Pale brown, sun-broiled scrubland stretches across Colorado. (Frank Morris/Harvest Public Media)
By now you know over half of the country is in a drought. Farmers are sitting back and watching their crops burn up. City water departments are regulating just how much water residents can use. Private lawn and landscaping businesses are struggling to find work for their employees. It seems like everybody is hurting.
“There’s an impact on the consumer,” said Des Moines-based commodity broker Tomm Pfitzenmaier. “It forces the liquidation of livestock herds then all of a sudden meat prices go up and there’s all the products that you buy in the grocery store that use corn.”
But for some farmers, maybe there isn’t so much hurting.
Thanks to crop insurance.
The Environmental Working Group hosted a conference call this week with reporters to point out that farmers hit by this severe drought will come out just fine.
“Most people don’t understand who compensates the farmers suffering from this severe drought,” said Craig Cox, senior vice president of agriculture and natural resources for the nonprofit. “Most people think it’s the insurance company that’s going to pay for the crop losses, but taxpayers will pick up most of the insurance payouts going to farmers.”
Cox, arguing that crop insurance needs to be reformed, said over the years, farmers have signed up for a newer highly subsidized insurance program.
“Farmers that have this subsidized policy might actually come out better because of the drought,” Cox said. “Even if they’ve lost a significant portion of their crop.”
According to Bruce Babcock, an economist at Iowa State University, almost 90 percent of the acres in Iowa are covered by this kind of plan.
So, farmers who bought the plan purchased when corn was much cheaper; with prices so high now farmers stand to gain a great deal. Babcock said those farmers who do actually produce a crop this year will have a really good year taking advantage of those high prices for corn and soybeans.
Look for in-depth coverage of this issue next week from Harvest Public Media’s Frank Morris.