Crop Insurance Today May 2014 - (Page 4)

CropInsurance TODAY By Keith Collins and Harun Bulut, NCIS (Note: the data discussed in this article are as of April 21, 2014, unless indicated otherwise.) Overview After the devastating drought of 2012, U.S. producers and the crop insurance industry experienced a more routine year in 2013, but still one with atypical events. Drought was eliminated in many areas, growing conditions turned out much more favorable and yields were near trend for many major crops, enabling farmers to harvest large production levels. The year also saw the Federal Crop Insurance Program attain several significant milestones. Total insured liability of nearly $124 billion was the highest ever, while gross premium of $11.8 billion was the second highest ever and insured acres at 296 million was a record high. Strong insurance policy base prices for major crops and the continuing increase in coverage levels contributed to the high insured value. Despite large production levels, the program's gross loss ratio-indemnities divided by premiums-turned out 4 MAy2014 Year In Review to be 1.00 as of this writing, coming in behind 2012 as the second highest in the past decade. The loss ratio was pushed up by a sharp drop in market prices of major crops caused by the rebound in crop production. The price declines, along with adverse weather affecting certain regions and crops, caused many losses on both revenue and yield policies. The $11.8 billion paid in indemnities as of April 21, 2014 was the second highest ever. The highest indemnities by state were paid in Iowa, $2.0 billion; followed by Texas, $1.5 billion; and Minnesota, $1.3 billion. Corn had the highest level of claims at $5.7 billion, followed by wheat at $2.3 billion and soybeans at $1.2 billion. The high level of total claims has resulted in back-to-back subpar financial returns for crop insurance companies and the first back-to-back annual gross underwriting losses since 1999 and 2000. The drought of 2012 caused large underwriting losses both for the government and the companies, offsetting prior years of underwriting gains. The companies' rate of return on retained premium is estimated as a negative 15 percent for 2012, and the losses incurred in 2013 will likely result in a rate of return on retained premium in the mid-single digit range. Companies need successive years of favorable returns to build surpluses to meet the losses that come with catastrophic years. With crop insurance providing financial support, farmers were able to plant 325 million acres in the spring of 2013, down slightly from a year earlier but four million above the previous five year average. The winter was warmer than average across the country, supporting winter wheat, and above-average precipitation in the Eastern half of the county finally eliminated drought in the Corn Belt and Southeast. The Southern Plains drought experienced some relief, but dryness on the West Coast and North Central areas was a continuing concern. A cold, wet spring caused significant planting delays in the Northern Plains, Midwest and Mississippi Delta. Planting progress was dramatically worse than in 2012 when the pace of plantings far exceeded the previous five year average for all the major spring planted crops. By the end of April

Table of Contents for the Digital Edition of Crop Insurance Today May 2014

“...Where to now, St. Peter?”
2013 Year In Review
NCIS Celebrates Silver Anniversary
2014 Annual Convention Draws Record Numbers
Four Industry Stalwarts Presented Lifetime Achievement Awards
Dan Carothers Receives Outstanding Service Award
Kenny Shock Receives NCIS Industry Leadership Award
Tom Vetter Receives NCIS Industry Leadership Award
Committee Chairs Ready for the Year
Jo Anne Baker Retires Leaving NCIS

Crop Insurance Today May 2014