Economist disputes crop loss numbers [The Salina Journal, Kan.]

Aug. 27--Sen. Pat Roberts won't deny that crop losses were immense in 2012, but he echoes a Kansas farm economist's opinion that the Federal Crop Insurance Program did its job.

"That's what it's there for," the Kansas Republican said Monday after speaking to the Salina Noon Rotary Club.

The Natural Resources Defense Council announced Monday that it would release a report and map today showing Kansas was among the 10 states with the highest crop losses in 2012, and that extreme drought forced the federally subsidized crop insurance program to pay a record $17.3 billion last year. NRDC attorney Claire O'Connor amended that figure to $17.4 billion late Monday, quoting information from the U.S. Department of Agriculture'sRisk Management Agency.

The biggest losses were felt in the Corn Belt, said Art Barnaby, an agricultural economics professor for Kansas State Research & Extension.

He said the number is inflated by about $5 billion.

Barnaby said crop insurance losses in Kansas -- which ranked fifth in the nation in 2012 -- were half those in Illinois.

"The net cost to the taxpayers was ($11.8) billion," he said. "Basically, they're inflating their numbers by using gross claims."

The $17.4 billion number doesn't account for the premiums that farmers paid, Barnaby said, or the amounts paid by insurance companies over and above the subsidies.

"The reality is, they (NRDC) are simplifying numbers that misrepresent what's going on," Barnaby said.

The NRDC plans an 11 a.m. call-in news conference today to discuss its findings.

In addition to Kansas, the top 10 states includes Illinois, Indiana, Iowa, Kentucky, Missouri, Nebraska, South Dakota, Texas and Wisconsin.

O'Connor said the goal of the report is to show "the scale of loss that farmers suffered," rather than costs.

"We're more focused on some of the challenges that farmers are facing, using the amount of indemnities paid to farmers, not the cost to the taxpayer," she said.

Roberts and Barnaby "haven't seen the report," O'Connor said.

Roberts sponsored the Agricultural Risk Protection Act in 2000, and since then, the government's share of the premiums was increased to "entice more farmers to join," Barnaby said.

The NRDC reported that Federal Crop Insurance payouts averaged $4.1 billion a year from 2001 through 2010. Net taxpayer costs were actually just over $4 billion during that span, Barnaby said.

Saying the actual losses in 2012 were closer to $17.2 billion, Barnaby said farmers paid $4.12 billion in premiums, insurance paid $1.3 billion in claims, and taxpayers shelled out $11.8 billion.

O'Connor said today's report will offer a "blueprint to help alleviate (farmers') suffering." Coming from a family farm in Waverly, Neb., she said, "I think farm communities should welcome this. It's a great indication of what people are facing."

The senator and Barnaby agree last year was a tough one for crop insurance.

"Frankly, if you don't have 2012 or a year like that, you can write crop insurance privately. You don't need government help," Barnaby said. "You can't expect farmers to write checks for premiums every year and then you don't want to pay them when you have a catastrophic loss. It worked the way it's supposed to, and most farmers were happy with their coverage in 2012."

For 20 years prior to 2012, farmer-paid premiums in Illinois exceeded all the claims, he said.

"But it took only one year (2012) to wipe it all out on corn," Barnaby said. "That catastrophe is the real reason you need government support."

He also noted that 2012 was the first year in 30 years with major losses that wasn't followed with an "ad hoc disaster program" from the feds.

The government subsidy "covered the catastrophic risks that the insurance industry is not set up to cover."

That $11.8 billion loss wouldn't compare to the cost of a disaster program, Roberts said, and doing nothing would be devastating, considering the number of farmers who would have gone out of business, causing "out-migration from small towns."

Barnaby added that the payments after the 2012 crop year kept farmers in business, which in turn kept the doors of small rural banks open.

Losses in 2012 represent a "one-in-20 year hit at the very best," he said. "Crop insurance did pay. Twelve billion (dollars) is a very small amount of money compared to what it costs to run the military."

-- Reporter Tim Unruh can be reached at 822-1419 or by email at [email protected].

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