Crop Insurance Indemnities Reach $11.473 Billion for 2013 Crops

March 26, 2014 09:44 AM
 

Payouts continue to push the loss ratio closer to 1.0.


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Crop insurance indemnities have pushed to $11.473 billion for 2013 crops with the loss ratio at 0.98, according to Risk Management Agency (RMA) data for the week ended March 24.

The loss ratio of 0.98, however, is still behind the 2012 crop mark of 1.57 but ahead of the 2011 crop loss ratio of 0.91. The loss ratio is calculated by comparing the total indeminities against total premiums paid into the program.

Corn payouts are nearing $5.45 billion, accounting for nearly 48 percent of the total indemnities for 2013 crops. Corn accounts for over 28 percent of net acres insured with soybeans next at nearly 23 percent  and pasture and rangeland at just over 18 percent and wheat at just over 16 percent.

2013 Crops

Week Ended

Net Acres Insured
(million)

Premiums Paid
(Billion dollars)

Subsidy
(Billion dollars)

Indemnities
(Billion dollars)

Loss Ratio

Corn

03/24/14

84.747

$4.685

$2.826

$5.449

1.16

03/17/14

84.771

$4.685

$2.826

$5.403

1.15

Cotton

03/24/14

9.722

$0.666

$0.437

$0.951

1.43

03/17/14

9.864

$0.677

$0.443

$0.965

1.43

Pasture & Rangeland

03/24/14

54.241

$0.196

$0.105

$0.176

.90

03/17/14

54.234

$0.196

$0.105

$0.176

.90

Peanuts

03/24/14

0.950

$0.046

$0.027

$0.024

.52

03/17/14

0.952

$0.046

$0.027

$0.024

.52

Rice

03/24/14

2.299

$0.062

$0.042

$0.117

1.88

03/17/14

2.298

$0.062

$0.042

$0.117

1.88

Sorghum

03/24/14

5.758

$0.276

$0.176

$0.359

1.30

03/10/14

5.793

$0.277

$0.177

$0.359

1.29

Soybeans

03/24/14

67.463

$2.493

$1.535

$1.178

.47

03/17/14

67.459

$2.492

$1.535

$1.166

.47

Burley Tobacco

03/24/14

0.064

$0.021

$0.012

$0.028

1.34

03/17/14

0.064

$0.021

$0.012

$0.025

1.22

Flue-Cured Tobacco

03/24/14

0.220

$0.047

$0.027

$0.079

1.66

03/17/14

0.220

$0.047

$0.027

$0.079

1.66

Wheat

03/24/14

48.414

$1.973

$1.243

$2.243

1.14

03/17/14

48.585

$1.981

$1.249

$2.256

1.14

TOTAL

03/24/14

295.372

$11.762

$7.268

$11.473

.98

03/17/14

295.724

$11.783

$7.281

$11.434

.97

 

As for 2014 crops, RMA data indicates that net acres insured stand at 87.108 million as of March 24, just behind the pace seen at this point a year ago for 2013 crops of 89.678 million. That level will continue to rise as producers had to make their decisions in terms of obtaining crop insurance coverage by March 15 in many locations for spring planted crops in the Midwest. That March 15 date is listed in information from various states even though that fell on a Saturday in 2014. Some reports have signaled March 17 was the sales closing date, but fact sheets from most states indicate that March 15 was still the sales closing date.

Following are the crop insurance 2014-crop projected prices for corn, soybeans, spring wheat and grain sorghum as published by USDA’s Risk Management Agency (RMA) March 3, based on the futures prices for the commodities during February:

Crop

2014
$/bu.

2013
$/bu.

Corn

$4.62

$5.65

Grain Sorghum

$4.46

$5.53

Soybeans

$11.36

$12.87

Spring Wheat

$6.51

$8.44

Durum

$9.64

$7.25

As for coverage levels and premium  subsidies involved, those vary by crop and location, with the following applying to 2014 corn to corn policies sold in Iowa. 

Corn may be insured at the coverage levels shown in the following table in Iowa, with crop insurance premiums subsidized as shown. For example, if a producer in Iowa selected the 75 percent coverage level with an enterprise unit, the coverage is based on 75 percent of the producer’s approved APH yield, the premium subsidy is 77 percent, and the producer’s premium share is 23 percent of the base premium.

 

 

What are those units in the above table?

Basic Unit (BU) - A basic unit includes all of insurable corn acreage in the county by share arrangement. Premium discounts apply.

Optional Unit (OU) - If a basic unit consists of two or more sections of land, and certain recordkeeping requirements are met, the producer may apply for optional units by section.

Enterprise Unit (EU) - Generally, this is defined as all the insured crop acreage in a county. Premium discounts apply.

Whole Farm Unit (WU) - Generally, all the insured crops in the county that are covered by the insurance plan. Premium discounts apply. Does not apply to Yield Protection Plan.

Comments: The focus on the crop insurance program will continue high, with some lawmakers and others focusing intently on the costs for the program and how many dollars have flowed to producers in terms of the premium subsidies. In addition, the focus is also on how many improper payments were made, with that percentage for crop insurance put at 5.2 percent. Some Democratic lawmakers in particular continue to cite that percentage figure as running higher than the same percentage for the Supplemental Nutrition Assistance Program (SNAP) of 3.4 percent.

But House Ag Appropriations Subcommittee Chairman Robert Aderholt (R-Ala.) responded by pointing out the 3.4 percent error rate in SNAP amounts to $2.6 billion, while the 5.2 percent error rate in crop insurance amounts to $566 million. "I know the administration likes to stress the low error rates, but I think it’s important to put the error rate percentage into dollars. Whether it is SNAP or crop insurance, this subcommittee will be vigilant in ensuring that USDA reduces improper payments so as to protect hard-earned tax dollars," Aderholt said.

 

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