Historically high prices that appear likely for many U.S. crops this year are worrying the companies that insure farm incomes and driving up premiums, says Tom Zacharias, president of National Crop Insurance Services.
Crop insurance providers carried about $80 billion in liability last year and that is expected to rise to $112 billion this year, former USDA Chief Economist Keith Collins told Dow Jones Newswires. Collins currently is a crop insurance industry consultant. Collins added that risk goes up with crop prices, especially in a year when there is a good chance of high volatility.
Collins and Zacharias, spoke to reporters in an effort to warn the public that crop insurance premiums may be higher than expected because of the added risk from unusually high crop prices. "It doesn't take much to make prices swing quite a bit," said Collins, who also stressed that prices don't have to fall much before crop insurance companies have to begin paying policy holders.
Crop insurance is heavily subsidized by USDA, which paid out about $4 billion for the program last year. Most of that money went towards indemnity payments to farmers and reimbursements to companies for administrative and operating expenses.
