The Risk Management Agency (RMA) conducted an analysis published in 2011 due to the reduced losses of some crops, including corn and soybeans. The updated version was first implemented in 2012.
We examine whether crops that had low risk before 2012 continue to lose after the review. The five crops with the lowest risk before 2012 are almonds, soybeans, potatoes, rice, and corn.
With the exception of rice, the rest of the crops continued to have a low risk after 2012. Corn and soybeans continued to experience small losses, with soybeans being below the other crops.
Loss figures are used to judge crop insurance. The loss ratio is equal to the crop insurance premium divided by the total amount paid for crop insurance. The total payment includes the share paid by the farmers and the risk support provided by the Federal government. A mortality ratio of 1.0 means that crop insurance premiums are equal to total premiums. A loss ratio above 1.0 means that earnings exceed earnings and vice versa.
When setting premiums, the Risk Management Agency (RMA) aims to keep the risk a little lower than 1.0, thereby building a loss buffer in the ratings. The goal is to maintain this ratio over time. However, in any given year, the loss ratio can exceed 1.0 due to adverse weather and tree events.
Over time, RMA has achieved its goal for the entire program. RMA has published the most frequent losses since 1989 in its Business Summary (see Figure 1). In the first few years, the total loss ratio was high and above 1.0: 1.49 in 1989, 1.16 in 1990, 1.30 in 1991, 1.21 in 1992, and 2.19 in 1993. Since this high period, the loss ratio has generally been lower. . From 1994 to 2021, the loss ratio was .83.
The loss figures in Figure 1 are divided into three categories:
- 1989 – 2001 represents the initial phase of the current Federal crop insurance program. During this time, many new products were introduced, and the money maker was very basic. The use of crop insurance products increased during this period. For example, insured corn acres in Illinois was less than 50% in 1989, increasing to 60% by 2001. The mortality rate during this period was 1.10.
- 2002 – 2011 represents the insurance industry’s most mature period. Most of the common uses and yields remained the same throughout this period, while growth in insured acres was still underway. Towards the end of this period, the RMA began to review the amount of each crop from corn to soybeans. Corn and soybeans had the least losses before the outbreak. The average loss ratio during this period was .79.
- 2012 – 2021 represents the most recent years for crop insurance. In general, the crop insurance business has reached its peak, with many acres of the largest crop being insured. In the first year of the season, 2012, the Midwest experienced a severe drought, and the death toll for that year was 1.59. Even given the highest loss rate in 2012, the most recent decade including 2012 to 2021 has an average loss rate of .84.
RMA has been meeting its goal of keeping the total loss ratio below 1.0. One seed, however, may be above or below the 1.0 benchmark.
Assessment of Plant and Seed Losses
The yield loss statistics were analyzed, with a particular emphasis on time:
- 2002 – 2011 is the decade before the polls, and
- 2012 – 2021 is the latest decade.
A comparison of the loss figures is made for the 15 main crops according to the average annual value from 2017 to 2021 (see Table 1). From 2017 to 2021, the total amount was $10,775 million. Maize (35% of total value) and soybeans (22%) are the most important crops.
These two crops make up 57% of the total cost. As a result, the performance of all Federal crop insurance is related to these two crops.
The next four crops are cotton (9%), wheat (9%), pasture (5%), and sorghum (2%). Pasture insurance is new, since 2007. Another “seed” in the top 15 is “Whole Farm Revenue Protection,” a product that covers all assets in one policy. All Farm Income Protection was introduced in 2015.
The top 15 yields account for 89% of the total value over the past five years. The remaining 11% of the premium is spread over 120 other crops.
Loss of Shares and Seeds
Table 2 shows the fifteen harvests by time. Crops are ranked from lowest to highest losses in the period 2002-2011, immediately before the RMA retest. During the period 2002 – 2011, the five crops with the lowest loss ratio were almonds (.32 loss ratio), potatoes (.59), corn (.64), soybeans (.68), and rice (.74).
There is a correlation between the rate of loss in the period 2002 – 2011 and the period 2012 – 2021, as shown in Figure 2. The five crops with the lowest loss in the period 2002 -2011 are listed in Figure 2. Four of the five crops were the lowest in 2002 – 2012 it was low in the period 2021 – 2021:
- Almonds had the lowest risk from 2002 – 2011 and the lowest risk from 2012 – 2021.
- Potatoes were the second lowest from 2002 – 2012 and the third lowest from 2012 – 2021.
- Corn had the third lowest rate from 2002 – 2011 and the seventh lowest from 2012 – 2021. The most important 2012 – 2021 period includes the 2012 drought year in which corn had a rate of 2.74. Drought years like 2012 occur frequently but less than once in ten years. One in twenty or one in twenty-five years is probably close to the incidence rate. Without 2012, the corn damage rate would have been .66.
- Soy had the fourth lowest rate from 2002 – 2011 and the second lowest rate from 2012 – 2021.
- Rice had the fifth lowest loss rate from 2002 – 2011 and the fifteenth lowest crop loss from 2002 – 2021.
Four of the 15 crops that have grown the most in recent years are known to be of low quality: almonds, soybeans, potatoes, and corn. Soybeans and corn – the two crops with the highest costs – have a yield below the 1.00 benchmark, even after the 2012 analysis.
In order for the RMA to maintain a loss target, the total loss rate for corn and soybeans cannot be reduced due to the large share of these two crops in the program. However the opposite of authority can be said that all seeds should have the same ratio. Soybeans and corn both have a low loss ratio, with soybeans having the lowest loss ratio.