As blistering heat continues to sear crops across the Midwest, increased attention will be placed on crop insurance.
Drought claims are expected to drive up corn and soybean insurance payouts this year, but one insurance executive isn't discouraged.
"Crop insurance is a great business," said Evan Greenberg, chairmand and CEO of ACE Ltd., the Swiss-based insurance firm that offers Rain and Hall Agricultural Insurance.
Greenberg told AgWeb that crop insurance earnings are under pressure but are still projected to be reasonable.
Dave Miller, director of research and commodity services at the Iowa Farm Bureau, said corn and soybean crop insurance payouts will be high for the 2012 crops, "but insurance companies spread their risks across a wide geographic area and broad insurance markets -- with backing from the federal government."
Jake Anderson, manager of Toulon-based Stark County Farm Bureau, said this year's drought indicates the importance of insurance payouts.
"Crop insurance is the only meaningful risk management option available to farmers today. There are no federal disaster programs in place," he said.
"Fortunately, 80-85 percent of farmland is insured, meaning those farmers plagued by the drought should have the financial wherewithal to plant a crop again next spring and continue to grow our food," said Anderson, who approved government involvement in the program.
"Just as many employers share the cost of health insurance premiums for their employees, the government shares the premium cost to insure crops," he said.
"The government share of the premium is not a handout to the farmers. It is a discount to the total crop insurance premium. The farmers' share of the premium is not cheap," he said.
"The out-of-pocket expense for farmers, based on average-per-acre premiums for corn and soybeans, can run in the neighborhood of $20,000 per year for an Illinois farmer with 1,000 or more acres. In 2011, Illinois farmers spent $409 million out of pocket on crop insurance premiums," said Anderson.
"Even though they invest heavily in crop insurance, (farmers) often don't see a return. If they don't experience any losses, they don't collect any benefits. In the last six years, corn and soybean farmers in Illinois have received an average of 38 cents for every $1 spent on insurance premiums," he said.
"In the absence of crop insurance, if Congress were to enact disaster programs to protect the food supply, such programs would likely be 100 percent taxpayer-funded, unlike crop insurance," said Anderson.
Steve Tarter can be reached at 686-3260 or firstname.lastname@example.org.
(c)2012 the Journal Star (Peoria, Ill.)
Visit the Journal Star (Peoria, Ill.) at www.PJStar.com
Distributed by MCT Information Services