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Drought triggers crop insurance indemnity payments... in some areas
Much of the western U.S. experienced severe, extreme, or exceptional drought in 2004. As of January 17, 2005, USDA had paid producers $260 million in crop insurance indemnities related to the 2004 summer drought plus an additional $200 million to winter wheat growers. Areas experiencing drought conditions and those receiving indemnity payments do not always overlap—drought impacts and indemnity payments depend not only on the physical extent and severity of drought, but also on economic factors, such as location, investment in irrigation, and producers’ choices about participation in crop insurance and other programs. Possible explanations for drought-driven crop insurance payments outside identified drought areas include localized drought conditions or inadequate moisture at critical crop development times in areas with otherwise adequate precipitation.