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Farm-level revenue insurance choices

When farm-level revenue crop
insurance policies are used, most Illinois farmers now purchase 80 and 85
percent coverage levels. In 2011, 71 percent of the corn acres and 60 percent
of the soybean acres were insured at 80 and 85 percent coverage levels. Use of
80 and 85 percent coverage levels have increased in recent years, with a large
increase occurring in 2009.

Figure 1 shows percent of
corn acres insured by coverage levels for farm-level revenue crop insurance
products. From 2001 through 2010, farm level revenue products included Crop
Revenue Coverage (CRC), Income Protection (IP), and Revenue Assurance (RA).
Farm-level products in 2011 were Revenue Protection (RP) and Revenue Protection
with Exclusion (RPwExl).

0928coverage1.jpg

In 2001, 80 and 85 percent
coverage levels were used on 29 percent of the acres. Between 2001 and 2008,
use of the 80 and 85 percent coverage levels gradually increased to 43 percent
in 2008. In 2009, use of 80 and 85 percent coverage levels jumped to 63 percent,
an increase of 20 percentage points over 2008 levels. Since 2009, use of 80 and
85 percent coverage levels continued to increase, reaching 71 percent in 2011.

The large increase between
2008 and 2009 can be attributed to the 2009 introduction of higher subsidy
levels for enterprise units. The 2008 Farm Bill raised subsidy levels for
enterprise units, leaving subsidy levels for basic and optional units at lower
levels. An enterprise unit includes farmland of all of one crop in a county as
the insured unit. Basic and optional units divide farmland into smaller units.
Higher subsidies dramatically lowered enterprise unit costs relative to basic
and optional units. As a result many Illinois farmers switched to enterprise
units, lowering farmer-paid premiums. With the savings from the switch to
enterprise units, many farmers increased coverage levels.

0928coverage2.jpg

Similar trends to corn exist
for soybeans (see Figure 2). Use of 80 and 85 percent coverage levels increased
from 24 percent in 2001 up to 30 percent in 2008. Then in 2009 use of 80 and 85
percent coverage levels increased by 22 percentage points to 52 percent. In
2011, 60 percent of the acres were insured at 80 and 85 percent coverage
levels.

By Gary Schnitkey,
Department
of Agricultural and Consumer Economics,
University of Illinois

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