Texas agriculture hard hit by cotton crash; enter the insurance factor

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Early estimates from August peg drought-related agriculture losses at $5.2 billion statewide.

Among the hardest hit have been cotton growers, with cotton losses estimated to be $1.8 billion.

“Both of which are the highest ever estimated by us,” said John Robinson, a professor and extension economist with the Texas AgriLife Extension Service.

For area cotton growers, cotton insurance provides revenue when yields fall short of grower expectations.

“We had 1.2 million acres planted in our area,” said Karin Kuykendall, executive vice president of Rolling Plains Cotton Growers Inc., a nonprofit trade organization that advocates for growers in a region that includes Jones and Taylor counties.

For land not irrigated, the drought has killed any potential crop, she said.

“We have no dryland crop,” Kuykendall said, with maybe 200,000 acres able to be harvested this season in the 31-county region her organization serves.

Higher-than normal market prices earlier this year factored into insurance payouts, which also are based on recent years of production at a particular farm.

“In farming, you rely on the weather directly. You’ve got to have some way to manage that, with the weather patterns that we get,” Kuykendall said, acknowledging that some farmers have enjoyed high payouts this year.

She noted, however, that equipment can be a huge cost for farmers, even when sitting idle.

Crop insurance “is not there for them to make money on,” Kuykendall said. “It’s for them to survive another year.”

With crop policies structured to take into account several years of recent yields, one year with zero yield can potentially reduce future payouts.

“So, we’re going to have a smaller yield coverage for 2012 than what we have for 2011,” said Tim Hall, executive director for the Taylor County Farm Service Agency, who called insurance “the salvation, this year, for cotton’s future existence.”

Major changes have been talked about relating to the federal farm bill, which outlines funding for programs — including crop insurance, which is, in effect, federally subsidized. The legislation likely will be hashed out next year, though budget considerations this year also could influence farmers.

Robinson said any changes could reduce payments to farmers, but his concern has more to do with federal guarantees to lenders who extend credit to farmers.

“If they cut back on that, I’m worried abut what those bankers might do or not do,” Robinson said.

Darren Hudson, director of the Cotton Economics Research Institute at Texas Tech University, said the loss this year extends beyond farmers.

“In some respects, the farmers had some protection from the insurance,” Hudson said.

Not so for gin, implement dealers or other agriculture-related businesses.

“They’re suffering pretty hard right now. Those are the ones really taking it on the chin,” Hudson said.

Source: http://www.reporternews.com/news/2011/oct/01/texas-agriculture-hard-hit-by-cotton-crash/

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