Wednesday, October 16, 2013

Seriously, $70?...

 Gary Schnitkey has been churning out analyses from FBFM numbers. This one surprised me.
The "no insurance" farms had average net farm income per acre of $210 per tillable acre while http://farmdocdaily.illinois.edu/2013/10/2012-drought-net-incomes-insurance.html with insurance" farms averaged $279 of net income per acre (see Table 1). The difference in income between the two groups was $69 per acre ($279 - $210), with this difference roughly accounted for in crop insurance payments.
Am I missing something here?  The worst drought in decades and crop insurance showed a whopping  $70 payback?  Wouldn't that just cover the last three years or so of premium?

What I think is happening is individual farmers don't have any way to look at the what-if scenario and only look at the huge insurance check.  If they had no insurance it seems like the higher prices make a kind of insurance for others.

Note also the caveat buried in the text of the report.
Factors other than yield also impact income distributions. One factor was timing of grain sales. In 2012, those farms with more pre-harvest sales tended to have lower incomes than farms with fewer sales. Obviously, timing of grain marketing will not have the same impact in different years.
I think it is hard to overestimate this factor.  But on average the results speak for  themselves.


Hey!  I posted from the field on my iPad!




2 comments:

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