During the next couple weeks, many farm operators will be finalizing their crop insurance decisions for the 2008 crop year; March 15 is the deadline to purchase crop insurance for the 2008 crop year. Producers need to analyze how crop insurance fits into their risk management and grain marketing strategies for the coming year.
New Crop Insurance Option For 2008
The USDA Risk Management Agency (RMA) has announced that the biotech yield endorsement (BYE) corn crop insurance policies will be available to producers in Minnesota, Iowa, Illinois and Indiana for the 2008 growing season. The BYE endorsement will provide a crop insurance premium discount of approximately 12-15% to corn producers who plant corn hybrids in 2008 under the marketed trade names of YieldGard Corn Borer, YieldGard Rootworm and Roundup Ready Corn2. Corn producers with an APH, RA or CRC crop insurance policy for 2008 can qualify for BYE, provided that a minimum of 75% of the corn acreage on a given farm unit is planted to one of the three qualifying hybrids. Growers who utilize BYE must comply with Environmental Protection Agency refuge acre requirements for the three biotech corn hybrids. Growers interested in BYE for their 2008 corn crop insurance should contact their crop insurance agent for more details.
2008 APH Market Price
Corn: $ 4.75/bu.
Wheat: $ 4.90/bu.
CRC and RA-HP Price Guarantee Calculations:
Base Price for CRC and RA-HP is the average settlement price for December CBOT corn futures in February. Harvest price for CRC is the average settlement price for December CBOT corn futures in October during the year of harvest. Harvest price is limited to the base price plus or minus $1.50/bu. Harvest price for RA-HP is the average settlement price for December CBOT corn futures in November during the year of harvest. RA-HP has no limit on the final harvest price.
Base Price for CRC and RA-HP is the average settlement price for November soybean futures in February. Harvest Price for CRC and RA-HP policies is the average settlement price for November CBOT corn futures in October during the year of harvest. Limit: Harvest price for CRC is limited to the base price plus or minus $3/bu. RA-HP has no limit on the final harvest price.
2008 RA and CRC base prices will be finalized on March 1, 2008. As of February 22, they were estimated at:
Other Crop Insurance Considerations
· 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?
- 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 premiums for various option or types of crop insurance policies.
· Take a good look at the 80% and 85% coverage levels, especially if you are forward pricing a considerable amount of grain.
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 $600/acre for corn and over $400/acre for soybeans.
· Take time to compare coverage differences and premium costs between the RA-HP and the CRC policies.
The harvest price limits on CRC, compared to no limits with RA-HP policies, may be a factor, especially if you have a significant amount of 2008 grain forward priced.
· APH (yield-only) insurance policies offer some very good dollar guarantees, and may be an option on some farm units for producers trying to control their premium costs.
Remember the APH policies protect against yield reductions only, and offer no protection against fluctuating grain market prices, which may be an option for livestock producers.
· Investigate the potential of the BYE on eligible corn acres.
Be sure to find out all details of the BYE from your crop insurance agent prior to sign-up, and remember to follow the compliance regulations for the BYE.
· Be cautious when considering GRIP or GRIP-HP policies for 2008.
GRIP policies are available up to the 90% coverage level, and premiums on GRIP policies are usually significantly lower than CRC or RA-HP policies. However, GRIP policies are based on county-average yields, and do not necessarily cover yield losses from isolated storms or crop damage that affect individual farm units.
More Information on 2008 Crop Insurance Alternatives
A reputable crop insurance agent is the best source of information to make 2008 crop insurance decisions.The University of Illinois Farm Management Web site has some good crop insurance information, and an on-line crop insurance premium calculator and comparison Spreadsheet.The Web site is: http://www.farmdoc.uiuc.edu/.
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.