HADDONFIELD, N.J. (DTN) -- The tally is in for Midwest corn farmers in 2012. Without crop insurance indemnities, their average revenues would have shrunk about $250 per acre and likely generated sizable losses on their drought-ridden crop, according to a study by the Brighton, Ill., financial consulting firm AgriSolutions.
Given the magnitude of the 2012 drought, "It is no surprise that crop insurance claim payouts per acre of corn were up last year," said AgriSolutions analyst Sam Bachman. "But it does look like farming is not nearly as risky as it used to be. At least there is a way to manage it."
Several hundred AgriSolutions clients from more than a dozen states reported average crop insurance claims (before accounting for premiums) equal to 26% of their farm's total income last year, or $247 per acre. Since not all operators took insurance or triggered their deductibles, the averages probably understated crop insurance's significance to individual farmers, Bachman cautions. In 2011, a year with massive drought in the Great Plains, roughly 1.15 million policies were purchased by farmers and only 395,000 were indemnified, according to National Insurance Services.
Big crop insurance payouts aren't the norm for corn growers. According to Ohio State University economist Carl Zulauf and University of Illinois economist Gary Schnitkey, net crop insurance payments represented only 2.9% of corn grower sales between 2003 and 2012. Upland cotton growers were the most reliant on crop insurance for support, accounting for 8.4% of their income during this same period.
Between 2008 and 2011, crop insurance indemnities in the AgriSolutions database averaged $51 per acre to $77 per acre and accounted for no more than 11% of total revenue.
Despite the disaster, AgriSolutions' corn growers experienced a personal best for 2012, grossing a record income of $964 per acre, slightly better than their 2011 average. "I expect many farm families are just saying thanks," Bachman said.
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