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Farmers, experts: Keep crop insurance afloat

The total damage done to U.S. crop yields inflicted by last year's drought continue to mount in the form of rocketing crop insurance indemnity payments, though industry officials say the total tab will be far less than some expectations during and after last year's crop season concluded.

As of earlier this week, $14.2 billion has been paid out in indemnity payments to crop farmers following last year's drought. That total comes on the heels of an estimate by the Congressional Budget Office last week that showed the total payout had already exceeded $16 billion. In all, farmers have paid $4.1 billion in premiums for the protection afforded by last year's crop insurance, according to a report from National Crop Insurance Services, the trade group representing the crop insurance industry.

"Unlike natural disasters before the emergence of crop insurance, all of the cost is not falling on the laps of taxpayers," says National Crop Insurance Services president Tom Zacharias, adding the previous record for insurance payout was $10.8 billion in 2011.

These back-to-back $10 billion-plus payout years make crop insurance an easy target for general efforts to cut federal spending, something that experts say should be met with education by the ag sector if the industry is to stay in a position to help protect farmers from devastating circumstances like the drought of 2012.

"Crop insurance supporters need to address the negative impacts that others see in crop insurance, either by supporting research that in an unbiased way refutes the criticism or by offering alternatives that mitigate the concern. Failure to do so is likely to lead to a smaller program and perhaps its disappearance," according to a recent report from Ohio State University Extension ag economist Carl Zulauf and University of Illinois Extension ag economist Gary Schnitkey. "Ultimately, it was the inability or unwillingness of the farm community to address concerns with direct payments that has led to its questionable future. It will be interesting to see if the supporters of crop insurance can make this transformation."

And, farmers say that's not just an important message for the sake of sustained crop insurance coverage, but for the general public's sake as well.

"If these folks would care to look at the strategic importance of the entire Midwestern United States to our nation's food security, they would realize that without us, America would be a minor agricultural economic power," says Farm Business Talk senior contributor smokeyjay. "Lose our productive capacity and size, lose our ability to feed ourselves, let alone much of the world."


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