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Old insurance, new issues

Agriculture.com Staff 02/27/2007 @ 8:11am

A little-known provision in Crop Revenue Coverage (CRC) crop insurance could cost you this year if bad weather pushes crop prices past a limit on the harvest price guarantee.

CRC offers revenue protection based on both prices and yields. It pays for losses below the guarantee at the higher of an early-season price or the harvest price. The catch is that there's an upper limit on the difference between the early-season price set this month and the harvest price set next fall. For corn, it's $1.50 a bushel.

"This is a special concern this year because we are at substantially higher prices and higher risk," says Kansas State University ag economist and crop insurance expert Art Barnaby. With corn futures near $4, "based on where we're trending right now, you'd be capped at about $5.50," he says.

If drought pushes corn prices to $6 or $7, the insured value of your corn crop won't go that high under a CRC policy. Group Risk Income Protection (GRIP), which is based on county revenue, also has a $1.50 cap starting this year.

There is a way to avoid these problems: Buy Revenue Assurance with the Harvest Price Option (RA+HPO). It's similar to CRC, says Barnaby, but its harvest price isn't capped.

"If the price is $7, that's what you'd get," he says.

CRC is available in all states. Unfortunately, RA+HPO is not. It's available in most of the Corn Belt but may not be offered in parts of the Northeast and Southeast.

You'd think that premiums for the RA+HPO would be higher. They may not be in all areas, Barnaby says. These are good reasons to re-examine your crop insurance coverage with your crop insurance agent before the March 15 deadline for changes.

A little-known provision in Crop Revenue Coverage (CRC) crop insurance could cost you this year if bad weather pushes crop prices past a limit on the harvest price guarantee.

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