Crop Insurance Payments for Drought More Than for Flooding

Farmers are reaping higher yields and ranchers’ feed costs have fallen sharply since flooding swept across the southern U.S. Plains in May, with the record rains providing tangible benefits to agriculture despite causing damage that will likely cost billions of dollars to repair.

The storms inundated fields across Texas and Oklahoma but they broke a years-long drought that wreaked havoc on the profitability of growers and cattlemen.

Even though floods tend to grab more headlines, drought is actually much more costly in terms of its impact on agriculture.

“The thing that differentiates it (drought) from all other natural hazards is the fact that it covers such a wide swath or spatial extent,” said Don Willhite, climatologist in the School of Natural Resources at University of Nebraska-Lincoln. “Floods are much more localized. (Drought) goes on for so long. The impacts accumulate year to year.”

Floods also are less costly for the U.S. government.

Between 2012 and 2014, a period when the U.S. Southwest and other major crop production areas suffered from drought, the U.S. Agriculture Department paid out $23.892 billion in crop insurance claims due to dry soils. The peak came in 2012, when the government paid out $15.672 billion after dryness and heat ravaged production in both the Plains and the Midwest.

During that same time, crop insurance claims related to floods totaled $6.209 billion. In 2011, the last time a major flood caused heavy damage to a key agriculture region, crop insurance claims related to excess water totaled $3.476 billion, which was still less than that year’s $5.646 billion in drought claims.

Insurance payments have not yet been calculated for the damage inflicted by the recent flooding in the Southwest.

“Most producers are working on making sure their families have a roof over their heads and are taken care of first,” the USDA said in an email. “There is no way to predict what those numbers will end up being. When producers have an opportunity to access their situation and the damage, I am sure they will reach out to USDA for help.”

In addition to causing property damage, the rains may lower the protein level of the wheat, which will cost farmers in payments received from elevators on a per-bushel basis. The excess moisture raises the risk of disease pressure on crops. And the Southwest is still prone to dryness, so the benefits from the rains could be short-lived.

But most forecasters do not expect the drought to return this year thanks to an El Nino weather pattern, which typically brings cooler temperatures and rain to southern areas of the United States.

“It wouldn’t take a whole lot of dryness to spark things up again,” said Southern Regional Climate Center climatologist Luigi Romolo.

“I am not expecting that, because this pattern of wet weather is expected to continue at least through the summer,” he said.

Ranchers already were seeing tangible benefits from the rain.

Hay costs have fallen to $35 a bale from a peak of $130 during severe drought in 2012 and 2013, even with some soaked bales rendered useless by the excess moisture and supplies somewhat limited by harvest delays.

Grass also is abundant, allowing animals to graze in pastures that had long been dormant and further cutting in to feed costs.

But even in areas where the rain was welcomed as long overdue, the inundated fields have caused challenges.

“I park at the road and walk in mud boots about a quarter of mile in one place,” said Oklahoma rancher Kent Donica, who also has to navigate through waist-high grass on parts of his property to find his animals.