Losses paid out by crop insurance companies to farmers for 2011 crops have now exceeded $10.7 billion and are edging ever closer to the $11 billion mark, according to data from the Risk Management Agency (RMA). This surpasses the previous record of $8.76 billion set in 2008 by almost 25 percent.
Spurred on by one of the worst weather years in history, farmers and ranchers faced unparalleled challenges in 2011 and crop insurance reached record amounts. The numbers paint a picture of Mother Nature’s devastation that befell farmers from coast to coast.
The top crops damaged, by dollar value, were corn, cotton, wheat, soybeans grain sorghum, pastureland and rangeland, and tobacco. And while the average loss ratio across the country is at .90 – which means that for every dollar purchased in coverage, 90 cents was paid out in indemnities – those numbers are much higher in some key states.
Top among them is Vermont, which felt the brunt of Hurricane Irene’s wrath last summer and is currently at a loss ration of 2.59. Texas and Oklahoma are not far behind, having fallen victims to an historic and prolonged drought, registering a 2.35, and 2.15 respectively.
The news comes as the Senate Agriculture Committee recently passed the 2012 farm bill and the House is conducting hearings on their farm bill. As Lubbock, Texas, banker Rick Boyd noted in a recently-released NCIS video, the drought could have been catastrophic for many Texas farmers if they had not purchased crop insurance.
“2011 was such that, with the insurance, we did not have any farmers that actually went out of business, and over 90 percent of our customers had to draw on their insurance claims,” he said. “The programs were in place that allowed them, not to make a profit, but to actually get a lot of their expense money back and that was enough to enable them to get financing for the upcoming year,” he added.
“Thanks to the foresight of Congress, crop insurance has been in place to weather enormous natural disasters and help ensure that farmers survive to plant yet another year,” said Tom Zacharias, president of NCIS. “Those billions in damages would have landed on the plates of input suppliers, lenders, marketers and farm families if crop insurance wasn’t in place,” he said.
Since 2008, more than $28 billion private sector dollars from crop insurance companies have gone back into the hands of farmers across the country for policies they purchased. During that same period, crop insurance has shouldered more than $12 billion in cuts in Federal investment even while exposure to risk has continued to rise.
“With damages from last year approaching the $11 billion mark, the fact that there has not been a single call from farmers and ranchers for a federal disaster bill is testimony to the efficacy of crop insurance and proof that farmers and rancher consider it indispensible,” said Tom Zacharias, president of National Crop Insurance Services.