March 15 is the deadline to purchase crop insurance for the 2011 crop year.A good crop insurance program is a key part of a solid risk-management plan for a farm business. Farm operators are encouraged to discuss the new COMBO insurance options, as well as other 2011 crop insurance needs and options with their crop insurance agents before the March 15 deadline.
The new Common Crop Insurance Policy (COMBO) is in effect for the 2011 crop year. Following are the 2011 crop insurance options under the COMBO insurance policies:
- Yield Protection (YP) – The new YP policy option will replace and be equivalent to the former actual yield production (APH) policies, or yield only insurance protection. The biggest difference in the YP policy option for 2011 from the AYP policies in 2010 will be the price determination for insurance coverage. Previously, the prices used for AYP insurance policies were pre-determined prior to the crop insurance sign-up period by RMA, and now under YP, prices are based on average Chicago Board of Trade (CBOT) prices in the month of February, similar to revenue insurance products.
- Revenue Protection (RP) – The new RP policy option in 2011 will function similarly to the way that crop revenue coverage (CRC) policies and revenue assurance with the harvest price option (RA-HPO) policies functioned in 2010 and earlier. Producers who choose RP options for 2011 are guaranteed minimum dollars of gross revenue per acre (yield x price) based on yield history (APH) and the average CBOT prices in February for spring crops. The revenue guarantee is increased for final insurance calculations if average CBOT prices in October are higher than the February prices.
- Revenue Protection with Harvest Price Exclusion (RPE) – The new RPE insurance policy option in 2011 is equivalent to the basic revenue assurance (RA) policies, without the harvest price option, that existed in 2010 and before. The biggest difference between the RPE and RP options is that the minimum revenue guarantee (yield and price) is fixed, based on the February CBOT prices for spring crops, and can not be increased based later.
Bottom line on crop insurance decisions:
- View crop insurance decisions from a risk-management perspective. How much financial risk can you handle if there are greatly reduced crop yields due to weather problems and/or lower-than-expected crop prices ?
- Take the time to verify yields and keep good yield records from year to year. You can greatly enhance your insurance protection with YP or RP and RPE options at little or no extra cost by doing a good job of maintaining the maximum APH on farm units.
- There are a wide variety of crop insurance policies and coverage levels available. Make sure you are comparing apples to apples when comparing crop insurance premium costs for various options or types of crop insurance policies, and recognize the limitations of the various crop insurance products.
- Take a good look at the 80% and 85% coverage levels, especially if you are using enterprise units with RP policies. You will be surprised how much additional protection can be added at these higher coverage levels for a modest increase in premium costs. Many producers will be able to guarantee over $800/acre for corn and over $500/acre for soybeans.
- Be cautious when considering enterprise units,GRIP or GRIP-HP policies for 2011. Enterprise units and GRIP policies become quite attractive due to significantly lower premium costs compared to optional units on RP policies. However, enterprise units and GRIP policies are based on larger coverage areas, and do not necessarily cover losses from isolated storms or crop damage that affect individual farm units.
- Investigate the potential of the BYE on eligible corn acres. There will be a significant premium savings with the BYE on corn acres in 2011. However, producers should find out all details of BYE prior to sign-up, and remember to follow the compliance regulations for the BYE.
- Where to get more information on 2011 Crop Insurance alternatives. A reputable crop insurance agent is the best source of information to find out more details of the various coverage plans, to get premium quotes and to help finalize 2011 crop insurance decisions.
- Following are some very good web sites with crop insurance information
- University of Illinois farmdoc
- Iowa State Univ. Ag Decision Maker
- USDA Risk Management Agency
Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at firstname.lastname@example.org.