Good news on crop insuranceThere were some weary insurance agents in the region March 16. There were plenty of farmers with better-than-usual crop insurance coverage, too. March 15 was the deadline for purchasing or modifying crop insurance for spring-planted crops this growing season
By: Jonathan Knutson, Agweek
There were some weary insurance agents in the region March 16. There were plenty of farmers with better-than-usual crop insurance coverage, too.
March 15 was the deadline for purchasing or modifying crop insurance for spring-planted crops this growing season.
Two things make crop insurance this season particularly noteworthy:
n The U.S. Department of Agriculture’s new Common Crop Insurance policy, or COMBO, is in effect.
n High crop prices have provided crop insurance that, on paper, should cover most producers’ costs.
“The only other year that’s happened is 2008,” says Andy Swenson, North Dakota State University Extension Service farm management specialist.
This year, the price at which crops can be insured under yield and revenue protection was finalized March 1. Prices at the time were near or at record highs, reflecting a long rally that began last summer and intensified early this year.
The prices set were $9.89 for spring wheat, $6.01 for corn and $13.49 for soybeans.
Crop insurance is a crucial risk management tool for farmers, particularly as expenses continue to rise, officials say.
Crop insurance also is a subject about which generalizing can be risky.
“There are a lot of moving parts, a lot of variables,” Kent Thiesse, ag loan officer and vice president of MinnStar Bank in Lake Crystal, Minn., says of crop insurance.
For instance, a producer’s yield history and level of coverage play a huge role in whether crop insurance will cover costs, he says.
That said, most producers should have been able to obtain insurance that covers their costs this year, he says.
Under the new COMBO policies, producers have a yield protection option equivalent to the former actual production history policies, Thiesse says.
But the yield protection option calculates the price used for coverage differently than the price used for APH coverage, a change that finalized the price on March 1 and benefits producers, Thiesse says.
Another factor complicating crop insurance is that farmers with a “revenue guarantee” in a revenue protection policy often receive less than the amount guaranteed, Swenson says.
The difference reflects distance to markets, the quality of grain and the timing of sales, he says.
No go on ‘self-insurance’
Crop insurance premiums have jumped this year — as much as 50 percent in some cases, Thiesse and others say.
The higher premiums are inevitable, given the larger sums being insured, he says.
Historically, some farmers — typically established ones with money in the bank — have gone without crop insurance, a practice known as self-insurance.
Given rising production expenses, going without crop insurance today would be foolish, even with the higher premiums, says Kent Olson, crops specialist with the Professional Insurance Agents of North Dakota in Bismarck.
Farmers in general recognize the importance of federally subsidized crop insurance, Thiesse says.
Many producers probably would be willing give up other programs, such as direct payments, in the 2012 farm bill to preserve federal crop insurance, he says.