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Insurance offsets losses from parched summer

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Last year, when a drought hit Indiana farms, many farmers relied on insurance payouts to protect them from losing money.

The lack of rain caused crops, especially corn, to dry out and die early, with some Johnson County farmers harvesting less than one-fourth the crop they normally bring in each year.

Farmers who didn’t have crop insurance faced financial losses. Depending on their policy’s coverage, farmers can get insurance payouts for the value of up to 85 percent of their average crop if natural disasters ruin the crop or prevent planting. The insurance is optional, and farmers without it can end up paying for their expenses out of their low earnings.

The federal government underwrites private crop insurance programs and in 2012 paid $29.8 million toward Johnson County farmers’ claims after the drought. That was a 178 percent increase from 2011, when the U.S. Department of Agriculture paid $10.7 million.

This year, the weather was milder; and local farmers saw corn yields of up to 200 bushels per acre, in some places more than quadrupling last year’s production.

But the good yields don’t mean farmers are recouping their losses, according to Merrill Kelsay of Whiteland.

He plants about 1,200 acres of corn, 800 acres of soybeans and 400 acres of alfalfa and wheat. The drought meant reduced yields but high selling prices for corn because so much of the crop was ruined nationally that demand was high.

Kelsay said his corn yields last year were 50 to 60 bushels per acre; this year, it’s 180 to 190 bushels per acre. That abundance, however, was offset by lower prices because yields were up for many farmers.

“The crop isn’t worth as much this year, but it is a good crop,” he said.

How farmers did after the drought depended on their crop insurance plans, which vary and can cover low yields or revenue losses.

The insurance payouts also vary based on what percentage of a farm’s average crop was insured, ranging from 55 percent to 85 percent, according to agent Kevin Carson with J&S Farmers Insurance in Franklin.

An insurance policy that covers yields insures a farmer against lower-than-average harvests because of natural causes, such as drought, insects and flooding, according to the U.S. Department of Agriculture website. A policy covering revenue losses insures a farmer’s average revenue against losses because of low crop selling prices and bad crops.

As with other types of insurance, crop insurance is designed to compensate a farmer for a loss, not help them earn a profit, Carson said.

“It’ll take a long time (to recoup). You’ve lost what you’ve lost, and you’re kind of going on,” Kelsay said. “The crop insurance does help to soften the blow and kind of get you down the road.”

His drought-related losses in 2012 were about 10 percent to 15 percent but would have been worse if he hadn’t had crop insurance and if corn prices hadn’t been high. He wasn’t sure how long it will take to recoup the loss, he said.

Having crop insurance was the difference between losing money and earning an income last year for Steve Robards, who grows corn and soybeans in Johnson, Clinton, Marion and Morgan counties.

Robards’ average yield was 35 bushels of corn per acre in 2012, compared to 170 to 180 bushels per acre in an average year. His crop insurance covered his input costs, such as seed and fertilizer, and brought him a slight profit, he said.

That profit was at least $100 per acre because of the high demand and high selling prices for corn, Robards’ nephew Chad Robards said. The two men farm together.

“Without the insurance policies the past two years, we would’ve absolutely been broke. There’s no way we could’ve farmed,” Chad Robards said.

The insurance money paid to the Robardses’ farm was calculated based on his average yield per acre over several years, minus his actual yield that year. The insurance adjuster looked at how much is harvested on average and how much money would have been earned from it, Steve Robards said.

So they were looking at how much the farm usually harvests versus how much they harvested last year, which was about 140 bushels of corn per acre less than average, Chad Robards said.

Because his revenue from average past harvests was insured, the amount paid for his corn yield losses was based on the year’s high selling prices for corn, so the farm actually earned a profit, Steve Robards said.

Larry Vandenberg farms about 300 acres of corn and 300 acres of soybeans in Johnson County, and 2012 was one of the few years out of the 40 he’s farmed that he thinks he should’ve paid for a crop insurance policy, he said.

He said he doesn’t buy crop insurance because he doesn’t think it’s worth the expense most years.

During the drought, he lost about 40 percent of revenue on the farm. Luckily, he has another job as a construction manager, he said.

“I feel fortunate. I have an off-site job. I have another income besides farming,” he said.

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