Crop Losses in Eastern Idaho Impact Economy

August and early September were the wettest since 1953 in eastern and southern Idaho, and the heavy rain caused flash floods and other problems in several communities. Agriculture was hit hard.

An economist from the University of Idaho Extension Service estimated damage to crops at over $230 million.

Much of the barley and wheat in eastern Idaho was ruined or damaged by the heavy, sudden rains. Downpours caused sprouting and added moisture to the kernels, making it unsuitable for anything other than livestock feed.

University of Idaho Extension Economist Paul Patterson said the hay crop in Idaho’s 16 eastern counties suffered $33 million in damage while the loss in barley and wheat was up to $107 million.

The Idaho Barley Commission, however, estimated barley and wheat losses even higher – as much as $186 million.

“It’s certainly had a negative impact on agriculture, and agriculture is certainly the life blood of eastern Idaho,” Patterson said.

Smaller communities like Blackfoot, Malad, Rigby, Aberdeen, Ririe, American Falls and Preston depend heavily on farm revenues. Crop losses will hurt many businesses and could impact employment.

Crop insurance may help many farmers avoid catastrophic losses, but not all eastern Idaho farmers choose to buy insurance.

In 2013, 76 percent of Idaho’s 630,000 acres of barley and 78 percent of 1.3 million acres of wheat was insured, according to the U.S. Department of Agriculture. Additionally, only a third of the state’s hay crop was covered.

While crop insurance helps mitigate loss, the payout is limited. Crop insurance generally covers between 50 percent and 85 percent of a crop. The percentage of coverage is determined by the historical production level of the land being insured and the projected price of the crop.

For example, a barley farmer has 50 acres of land and purchases crop insurance to guarantee compensation for 65 percent of the historical average yield of the crop. At 70 bushels an acre with a projected price of $6.72 a bushel, that farmer has a production guarantee of 2,275 bushels and would be paid $15,288 on the policy.

If the barley farmer suffers losses that are less than 35 percent of the historical yield average, then there is no claim. If losses are greater than 35 percent but less than a 100 percent, then the barley that can be harvested is subtracted from the insurance award of $15,288.

The resulting crop insurance payments help mitigate losses suffered by farmers in the region. Assuming average insurance coverage for the region – 77 percent of wheat and barley farmers protecting 65 percent of their crops – the net loss from the summer rains would be cut to $51 million from the estimated total loss of $107 million.

In the case of hay growers, on average a third ensure half their crop. That would reduce their estimated loss from $33 million to $27.5 million.

Assuming that crop insurance coverage and payout estimates are correct, in total, crop insurance will cover about $60 million of the $140 million loss.

Kelly Olsen of the Idaho Barley Commission says the situation is complicated by the fact many barley growers did not purchase malt barley endorsements on their policies. Other provisions related to small grains may also limit the insurance payout wheat farmers get. Without those the potential payout will be less as a percentage the greater value of those more specialized crops.

The full impact of insurance payouts will not be known until winter as claims are settled. It is possible Idaho farmers may receive considerably less than the potential $60 million in insurance relief.

Assuming uncovered crop losses of about $80 million in eastern Idaho, the impact on jobs could be sizable. Economic Modeling Specialists International estimates 870 jobs will be lost in the 16 counties. If insurance compensation falls below $60 million, that job losses may increase.

Potential jobs losses may be lessened by various federal loan programs to maintain operations next season. These loan programs are available to farmers without insurance and those who had insurance but are still in financial difficulty.

One thing is clear, extra rain in this past August and September will have an impact on the regional economy.

Dan.Cravens@labor.idaho.gov, regional economist
(208) 236-6710 ext. 3713