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Insurers see different TA strategies

DANIEL LOOKER 03/01/2012 @ 11:00pm Business Editor

If you haven’t decided yet, you’ve got until March 15 to decide whether or not to opt for trend-adjusted actual production history (APH) ­– even less time if you’re considerate of your insurance agent.
 
Most farmers are opting in, say representatives of major crop insurers at the Commodity Classic in Nashville. It costs nothing to update your yields in the states where this choice is offered for corn and soybeans, which is most of the Corn Belt.
 
“There is strong interest in the APH yield adjustment,” says Donald H. Preusser, president of John Deere Insurance Company. “We’re expecting a number of producers to utilize those trends.”
 
USDA’s Risk Management Agency is allowing an updated APH that partially reflects improvements in crop yields from seed technology, especially in corn. In many counties USDA is giving you a paper yield boost of 2 bushels an acre.
 
And, as a fact sheet from RCIS (Rural Community Insurance Agency) explains, to get an updated yield, you subtract the year from 2012 that the crop was grown and multiply that number by the yield factor (in this case, 2). In our slightly simplified example, an APH of 179 becomes a trend-adjusted APH of 184. Here are the yields and changes:
 
2008:  150 bu/A + 4 years x 2 = 158
2009:  193 bu/A + 3 years x 2 = 199
2010:  176 bu/A + 2 years x 2 = 180
2011:  197 bu/A  + 1 year x 1 =  199
 
                         New average of the 4 years: 184 bu/A APH
 
If you update your yield, it doesn’t mean you have to use it when you buy insurance. In this example, you could keep the old yield of 179 but the premium you pay for it will be lower if you’ve updated your APH. You could use the higher yield and keep the same coverage level, say 75%, and in effect boost your coverage, but your premium subsidy won’t go down as it would if you didn’t update yields and decided to raise your coverage level to 80% or 85%.
 
Are growers keeping the same APH or using the higher one?
 
“We’ve seen both,” says Rob McHale, national sales director for RCIS, which is owned by Wells Fargo.
 
“We’ve even seen cases where they were at 85% (coverage) and they have gone to 75%,” McHale says.
 
Shannon Foster, who sells crop insurance offered by Rain and Hail to farmers in Nebraska, Kansas and Colorado, says that where a trend adjustment is available, “most of them are looking at it seriously.”
 
“Because of the rate decreases, what I’m seeing is they’re maintaining the same level of coverage,” she says.
 
For more background on the trend-adjusted APH, we suggest this University of Illinois web page.
 
And, obviously, it might be good to go over this with your crop insurance agent, if you haven’t yet.

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