BY JODIE SINNEMA, EDMONTON JOURNAL
EDMONTON – Insurance payouts could likely near $1 billion this year for the 80 per cent of Alberta farmers hit hard by this year’s drought, provincial agriculture representatives said Thursday.
Crop insurance programs have already paid out $70 million to farmers who have lost crops to drought, grasshoppers or hail. That number is expected to rise to between $700 million and $900 million as farmers head into harvest and file claims. That estimate is based on the best, most optimistic weather forecasts, so if there are more hail storms or an early frost, the number will rise.
Last year, when many farmers harvested bumper crops, the same programs paid out $371 million.
A $2-billion reserve fund in the Agriculture Financial Services Corporation’s insurance program, collected through premiums over the past 10 years, will cover the additional costs so neither the province nor taxpayers will have to foot the bill.
“There is no doubt that the early snow melt, dry spring and recent hail storms have taken a toll,” Agriculture and Forestry Minister Oneil Carlier said Thursday.
“While significant rainfall in July has provided some relief to portions of the province, we know that areas of the province remain very dry and some producers are still struggling.”
The rain has been spotty, with some farmers growing fairly good crops while their neighbours’ crops are stunted. In general, the worst hit areas are in northern Alberta in the Peace Country region, counties north of Edmonton, a strip in the province’s southeast and near Cypress in the south. Three counties added their names Thursday to the areas declaring agricultural emergencies, bringing the total to 17 counties declaring severe drought states. About two-thirds of those counties are north of Edmonton, including Lac Ste. Anne and Westlock, Thorhild and Sturgeon counties.
About 80 per cent of Alberta farmers are expected to feel the drought’s financial impact, with half of those likely taking in half the typical crop.
“What does that look like? If you take it where half your revenue from the year is gone, that’s really what it comes down to,” said Merle Jacobson, chief operating officer for Agriculture Financial Services Corporation, which administers the insurance programs for farmers. “It really makes it a challenge.”
The province estimates crop yields will be 25 to 30 per cent smaller than the average over the past five years. That’s similar to the drought in 2009, but less severe than the one in 2002 that devastated large areas of the province.
To help out beyond the typical insurance programs, the province is working with municipalities to find underused Crown land that hard-hit farmers could sub-let to feed their animals. Farmers filling up their dugouts and reservoirs with water pumped from provincial lakes and rivers will also pay half the rental fees they usually do, with the reduced pumping fees retroactive to April 1. About 50 people have used the water pumping program this year, although the province is prepared to see up to 1,400 clients coming forward to fill dugouts for cattle.
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Last year, when stellar crops created an ideal year, the Agriculture Financial Services Corporation spent $371 million on several crop insurance programs. That amounted to 50 per cent of premiums brought in.
During the last significant drought in 2009, insurance payouts amounted to about 111 per cent of premiums paid.
In 2002, during a one-in-100-year drought, insurance payouts were just shy of 400 per cent of premiums.
This year’s drought insurance payout is estimated to be 120 to 125 per cent of premiums.