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The Effects of Crop Insurance in 2012 Drought


Drought hit Illinois farmers hard last year,  though many of those farmers had federally subsidized crop insurance that helped them cope.

Gary Schnitkey is an economics professor with the University of Illinois at Urbana Champaign.

He looked at what effect crop insurance had on the incomes of individual farmers in 2012. Schnitkey found that those who had insurance had  significantly higher incomes per acre than those who didn't, around 210 dollars per acre as opposed to 280 dollars per acre for those with insurance.

He said just looking at the average effects of crop insurance can be a bit misleading, saying that disasters like last year's drought can often make the overall average farm income go up not down.

Shnitkey said however that for farmers who had a very low incomes last year,  insurance kept them from losing money.

"Only looking at the average really understates the importance of crop insurance on those low revenue grain farms," he said.

Schnitkey also said the data, provided by the Illinois Farm Business Farm Management, shows most farms of all sizes  bought insurance. That's farms of 500 acres and above, 500 acres being the minimum farm size required.