Insurance proves vital for drought-hit western producers

Farmers and ranchers who purchased crop insurance in the Plains and West found that the drought that plagued the region throughout the growing season made a big difference in earnings.

Rain index insurance, a relatively new policy that reimburses pastures, pastures and pastures when rainfall in growing areas falls below normal, increased to 205 million acres last year and 100 million in 2020. It jumped from 61 million acres to 253 million acres this year.

Introduced as a pilot program in 2007, RI’s policies have so far paid out $1.6 billion in compensation to farmers at less than $1.4 billion in premiums, more than half of which is paid by the government. It’s the third year in a row that his losses exceed his premiums.

In Texas, hit by the worst drought in a decade this year, growers who purchased RI insurance on 38.2 million acres of pasture and feed claimed $714 million in compensation. In July, 57% of the state was classified as having extreme or exceptional drought.

Cotton producers in Texas, who have seen prices crash even as crops dry up, could be well compensated this year through revenue protection policies and supplemental coverage.

Marcia Bunger, manager of the USDA’s Office of Risk Management, said the rainfall index program has grown “exponentially” over the past five years, adding that the policy’s “simplicity makes it very simple for growers.” ‘ said.

She hopes the program will continue to grow and has rejected some Reforms aimed at limiting compensation recommended by a group of consultants during the 2020 Trump administrationBanger expressed concern that the reforms would reduce participation.

“We are moving forward with the status quo and have no intention of implementing any recommendations found in the investigation at this time,” she said.

The report recommended lowering the maximum compensation level from 90% to 80% while adjusting the county fodder value, or “county base value,” used to calculate compensation.

Brandon Willis, a former RMA administrator who sold RI insurance in western states, said the policy “has been very effective over the past few years, keeping business people away from the West.” He doesn’t think enrollment in the West will continue to grow as rapidly as it has in recent years, but he thinks national attendance numbers could eventually double this year. I’m here.

The total amount of RI compensation paid this year will not be known until early 2023, according to the RMA. Producers select pasture, range and feed policy (PRF) coverage at two-month intervals. The last covered period for 2022 he is November-December.

December 1st is the registration deadline for 2023 rain index insurance.

Beekeepers have insured feed for 2.7 million colonies this year and received $91 million in compensation.

Cotton producers, on the other hand, were happy to purchase additional insurance policies in the spring when market prices soared.

Of the 7.1 million acres of cotton planted in Texas, only 2.5 million are expected to be harvested, according to the USDA.But about 6.9 million acres of U.S. cotton, including his 4.3 million acres in Texas This year, we have a supplemental revenue protection policy known as STAX. Only 1.5 million acres of cotton will be covered by STAX in 2021. Farmers typically grow 11 million to 14 million acres of cotton per year.

Rain Index Insured Acres from 2010 to 2022

STAX, and similar policies available for other crops with supplemental compensation options, are designed to help farmers reduce deductibles and insure “shallow” losses not covered by basic revenue protection policies. STAX is the most profitable of the supplementary policies, allowing farmers to guarantee up to 90% of the county’s expected returns, with the government paying his 80% of the premium.

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Most cotton farmers insure their crops based on a price of $1.02 to $1.03 per pound. The USDA sets insurance prices at the beginning of the year. However, the market price he started to fall in May, plummeted in June and now he is below 80 cents a pound.

RMA has not yet reported STAX compensation, but it could be substantial.

“The plunge in prices certainly triggers beneficial price-based compensation for growers…but given the scale of crop losses in Texas this year, the real benefits are to growers facing a complete crop failure. Yes,’ said Bert Fisher, an economist at Texas A&M University, in an email. Agripulse.

Producers will face another challenge if prices do not come down next year, he said.

“Even if we don’t see a recovery, producers should continue to focus on squeezing out all the protection they can (including STAX research). (and they’re starting to look to Title 1 for stronger protection),” he said, referring to the Farm Bill’s price loss compensation program.

The problem for producers, he said, is that PLC reference prices are not high enough to help producers when input costs are rising sharply.

For example, if the market price in 2023 is 76 cents per pound, which is too high to trigger a PLC payment, a producer who buys income protection insurance and supplements it with STAX will pay just a little less per pound. 68 cents, or only 90% of the market. price. Fisher said that would be “well below the break-even point for many producers.”

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