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Droughts and crop insurance add to costs for Texas farmers

On Behalf of | Jun 10, 2024 | Insurance Coverage | 0 comments

Recently in this blog, we discussed how climate change and natural disasters are contributing to a crisis in homeowners insurance. In this blog post, we will address how many of the same issues are affecting farmers.

As reported recently in the Texas Tribune, researchers recently published a study of the ways droughts affect farmers’ crop insurance. According to the report by the nonprofit Environmental Working Group, Texas receives more money than any other state in payouts through the federal crop insurance program. The top cause of crop insurance payouts is drought.

And the problem is getting worse.

According to the Environmental Working Group, payouts for drought damage in Texas cost the crop insurance program an annual average of $251 million just 20 years ago, but that number has been rising quickly — much faster than the rate of inflation. Over past four years, researchers said, the annual average has been more than $1 billion.

What is crop insurance?

Farming is an inherently risky business because it is so dependent on the weather. Excessive heat and insufficient rainfall can ruin a whole year’s crop, leaving farmers destitute.

During the Great Depression and the Dust Bowl of the 1930s, the federal government began protecting farmers from this kind of risk. Later, the Federal Crop Insurance Act of 1980 created a new agency to over see a nationwide program insuring farmers at subsidized rates. Federal crop insurance is now a $12.37 billion program insuring more than 2 million farmers.

More than half of the nation’s cotton is grown here in Texas, and cotton account for 60% of the crops insured under the program.

Rising costs

Unfortunately, costs are rising for everyone involved.

Many farmers cannot afford to insure their entire crops, and so they can’t recover everything they’ve lost after losing a year’s crop to drought.

Meanwhile, climate change-driven natural disasters are leading to more payouts, draining the federal program’s reserves. Some critics say it will soon be unable to pay many claims.

In 2022, drought caused Texas agriculture $8 billion.

All this adds up to increased pressure on Texas farmers to get the most out of their insurance. They need skilled help when insurance providers refuse to honor their claims or give them less than they deserve.