Corn crop insurance could save farmers from likelihood of massive US crop failure

Climate change could punish consumers, but farmers are sitting pretty with insurance coverage

Corn crop insurance could save farmers from likelihood of massive US crop failure

Catastrophe & Flood

By Sam Boyer

Researchers modelling climate change weather trends say a catastrophic corn drought could be increasingly likely in the coming years.

Should that eventuate, the consumer would likely suffer, but about 90% of US corn farmers should be OK – because they’re insured.

Celebrate excellence in insurance. Nominate a worthy colleague for the Insurance Business Awards!

Dave Janson, agency president at Strategic Farm Marketing in Champaign, Illinois, said Corn Belt farmers would likely come out fine if there was a major crop failure, because the Government crop insurance program was so strong.

“Most corn crop insurance is sold under yield and revenue policies, so if the yield is very bad or if the crop price goes down, both of those things are covered,” he said. “And if we have a yield problem, the price is covered at the better of the February price or the October price.”

There are few agricultural products as omnipresent as corn. It’s in ketchup, soda, bread and candy. It is the US’s top feed grain, a dietary staple today for cows, pigs and chickens.

In 2016, the US harvested almost 87 million acres, producing 15.1 billion bushels, for a total value of $51.5 billion.

But a new study from the Met Office, the United Kingdom’s national weather service, says climate-induced drought could hit several of the world’s major corn producing regions all at once.

The Met Office used a novel approach to determine the probability of severe water stress in three major corn-producing regions that are responsible for 40% of global production, including the Corn Belt in the US (Illinois, Iowa, Ohio, Nebraska, Indiana, and Nebraska). Instead of relying on observed historical data – which the researchers found to seriously underestimate the impact of climate change – the new study used a model focusing on water stress.

“We haven’t seen a major drought in the US and China in the same year in the last 30 years,” said Chris Kent, the lead researcher on the study. “Our simulations indicate that that type of scenario is possible in the current climate.”

In the US, the chance of all six Corn Belt states simultaneously experiencing severe water stress is about 20% per decade. Similar events did conspire in 1988 and 2012, the researchers noted, leading to estimated losses of more than $30 billion worth of crops.

“Because the [crop insurance] program is so successful and so many acres are insured, I don’t think it [a massive crop failure] would be a big problem for the farming community,” Janson said. “2012 would be a good year to point to – it was an absolutely devastating year for much of the crop belt, but most farmers were protected because they purchased the crop insurance. That’s what it’s there for.”

Weather had been erratic in recent years, Janson said, although crop yields had been getting stronger – based largely on crop technology improvements. This year could actually turn out to be a rare poor year, though, he said.

“There are some parts of the country that are getting way too much rain and there are some parts of the country that are clearly not getting enough. So crop insurance [this year] could be a big deal when it comes to parts of Indiana, parts of Ohio, parts of the Dakotas and parts of Nebraska – they’re going to be affected. And maybe parts of Iowa, too.”

– with Deena Shanker, Bloomberg

Related stories:
Insuring Hawaiian crops is about much more than pineapples
Trump budget proposes massive cut to crop insurance

Keep up with the latest news and events

Join our mailing list, it’s free!