Drought spurs moderate crop insurance payouts this year
The ongoing drought that has gripped much of the U.S. may not be as economically calamitous as had been predicted, according to insurance payouts to farmers in some of the most drought-stricken states. Earlier this year, farmers had expected to lose the vast majority of their produce due to severe drought. While the drought proved to be one of the worst the country has experienced in its history, spurring the federal government to purchase stocks of fish and produce, the economic impact of the disaster is much less than had been anticipated. Crop insurance payouts show that claims are not as severe as the drought itself.
Drought causes concern, but not economic damage
The ongoing drought did produce high loss ratios among farmers, but these losses produced claims that were less than what had been expected to be covered through crop insurance. During the early days of the drought this year, crop insurance was a hot topic. The federal government had made changes to its crop insurance program in order to better protect farmers from loss, but these changes may have been unnecessary. Insurance payouts show that claims remained well below the 100% threshold for this year.
Iowa sees modest damage to corn and soybean crops
Iowa experienced some of the highest payouts in the country. Approximately $705 million has been paid in insured damages to Iowa farmers, below the $902 million that has been allotted to some 21 million acres of farmland in the state. These claims are a fraction of the corn and soybean crops that are considered viable in the state, which accounts for more than $18 billion when combined. The drought has certainly cut into yields, but the cost does not seem to be as catastrophic as had been predicted.
Crop insurance continues to be tricky subject
Despite the modesty of claims coming from farmers throughout the U.S., crop insurance continues to be a difficult subject for the federal government. More than 60% of farmers throughout the country purchase crop insurance policies that are provided by private companies. These policies are subsidized by the federal government, which means that the policies themselves are being paid with taxpayer money.