With March Madness upon us, no not basketball, but getting ready for spring planting, a major decision is what kind and at what level do we purchase crop insurance for the coming year.
The crop insurance industry has consolidated several different products into fewer major policies, but these “simplified” policies still have many decisions and coverage levels to choose from. There have been lots of meetings to go to and “experts” to listen to, but we still have to decide what to do by March 15th. Prices of crops have now been set (February daily closing average price) at $6.01 for corn and $13.49 for soybeans. Wow, those are high, but so is our cost of production, have you bought any diesel fuel lately?
The high prices for crops means higher premiums, but also higher dollar amounts of coverage. We had 85% level coverage with enterprise units (all units in one county of that crop added up together), crop revenue coverage last year. Enterprise units helps lower the premiums, but also lowers insurer’s risk. At our yields and these price levels we are insuring very good dollar amounts of coverage per acre. But, the cost will be substantially higher than last year.
There are also all kinds of other crop insurance products out there. GRIP,GRIP HRO, GRP, CAT, are all different kinds of crop insurance policies that are all different, but are used to mitigate risk for farmers.
Are we bored yet? Have you decided what you are going to do on your farm? We have. We will go with RP (revenue protection) at the 85% level and use enterprise units. I have a few new landlords who do not have yield production history who will stay with GRP (group risk protection) a few more years until they have yield data we can use on an individual policy. Another landlord will go with the 85% level and two others at around 75% level RP.
Last thing to do is get all the signatures, check that all the social security and EIN numbers are correct, along with correct addresses, and what ever else needs to be done all by March 15th.
If you think this is fun just wait until I describe signing up for the farm program for this year at the county government office (Farm Service Agency/USDA).
My final comments – of all the “farm programs” that the federal government spends money on, this one, crop insurance is the one to keep. It is run by private companies, sold by private crop insurance agents, and only is the premium subsidized by the government. This may not be popular to many government employees, but let crop insurance agents do acreage reports like they report crop yields and keep this one program that only pays you if you have an actual loss and the farmer still has to “stand” the first part of any loss and the farmer is paying the bulk of the premium money. When times are tight you really only need to hold onto the essentials and this risk management tool is very handy to have around.