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Revenue-based crop insurance a safe bet in volatile market times

What happens in the next few weeks -- before even a single corn or soybean seed has been sown in the Corn Belt -- may be the most important events in the production and marketing of your 2007 row crops.

The level of protection provided Federal Crop Insurance revenue-based products will be determined in mid-March. With the bulls driving the corn and soybean markets, especially since USDA's January 12 crop production report, this year's revenue guarantees for revenue-based insurance like Crop Revenue Coverage (CRC) and Group Risk Income Protection (GRIP) products will be high -- as much as 20% to 30% higher than 2006 levels, according to Iowa State University Extension farm management specialist Steve Johnson.

"The spring base price is the average December corn futures price in the month of February. For soybeans, it's the average November futures price during the month of February," Johnson says. "What we're going to see is much higher spring base prices, thus much higher revenue guarantees. But, along with higher revenue guarantees, the producer's going to have to pay a higher premium. So, as we see prices 20% to 30% higher than in 2006, we should anticipate that premiums will be every bit of that 20% to 30% higher."

While protection levels for revenue-based insurance products are now being established, growers using more traditional multi-peril insurance products have a clearer crystal ball. The spring base price for multi-peril policies, including hail coverage, were set earlier this year at $3.50 per bushel for corn and $7.00 per bushel for soybeans.

If you're looking at a multi-peril product -- which many growers may because of lower premiums -- Johnson warns they only pay out with crop loss, versus revenue-based products that pay out under any circumstance when earnings slide below the established spring base price.


Johnson explains the difference in coverage between conventional multi-peril and revenue-based insurance products, gives examples of each and discusses the opportunities growers have with revenue products.

What happens in the next few weeks -- before even a single corn or soybean seed has been sown in the Corn Belt -- may be the most important events in the production and marketing of your 2007 row crops.

What do higher revenue assurance levels and revenue-product premiums mean to the grower? Johnson says while the numbers will be higher in 2007, actual protection levels will remain similar to previous year. As such, he advises against making decisions based solely on the expense and payback of revenue-based products. Instead, the grower should keep his or her attention more on immediate cash needs.

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