DTN/The Progressive Farmer: Agriculture Markets, News and Weather

For many Midwesterners, private wind and hail insurance payouts justify their premiums, 2011 year-end returns show.

Before crop insurance, the standard farming rule was that it took seven good profit years to recover from the damage of one severe weather disaster. That's far from true today.

A fact surprising accountants as they study year-end farm financials for 2011 is how well private policies paid for wind and hail coverage, separate from more than $10 billion in claims paid nationwide under federal crop insurance last year. One crop insurance agent reports his company's Nebraska hail policies paid out $4 for every $1 in premiums in 2011.

"Hail and wind insurance paid in spades last year," agrees Sam Bachman, a financial consultant with AgriSolutions Inc. in Brighton, Ill., after studying early 2011 returns in the company's database. In fact, some hybrid corn growers with wind and hail damage made their best profits ever after counting returns from insurance claims and reimbursement for seed. One disaster victim with severe hail damage showed a profit of $1,200/acre on one field, thanks to payouts and reduced input and harvest expenses.

"I've lost more money to hail and straight-line winds like last summer's derecho than I've ever lost to drought," says DTN farmer columnist Adam Erwin who considers private insurance coverage the most important part of his risk management package. "Companies not only pay, they send sympathy cards when you do have a claim." The proceeds aren't necessarily windfalls, he points out, since growers may be unable to fill forward contracts and they may carry "goose eggs" in their conventional APH yields. That will penalize them in future years, something the hail-wind package compensates for now.

But the bottom line is much of today's weather risk is manageable. "It's not like Little House on the Prairie anymore, where one bad storm means you have to move back to the city," says Bachman.

? Copyright 2012 DTN/The Progressive Farmer, A Telvent Brand. All rights reserved.

Source: http://www.dtnprogressivefarmer.com/dtnag/view/blog/getBlog.do?blogHandle=business&blogEntryId=8a82c0bc35e51c2201363699564e033d

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