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Crop Insurance: Good News, Bad News
Crop insurance: Good news, bad news.
It's that time of year again – the March 15 deadline is looming for buying crop insurance for spring planted crops in most areas of the Midwest. The good news this year is that premiums are likely to be cheaper than last year, due both to lower prices as well as lower volatility, which affects premium rates. More good news: The deadline falls on a weekend, giving you until Monday, March 17, to make changes to your coverage.
Yet, as Iowa State University Extension farm management specialist Steve Johnson suggests in our video on this subject, "Crop insurance agents are going to be pretty busy, so make sure you call ahead and get an appointment."
The bad news: Those cheaper prices mean you can't insure the revenue we've grown used to over the past few years. For the majority of the Corn Belt, the approved Projected Price used by USDA's Risk Management Agency is $4.62 a bushel for 2014. It's $11.36 a bushel for soybeans. That's based on last month's average new-crop futures prices.
Since Revenue Protection is based on your yields as well as what happens to prices, you can improve your chances of collecting an indemnity payment in a low-price environment by taking the trend-adjusted yield. That's something you must do every year. If you took the trend adjustment last year, it doesn't automatically renew like the rest of your policy if you don't decide to change your insurance.
"The TA yield option is the cheapest way, the . . . least expensive way, to increase your revenue guarantee," Johnson says.
University of Illinois agricultural economist Gary Schnitkey has also written this winter about the potential benefits of increasing your coverage level to 80% or 85% if you're not there already.
Each year Schnitkey and his colleagues at the University of Illinois create a valuable online tool that provides estimated premiums for 750 counties in Illinois and seven other Corn Belt states and Maryland. It also shows how often you would collect an indemnity payment for different types of crop insurance and different levels of coverage.
On March 4, Schnitkey and fellow Illinois ag economist Bruce Sherrick posted a detailed analysis on Farmdoc Daily for a farm in McLean County, Illinois, a large and high-yielding county in the central part of the state.
And just this Tuesday, they both posted a comparison of how premiums per acre vary by county in Illinois for yield protection insurance as well as the more popular revenue protection -- both at the 85% coverage level. They also compare premiums for the county-level Area Risk Protection. For yield protection, the price per acre ranges from $6.26 in Macon County to $46.95 in Gallatin County. County-level ARP insurance ranges from $35.61 per acre to $96 an acre.
Obviously, crop insurance can be a significant part of your input costs, and the revenue coverage decisions you must make are more crucial this year. Current futures prices suggest that the harvest price option now included in revenue protection might affect indemnity payments as well.
Spending some time on the Illinois website will make you a more informed customer when you meet with your agent.