Crop Insurance Today May 2015 - (Page 5)

in the range of only five-six percent of their cumulative retained premiums. Since underwriting gains are only part of gross revenue, pre-tax net income returns would be considerably lower. Corn and soybeans continued to be the top premium crops, accounting for twothirds of U.S. premiums in 2014, with wheat coming in third. Minnesota had the highest loss ratio among major states and Iowa had the highest level of claims among all states, with excess moisture and lower prices being the principal causes of loss in both states. Minnesota and Texas were second and third in claims while Oklahoma and Iowa were second and third in loss ratio among major states. By crop, loss ratios were highest for ELS cotton, olives, macadamia nuts, burley tobacco and pistachios. The losses on ELS cotton, olives and pistachios were all due to California's persistent drought. Implementation of the 2014 Farm Bill led the list of program and policy developments in 2014. The new Farm Bill was signed into law on February 7, 2014 and features many new products and changes for crop insurance. The new law reduced the 10-year projected outlays on farm programs by an estimated $14.3 billion but continued the emphasis on risk management and crop insurance by raising crop insurance projected funding by $5.7 billion. The increase in crop funding is primarily due to the addition of two new supplemental revenue programs, the Stacked Income Protection Plan, or STAX, for upland cotton, and the Supplemental Coverage Option, or SCO for other crops. These plans will be available for cotton and major crops beginning in 2015. Implementation of the Farm Bill's crop insurance provisions has proceeded timely and effectively during 2014, with opportunities for industry input into the Risk Management Agency's (RMA) development of regulations and procedures. Farmers will have many new opportunities to expand coverage under the new programs and provisions. One concern continues to be the risk of loss for the program and the companies created by the new products that will raise producer coverage levels, such as the provision to exclude loss history in years of low county yields (APH Exclusion) and by the use of premium rating methods that have limited or no historical experience on which to base rates. Figure 1. Winter 2013-2014 (Dec-Feb) Statewide Precipitation Rank, 1895-2014 Record Driest (1) Much Below Average Below Average Near Average In addition to protection provided by the crop insurance program, farmers had $39.7 billion in privately provided crop-hail insurance protection in 2014. Farmers' premiums for 2014, as currently reported to NCIS, were the largest in the history of the program at $992 million, up from $953 million in 2013. This coverage proved valuable in 2014 as it paid out $1.2 billion in losses as the program had the largest hail losses in its history and became only the third year since 1948 in which the U.S. loss ratio exceeded 1.0. Canada, too, experienced 2014 hail losses that were significantly worse than 2013. The Canadian 2014 loss ratio was 0.84, as compared to the 2013 loss ratio of 0.50. U.S. Weather and Production of Major Crops Winter 2013/14. The production cycle for the major 2014 crops commenced with planting of winter wheat beginning in August 2013. Most of the nation had near to above average fall rainfall and by the end of September, seeding was slightly behind the 5-year average pace, but exceeded that pace over the next month and most acreage was rated good to excellent in late November. Planted acreage was 42.4 million, down about two percent from 2013, with an increase in Hard Red Winter (HRW) wheat, particularly in the Central and Northern Plains, which was offset by a sharp drop in Soft Red Winter (SRW) Above Average Much Above Average Record Wettest (119) wheat. White wheat in the Pacific Northwest was down from a year earlier. The 2013/14 winter was extremely cold with much snowfall in the Midwest. Many Corn Belt states had the coldest winter since 1978/79. The drought continued from California to the Southern Plains as indicated in Figure 1. California had its warmest and third driest winter on record. Arizona, New Mexico, Oklahoma and Texas all had abnormally dry winters. California also experienced a damaging December freeze that affected citrus and other crops in the Central Valley. Many wheat areas had adequate precipitation, much as snow, but variable temperatures, wind, periods of inadequate snow covering and dryness in the Southern Plains caused poorer wheat conditions across the Central and Southern Plains. The South and East also saw wintry weather and extreme cold but did not experience the severity of the Midwest. Spring 2014. Despite late spring showers, the Central and Southern Plains and the Southwest experienced below-normal spring precipitation (Figure 2). The late rains were too late to alleviate stress on the winter wheat crop. California's three-year drought continued with above-normal temperatures, which, along with a limited snowpack, boosted irrigation needs. Most of the rest of the nation had near- to above-normal precipitation, with the wettest areas being the Pacific Northwest, North Central states, and the South and CROPINSURANCE TODAY® 5

Crop Insurance Today May 2015

Table of Contents for the Digital Edition of Crop Insurance Today May 2015