most of my customers have now received their payouts, except for the largest one ($1 million),” he added.
According to Cherry, approximately 75 percent of Hoosier farmers apply for crop insurance each year.
“Of the 25 percent that did not insure their crops in 2012, half of those won’t ever take insurance, they can self-absorb the losses, but there’s not many of those guys,” he said. “The remaining half took insurance in 2013.”
In fact, Cherry took in eight new previously uninsured customers in 2013 (under the March 15 deadline). “These guys were uninsured last year, and they just don’t want to risk facing those losses again in 2013,” he said.
Nationally, U.S. farmers and ranchers received more than $16 billion in crop indemnity payouts for losses incurred in 2012, according to USDA as of March 25. Additionally, farmers in 2012 invested more than $4.1 billion to purchase more than 1.2 million crop insurance policies, protecting 128 different crops. The USDA reports under these policies, more than 281 million acres of planted land are covered.
Suffering from one of the worst droughts in decades, farmers and ranchers in 19 states reported loss ratios exceeding 1.05, meaning that for every $1 paid in premiums, companies are paying out $1.05 in indemnities. These states include Illinois, Missouri, Kentucky, Nebraska, Iowa, Indiana, Kansas, South Dakota, New Mexico, New Hampshire, New York, Wisconsin, Texas, Colorado, Massachusetts, Tennessee, Wyoming, Michigan and Ohio.