Crop insurance payouts may come at a cost

Crop Insurance
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Crop InsuranceAs the planting season edges nearer in 2013, Nebraska is among the states that have collected the most.

Among all of the states in the country, Nebraska is one of the six in which its farmers have collected crop insurance payouts worth over $1 billion due to damage that was caused by the drought last year.

That disastrous growing season led to over $12.3 billion in payouts as of Monday.

However, the most recent statistics that have been released by the Risk Management Agency of the federal government has also led to some worry among crop insurance policyholders and companies, alike. This is because it involved discussions of potential cutbacks to these programs from Congress, which is facing a number of cost conscious decisions over the next few years.

The majority of Nebraska’s crop insurance claims last year were for corn in 2012.

According to the Nebraska Corn Growers chairman, Carl Sousek, who is also a farmer in Prague (located northwest of Lincoln), the federally subsidized crop insurance coverage made a considerable difference to his farm, which includes acres which have not been irrigated. He explained that without that assistance “I would have been in trouble.”

He went on to say that “I like to think, with a couple of good years” prior to 2012, “I could have survived again for another year. But I would have been losing equity. I would have been borrowing against last year’s equity to plant a crop.”

Though Sousek’s typical yields are an average of 124 bushels per acre, last year’s yields were in the range of only 72 bushels per acre. Now, a considerable amount of concern is growing among Sousek and other drought victims, as Congress may not pass a five year farm bill – that includes the future of crop insurance – before the adjournment of 2012.

Watchdog groups have also been presenting criticism to the crop insurance program by saying that it has been overly generous, despite the fact that it has replaced coverage by emergency disaster programs.

At the moment, approximately 60 percent of the crop insurance premiums are paid by taxpayers. They also provide companies with compensation based on various threshold levels. At the same time, growers are able to purchase revenue policies that guarantee prices and that allow them to choose a standard harvest price for payment as they solidify the details of their coverage when the growing season begins.

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