If anyone doubted the huge role that the U.S. Department of Agriculture’s (USDA) Federal crop insurance program is playing this year in protecting rural America from economic disaster following last summer’s historic drought, a new study from two economists at the University of Nebraska-Lincoln should settle the issue.
USDA Federal crop insurance has paid over $16 billion so far in indemnities to American farmers for crop losses in 2012. This faraway single-year record reflects both the sheer size of last year’s disaster as well as today’s wide use of insurance by American producers. But this lifeline did not simply save farms. Instead, the new analysis by Nebraska economists Brad Lubben and Eric Thompson (underwritten by lender Farm Credit Services of America) shows that most of the money went directly to saving off-farm jobs.
According to the analysis, in Nebraska, Iowa, South Dakota, and Wyoming, farmers spent a full $2.2 billion out of the total $3.6 billion in net crop insurance indemnities received to support local businesses like retailers, restaurants, health care providers, farm equipment dealers, and others. The net effect was to save 20,900 local jobs – in addition to keeping the farmers themselves afloat.
No wonder that every discussion of a new Farm Bill for 2013 starts with crop insurance. Here’s the link to the study: http://www.omaha.com/article/20130313/MONEY/703139980