Crop Insurance Payouts Lower in 2015

Gary Schnitkey of the University of Illinois just posted an article in FarmDoc Daily on an analysis of crop insurance damage payments in 2015.  In 2015, the entire loss ratio for the industry was only .65 (1 is breakeven).  This ratio is much lower than the .97 ratio from 2010 to 2015 and also much lower than the 10 year average of .88.

For the major crops, corn had a .45 loss ratio; soybeans at .54 and cotton at .53.  Cotton STAX payments will increase the loss ratio to around .6.  Wheat came in at .55.

Rice came in a 2.71 and peanuts at 1.29 for crops having more losses than premiums.  With corn being at about 50% of the 10 year average, the crop insurance industry enjoyed a good year.  Much of this related to good weather across the corn belt and low prices for all crops.

States with high loss ratios included Texas, Washington, Oregon, Idaho, Nevada, California and South Carolina.  The upper corn belt states of Minnesota and Iowa almost consistently had loss ratios under .5

Unless we have bad weather this year, I would expect loss ratios to be low during 2016 due to lower discovery crop prices and expectations for continued low prices.  However, like the weather (or my weight) this can change rapidly.  We will keep you posted.

Paul Neiffer, CPA

CliftonLarsonAllen LLP