Crop insurance payouts could be a costly issue
The U.S. has been battered by an extensive and severe drought that has destroyed farmlands throughout much of the country. The drought has been a significant problem for some time and has been at the center of arguments and legislative action concerning the issue of crop insurance. Even before the drought took hold of the country, crop insurance was a hot issue. Now, the economic impact of insurance payouts that many have feared are becoming a reality.
Analysts suggest insurance payouts could reach $40 billion
Analysts from Farm Credit Services of America, a risk management and financial services organization serving many of the state impacted by the drought, suggest that the total insurance payouts associated with the drought could be as little as $25 billion. Analysts suggest that payouts could increase to as much as $40 billion if the drought continues to worsen or if significant changes are made to the country’s crop insurance regulations.
Drought continues to ravage much of the US
A report released last month from the U.S. Department of Agriculture shows that 27% of South Dakota is now considered to be in exceptional drought, with the remaining 82% of the state under severe drought conditions. Alone, South Dakota has sparked over $149 million in crop insurance payouts, with another $2.2 billion payouts to other states throughout the country. The drought has already proven to be a serious insurance and economic problem for the U.S., but the country is considered to only be on the veritable doorstep of the troubles the natural disaster is ready to cause.
There may be some good news for farmers in wake of disaster
Because of the financial impact of the drought, the country’s crop insurance structure is likely to see significant changes. The federal government has already been entertaining the prospect of making changes to the crop insurance industry. Perhaps good news for farmers: The government is beginning to see food production as a matter of national security, thus crop insurance may soon become more comprehensive for farmers of high value crops.