As of Monday, the U.S. Department of Agriculture reported insurance payouts for 2012 corn, soybeans and wheat losses due to the drought topped $1.04 billion, and the amount is expected to grow. The total payout has already doubled the previous record of $522 million in 2008.
In a press release issued by Purdue University, PU Extension Agricultural Economist Chris Hurt said, “These crop insurance indemnities are the primary reason the state’s farm sector income has not collapsed under drought losses. The income-stabilizing impact of crop insurance has helped keep rural communities economically healthy.”
Of the total amount of 2012 insurance indemnities, $900 million in payments have been for corn losses. Indiana corn yields averaged 99 bushels per acre, nearly 40 percent below normal. The previous high for corn was $269 million for the 2008 crop.
Corn sales from the limited crop are generating about $700 million less across the state than had been expected before the drought. “So an infusion of an additional $900 million in insurance claims will bring total receipts to somewhat more than pre-drought estimates,” Hurt said.
Because of the large losses in 2012, Indiana corn farmers on average received $3.47 of insurance indemnity for each $1 they paid for crop insurance premiums.
Losses in soybeans accounted for the second-largest insurance payouts – $138 million. Soybean yields were not affected as much as corn last year because of more abundant late-summer rains. Final yields in Indiana were 43.5 bushels per acre, down about 10 percent from normal.
Final soybean marketing revenues for the state are expected to be about $275 million less than had been expected before the drought, Hurt said. Crop insurance, therefore, might not fully cover reduced returns from soybean losses across Indiana. Statewide, farmers received $1.09 of crop insurance indemnities for each $1 they paid for soybean insurance premiums.
While corn insurance indemnities were more than the losses, soybean indemnities were somewhat less than the losses. But the combination means that insurance payouts covered the losses for both crops, Hurt noted. Most farmers plant both corn and soybeans.
“With Indiana farm income expected to be in the range of $3 billion to $4 billion a year, it is clear that the recovery of more than $1 billion from crop insurance due to the 2012 drought is a significant part of that income,” Hurt said. “Unfortunately, some producers did not elect crop insurance in 2012.”
About 75 percent of Indiana crop acres were insured in 2012. Farmers wanting insurance for this year’s crop must sign up for it by this Friday.