Taxpayers shell out $8.4 billion for lost crops
Texas in top 10 for payments
Crop losses nationwide in 2012 exceeded the previous record of $10.8 billion paid in 2011, according to a February 2013 report given to the U.S. Senate Committee on Agriculture, Nutrition, and Forestry by USDA Chief Economist Joseph Glauber.
The Natural Resources Defense Council stated the Federal Crop Insurance Program paid a record-breaking $17.3 billion in crop losses last year. From 2001-10, crop losses averaged $4.1 billion a year. A major concern is that $8.4 billion of the 2012 payouts were funded by taxpayers.
As of Aug. 19, farmers had purchased $4.2 billion in crop protection for 268 million acres of crops, accounting for $114 billion in crop coverage. The Federal Crop Insurance Program is a public-private partnership between the U.S. Department of Agriculture’s Risk Management Agency and 18 private insurance companies.
Last year, farmers purchased $4.1 billion to protect more than 281 million acres, or 86 percent of cropland planted.
As of March 25, 2013, more than $16 billion has been sent to farmers who suffered losses.
Calling for reform
The Natural Resources Defense Council (NRDC) is calling for reform. “The Federal Crop Insurance Program has failed farmers and taxpayers by ignoring water challenges,” said Claire O’Connor, the council’s agricultural water policy analyst. This group is using the historic drought as means to support sustainable agriculture.
“The program was designed to be a safety net, not a subsidy for increasingly risky practices and less sustainable food production,” O’Connor said. “We need to empower farmers to invest in low-risk, water-smart practices that are proven to reduce crop losses.”
To support its case, the group provided a breakdown by state and by counties within each state.
Texas losses ranked 18th in the nation for crop loss due to drought, heat, and hot wind, with the Federal Crop Insurance Program paying out $963 million. This accounts for only 75 percent of the total losses. If hail, wildlife, and other losses are factored in, the state ranked 10th, with total costs of $1.288 billion for the more than 15.2 million acres planted. See “2012 Indemnity payments to area farmers” for numbers related to Wilson and area counties. Depending on the insurance coverage -- drought or hail -- farmers received as little as $1.15 per acre in Gonzales County to as high as $36.72 per acre in Wilson County.
Illinois, Iowa, Indiana, Kentucky, Missouri, Wisconsin, South Dakota, Kansas, and Nebraska all had 92 percent or more in losses in 2012.
The American Farm Bureau Federation also is following the crop insurance issues.
American Farm Bureau Federation President Bob Stallman advocates “protecting and strengthening the federal crop insurance program without reducing its funding.”
“Fundamentally, Farm Bureau continues to support a single program option for the commodity title [of the Farm Bill] that extends to all crops,” he said. “We believe the safety net should be comprised of a strong cap insurance program, with continuation of the marketing loan program and a catastrophic revenue loss program based on county level losses for each crop.”
He also urged mandating the risk management in the crop coverage to reject any provision linking conservation compliance with crop insurance.
With 96 percent of Texas currently categorized in drought conditions as of Sept. 16, Texas farmers will again be among those receiving indemnity payments.
It should be noted that due to the expiration of the 2008 Farm Bill, no disaster or federal provisions are included to assist cattle raisers. They are faced with either dispersing their herds or paying high prices for feed and hay.
Federal Crop Insurance
“Congress first authorized federal crop insurance in the 1930s, along with other initiatives to help agriculture recover from the combined effects of the Great Depression and the Dust Bowl,” according to the U.S. Department of Agriculture (USDA) Risk Management Agency website.
Prior to the Federal Crop Insurance Act of 1980, crop insurance remained an experiment.
In 2000, Congress enacted legislation that expanded the role of the private sector, allowing entities to participate in conducting research and development of new insurance products and features.
How severe was the 2012 drought?
“2012 ended as one of the driest years on record having had much of the country over or near 60 percent in moderate to extreme drought. Only 1934 had more months with more than 60 percent of the contiguous U.S. in moderate to severe drought.”
Source: Dr. Roger S. Pulwarty, director of the National Integrated Drought Information System, National Oceanic and Atmospheric Administration, U.S. Department of Commerce