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Crop insurance decisions

Agriculture.com Staff 02/24/2006 @ 9:26am

Next week, I will wrap up the winter marketing meetings for this year.

The 'Winning the Game' workshops include a crop insurance component. In many cases, the local sponsors of these meetings are crop insurance agencies. The crop insurance deadline for most of the Midwest is March 15.

If you change your crop insurance coverage, it must be done my then or you will not have another opportunity until a year from now.

There are many crop insurance products. As I have traveled around Eastern Nebraska, I have found that some crop insurance agencies have certain policies that are their favorites. The standard for many years has been Crop Revenue Coverage.

Revenue Assurance with the harvest price option has come on the scene in recent years. It parallels very closely the CRC coverage. Both are good alternatives that fit a lot of farm operations.

However, there are other alternatives that may fit your operation. You need to explore all of the possibilities in deciding which fits the risk management needs for your business.

When I was farming full time prior to 2004, I had land on the Missouri River bottom that was classified as high risk because of flooding. The premium on that land was about two and a half times the premium on the upland. With several rental farms plus what my wife and I own, I had a total of ten units. Hail is not an issue because there has not been a hail storm on the place where I live since 1926. Under those conditions, CRC with the enterprise option worked very well. The enterprise option reduced my premium about 35% so that I could afford higher coverage on the high risk land. In the 2002 drought, I collected more indemnity for a lower premium by using the enterprise option.

Now that I have reduced my acreage and no longer have the high risk land, I have chosen to purchase GRIP coverage. I have no operating loan and getting a quick settlement is no longer an advantage. On the east end of Cass County where I farm the risk from drought is less than it is for the county as a whole. The odds of me having a yield poorer than the county average are very small. In the really bad years my yields are far above the county average. Therefore I am willing to give up individual protection for the probability of a much better payoff in drought years.

One additional factor that comes into play this year is that the coverage levels will be higher because grain prices are higher. I have not tried to estimate the soybean price coverage yet. However, the February price on corn will be around $2.57. That will be 19 cents higher than last year's beginning price. You need to factor that into your crop insurance program and marketing plans if you intend to forward price corn for the 2006 crop.

There are so many possibilities to consider that you need to consult with someone in the crop insurance industry about what fits your farm business. Learn all of the alternatives, not just what your agent wants to sell. If he or she won't explain all of the alternatives to you, get someone who will. There are ways to reduce premium and/or increase coverage besides buying what the agent wants to sell. Shopping and weighing the options will be well worth your time.

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