February 1, 2022

Sharp rise in US crop insurance payouts due to droughts

According to an analysis of federal data by the Environmental Working Group (EWG), there is a sharp rise in US crop insurance payouts to farmers for crops lost to droughts and flooding by more than threefold over the past 25 years, Reuters reported.

The report strengthens fears that crop insurance will be more expensive for insurance companies, farmers, and taxpayers as climate change results in erratic weather events that disrupt agriculture.

According to the Congressional Budget Office, the government pays close to 60% of the country's crop insurance premiums through taxpayer subsidies.

EWG said crop insurance payouts increased above 400% between 1995 to 2020 to US$1.65 billion, while insurance payments for floods increased close to 300% to US$2.61 billion. EWG analysed publicly data from the US Department of Agriculture (USDA).

EWG also said the number of insured acres only grew 84.5%.

Based on a 2019 USDA report, the cost of insuring crops could go up between 3.5% to 22% by 2080 because of climate change even if farmers were able to adapt to the changing weather.

Crops that are insured include corn, soybeans, wheat, and cotton.

Farmers are obliged to meet minimal conservation standards in the US federal crop insurance programme, which includes not planting on land highly vulnerable to erosion.

Anne Weir Schechinger, Midwest director of EWG, said the standards should be stricter to encourage farmers to be resilient to upcoming extreme weather events.

-      Reuters