Message Font: Serif | Sans-Serif
No. of Recommendations: 4
How is it possible to have a drought if at the same time, in 2012, US farmers harvested the Eighth Largest US Corn Crop On Record?

A few different reasons...

Good summary, Pete. Here's one more factoid worth considering:

U.S. Crop-Insurance Claims Rise to Record After 2012 Drought

The worst U.S. drought since the 1930s led to record payouts on crop-insurance claims, with farmers collecting $11.581 billion as of yesterday for damage in 2012, government data show.

Payments are up 6.8 percent from 2011, when claims reached the previous record of $10.843 billion, according to a Risk Management Agency report published today on the U.S. Department of Agriculture website. In 2010, the total was $4.251 billion.

Last year’s Midwest drought sent corn and soybean prices surging to records as output fell, while dry fields across the Great Plains left winter-wheat conditions in November at their worst since at least 1985, when the USDA began collecting the data.

A whole lotta acres of corn, wheat and beans were planted, and a whole lotta farmers lost their crop. As you noted, the irrigated farms survived the drought (while depleting the groundwater aquifers).

I've mentioned it before, but it's worth repeating - crop insurance subsidies paid by US taxpayers are such that we taxpayers not only get to pay more for our food during drought events, we also fork over large sums of money to large corporate farms:

(From the Heritage Foundation)

Farm Bill Should End Secrecy in Crop Insurance Subsidies

Crop insurance subsidies are one of the biggest taxpayer handouts to the agriculture sector. In 2011, taxpayers were on the hook for $7.4 billion for crop insurance premium subsidies alone
. Unlike most other farm payments, taxpayers are prevented from learning who receives these subsidies and in what amounts. Congress should end the crop insurance secrecy to enable taxpayers to hold lawmakers accountable for this massive spending.

...crop insurance has grown into an expensive taxpayer-financed handout to large agricultural corporations and insurance companies.

Unlike other farm payments, crop insurance premium subsidies are not subject to means tests or payment limits. Coupled with the trend toward larger farms, this has resulted in the bulk of subsidies going to wealthy farm owners. According to 2011 data compiled by the Environmental Working Group, the top 20 percent of farm recipients collected almost 80 percent of all premium subsidies.

Premium subsidies cover, on average, 62 cents of every dollar of crop insurance purchased by eligible farmers.

In addition to premium subsidies, the government also covered about $1.3 billion for administrative expenses of crop insurance companies in 2011.

According to a Bloomberg Industries analysis, administrative costs for crop insurance are about triple the rate of nonfarm property and casualty insurers. It is no surprise, then, that the insurers benefiting from taxpayer crop insurance subsidies earn a 30 percent average return, compared with 12 percent in the private sector.

This multi-year drought has cost the US consumer/taxpayer plenty.
Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.