The following table shows the expansion from 1948 through 1953 in the number of counties for each insurance program that is now being operated:

In those counties where the insured crop does not constitute the major portion of the agricultural income from crop production, there is need for either a combined investment insurance or the operation of several separate insurance plans. Both methods are now being tested by the Corporation-the combined investment protection through the multiple plan and the separate programs by operating more than one insurance program in a county. Experience indicates that use of both the combined and the separate plans is needed to meet the widely varying types of farming in the Nation. While generally the combined insurance plan may eventually be the choice of most farmers due to the lower premiums required for this basic protection, it is likely that in some areas a combined contract covering the important crops but providing for settlement of loss on an individual crop basis may be the best and most acceptable type of crop investment insurance. For proper testing of the combined contract with individual loss settlements, there is need for legislative authorization since previous legislation and legislative hearings did not contemplate this type of combined contract.

In recent years the Corporation has been under growing pressure to expand its operations into what might be termed the specialty crop field; such as rose bushes, tung nuts, and numerous tree crops. Several studies have been made regarding such insurance but actual experimentation with such programs has not been attempted yet due to the limited number of farmers who would be served by such programs, lack of comparable insurance experience, and the increased liability such programs might add without an adequate spreading of risk.

SPREADING THE INSURANCE RISK

The basic plan of crop insurance, like other types of insurance, is one of many people joining together and paying premiums for their mutual insurance protection against loss from common risks. Due to the very high-risk nature of crop insurance and the fact that the causes of loss against which it insures frequently extend over large areas, it was recognized from the beginning of the first cropinsurance program-wheat insurance in 1939-that premiums could only be expected to balance with indemnities over a period of years. In other words, the crop-insurance plan by the nature of the risks involved contemplates that the good years will take care of the poor-production years. Even though a sound basis of operation has been developed, it is to be expected that indemnities will exceed premiums whenever crop disaster is very widespread.

The reviews of the 1952 and the 5-year experience will show that some programs had the good fortune to get off to a good start with a series of good crop years in which premiums exceeded indemnities. However, when a new insurance plan is started the possibility exists that the first year or an early year of its operation may be one of widespread crop disaster. Such a start puts an insurance plan at a distinct disadvantage since experimentation in improving the plan must be conducted simultaneously with an effort to overcome the deficit position incurred due, in a major degree, to the particular point in the production cycle in which it was started.

The principle of the good years of crop production taking care of the poor years in bringing about a balance of premiums and indemnities over a period of time is well illustrated by the experience of the wheat program over the 13 years that it has operated. This experience is shown on the bar chart on the following page. In addition to illustrating how the good years can take care of the poor years and how a program can work back from a deficit position, it also illustrates very conclusively the increasing soundness of crop-insurance operations since the amendments to the legislation became effective in 1948.

It will be noted from this summary of the wheat program that for 5 straight years indemnities exceeded premiums by a wide margin. After going into the red to the extent of $26,308,097 in the first 5 years, the wheat program has worked its way back to overcome all of this deficit except $1,910,725. Indemnities totaling $141,565,149 have been paid during the 13 years of its operation. Study of the wheat experience by years gives added significance to this experience since due to the program being inactivated in 1944, there was no insurance in 1944, and only a very small program in spring wheat in 1945 following reinstatement of the program too late to insure winter wheat. Participation in 1945, and perhaps 1944, at the 1946 and 1947 levels would have provided considerable reserve for this program in addition to nullifying the less than $2 million that still remains against its total experience. Operations in 1948 at the 1946 and 1947 levels would also have added significant amounts to the wheat program reserves. Since wheat-crop insurance is the oldest and at the same time the predominating part of the Federal crop-insurance program accounting for nearly 60

percent of the 1952 premium earnings, the summary of its experience has much significance regarding the possibilities of developing sound plans of insurance for crop investments for the majority of the Nation's farmers.

REVIEW OF OPERATING EXPERIENCE FOR 1952

In 1952 many farmers in widely scattered sections of the Nation realized as never before the real value of crop-insurance protection in softening the shock if crop failure strikes and tempering the threat of financial ruin normally found in the wake of severe crop catastrophes which occurred in some areas and threatened in others.

The prolonged drought which prevailed throughout so much of the Nation in 1952 resulted in heavy crop losses in parts of the Great Plains area and the South and threatened for a time almost complete destruction of the wheat crop in most of the spring wheat area. But for the occurrence of timely rains the result of this drought in terms of crop losses might have rivaled the devastation of the Dust Bowl years.

The $21 million paid out to the farmers who lost all or part of their crop investments in 1952 was to the 45,000 farmers concerned tangible proof of the benefits to be derived from crop-insurance protection. However, more impressive still was the approximately $350 million of protection enjoyed throughout the growing season by the 347,000 farmers who paid a total premium of $21.3 million for protection of crop investments against unavoidable loss. Whether it was the wheat farmer in New Mexico who saw his entire wheat crop destroyed or the producer in North Dakota whose crops wavered under the threat of complete destruction, the value and meaning of crop insurance was clear. And, to the tobacco farmer in Tennessee, whose crop suffered almost complete destruction, the reassurance felt was little different from that experienced by the cotton farmer in Mississippi who knew that if disaster destroyed what was a bumper crop he would not suffer the loss of the money and labor he had invested.

