Droughts in 2012 may lead to record breaking insured losses.
The drought continues to drag on through many of the main farming states, leading to crop insurance losses that are expected to break records as a result of ruined soybean, wheat, and corn fields.
Almost half of the continental American states are experiencing these exceptionally dry conditions.
As a result, every day without a significant soaking rain is raising the crop insurance losses. This, according to a National Drought Mitigation Center report at the University of Nebraska-Lincoln.
This is creating crop insurance losses nationwide.
According to the National Crop Insurance Services president, Thomas Zacharias, “It will be a major loss situation.” He and his lobbying group, which represents private farm insurers, went on to say that “The companies are in the field adjusting claims as we speak.” One of that group’s economists has predicted that there will be insured losses of approximately $20 billion this year.
Unfortunately, this means that the cost will eventually trickle down to the taxpayers, which will be shouldering a significant amount of the baked fields through the country’s farm protection program.
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Although there have yet to be any official estimates, Keith Collins, an economist form the National Crop Insurance Services, said that it looks as though it will be equally as bad, if not worse, than the losses that have been seen in previous years of extreme drought. The majority of farmers will typically have protection from financial devastation through their coverage, which is greatly subsidized for them.
On average, the federal government pays about sixty percent of premiums for protecting farmers’ fields. Moreover, when losses do occur, the federal government also splits the bill with insurers, in order to make certain that the farmers are indeed paid. According to agricultural policy experts, the more devastating the disaster, the greater the financial burden taken on by the federal government.
In 2011, crop insurance premiums totaled approximately $11.9 billion, according to the federal government’s records. The U.S. Department of Agriculture Risk Management data shows that of that amount, the government paid $7.4 billion. Floods, droughts, and Hurricane Irene brought about $10.8 billion in insured losses last year, making it a record breaking year.