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Time to think of crop insurance

DANIEL LOOKER 02/08/2011 @ 9:17pm Business Editor

For some people February means Valentine’s Day. But for farmers, it’s one of the most important  business planning months of the year.  When this month ends, USDA’s Risk Management Agency will set the insurable value of crops based on the average new crop futures prices during February. And this year, due to higher prices, the premiums will cost considerably more than a box of chocolates and a bouquet of roses.

 The RMA’s website is already tracking the crop price averages, even though it’s only a few days into the month. 

And at the University of Illinois, ag economists Gary Schnitkey and Bruce Sherrick have already crunched some ball park estimates of premium costs in their state, based on projected prices.

“Overall, 2011 premiums are estimated to be 70% higher in 2011 than in 2010,” they report.   “Increases vary across counties.  Counties with the lowest increases are in central Illinois.  The five counties with the lowest increases are Moultrie (36%), Douglas (38%), DeKalb (41%), and McLean (42%) Counties.”  But not far away some counties in west central Illinois will see premiums almost double.

The actual estimated prices for coverage vary widely.  For Revenue Protection at the 80% coverage level for corn, it ranges from $12 an acre in DeWitt and Douglas counties in the central part of the state to $32 an acre in Gallatin Gounty in southern Illinois. For yields, the economists used the county Group Risk Income Plan (GRIP) yields minus 5 bushels. Much of the premium price difference is due to differing yield risk.

The University of Illinois farmdoc website also offers premium calculators for crop insurance for the 12 north central states.

This is the first year for the RMA’s new COMBO (or Common Crop Insurance Policy) that standardizes coverage. One of the main changes affecting the Corn Belt is that Revenue Protection combines aspects of the old Crop Revenue Coverage and Revenue Assurance with the Harvest Price Option.

In some areas, changes in COMBO are a slight factor in premiums.

“RMA-developed rates for 2011 spring crops vary widely from county to county and the overall impact is estimated to be up or down by 5%,” says Scott Arnold, vice president at Rain and Hail, LLC, in a article on COMBO appearing in the mid-February issue of Successful Farming magazine.

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