It is significant that the 1952 operations show a premium surplus for the year of slightly less than $1 million despite the extremely unfavorable conditions which existed in many areas. Nearly final tabulations of losses indicate that 86 percent of the premiums will be paid out in indemnities under the wheat program: 79 percent under the flax program; 42 percent under cotton; 87 percent for tobacco; 24 percent for corn; 59 percent for beans; 213 percent for multiple crop; and only a small percentage on citrus unless a freeze should hit before the end of the insurance period.

The tabulation below shows by programs the overall picture on the 1952 operating experience:

The above experience for 1952 indicates not only the basic soundness of the present approach to insurance on growing crops but emphasizes also the advantages obtained from spreading over wide geographic areas the risk assumed under any given program. In such manner it has been possible to offset the heavy losses paid in areas where catastrophes occurred with the favorable loss experience in other areas where weather and crop conditions are good. The details of the 1952 underwriting experience under each program follow: Wheat insurance

The 1952 crop year was the 13th year of wheat insurance which has become rather well stabilized during the last several years. Losses paid farmers in recent years show a close correlation to the crop conditions that have prevailed in the wheat crop insurance counties. The 1952 wheat crop yields varied widely between counties of the Nation in which wheat-crop insurance was provided.

The drought which started in the Great Plains areas during the fall planting season continued throughout the winter and became increasingly severe as the growing season progressed. In some winter-wheat areas, particularly in the

Southwest, many farmers lost their entire crop. In the spring-wheat area it appeared for a time that the severe drought would cause the heaviest loss since the drought of the thirties. However, the wheat in most of the area staged a remarkable recovery following late rains. Many farmers sustained heavy losses on their spring-wheat crop, but the overall results were very favorable compared to the catastrophe that threatened for many weeks. While many counties paid out considerably more than the premiums paid by farmers, these losses were offset by good experience in other counties so that the overall 1952 wheat experience shows approximately 10 percent of the premium income as surplus. The following tabulation summarizes the 1952 wheat insurance experience:

The flax-insurance program has been in operation for 8 years and in 7 of those years the operating results show a premium surplus.

Flax is now insured in essentially all the principal flax-producing counties. In addition, flax was insured in 1952 under the multiple crop insurance program in 32 counties in which that program operated.

In 1952, in the face of the serious drought that prevailed over the major flax area during the early growing season, it appeared that flax losses would exceed the premiums by a substantial margin. However, following the general rains over most of the flax area in July, the crop made a surprising recovery and only 79 percent of the premiums were used to pay losses. The flax insurance experience for 1952 is shown in the following tabulation:

The crop year 1952 was the 10th year of insurance on cotton. Although the early experience of this program was very unfavorable from a financial standpoint, recent results reflect the rapid progress that has been made in correcting program and actuarial weaknesses evident in the earlier years. Since 1949 the loss experience has been closely correlated with the crops produced in the counties where the program operated. During this 5-year period, indemnities exceeded premiums only in 1949 and 1950 due to unfavorable weather conditions and insect infestation, and in the other 3 years a substantial premium surplus resulted.

The 1952 loss experience which shows only 42 percent of the premiums paid out as indemnities reflects the rather uniform crop produced over the entire Cotton Belt. Although the 1952 cotton crop was seriously affected in some areas by drought, the reduction in yield was reasonably uniform with resulting moderate losses under the insurance contract. Oklahoma, with two cotton insurance counties, is the only State where indemnities paid out in 1952 exceed the premiums.

The tentative cotton crop insurance experience for 1952 is shown in the following tabulation:

Insurance on tobacco crops was first offered by the Corporation in 1945 in 13 counties. In the ensuing 8 years it has gradually expanded until in 1952 the program includes 82 counties, approximately 25 percent of the Tobacco Belt counties.

Premiums have substantially exceeded indemnities during each year except 1947 when premiums and indemnities were approximately equal.

During these 8 years approximately 65 percent of the premium income has been returned to insured producers in the form of indemnities.

In 1952, in addition to the usual causes of loss normally expected, the nationwide drought which appeared to strike its hardest blow in the Tobacco Belt caused a substantial reduction in both quantity and quality of the average tobacco crop. However, late rains were followed by a remarkable recovery in the tobacco crop, as in spring wheat, so that although a heavy loss seemed imminent for many weeks present loss estimates are only 87 percent of premiums. More indemnities are being paid in 1952 on the basis of complete destruction than in any previous year.

The tentative 1952 tobacco program experience is shown in the following tabulation:

The 1952 crop year was the 8th year of corn insurance which was started in 1945 in 15 counties and has been gradually expanded to 99 counties in 1952. In 4 of the 8 years premiums have exceeded indemnities although the combined experience over the 8-year period shows indemnities exceeding premiums by about 8 percent. The 1952 indemnities amount to approximately 24 percent of the premium income leaving a substantial premium surplus for the year's operation. This favorable loss experience reflects the favorable crop conditions which prevailed throughout 1952 and the uniformly good corn crop yields which were realized. The tentative 1952 corn insurance experience is shown in the following tabulation: