This spring's weather should serve as a reminder to farmers to review their current crop insurance policies and consider coverage for the future, says George Patrick, a Purdue Extension agricultural economist.
The deadline to buy insurance for this year's crops passed on March 15, but farmers can begin to consider different options for next year, said George Patrick, who specializes in risk management.
"Just as you have to place your bet before the roulette wheel starts spinning, you have to place your bet and buy insurance before the spring weather happens," he says.
According to Patrick, about 70% of Indiana's farmers insure their crops, and there are several different types of insurance.
The most basic forms of crop insurance are yield protection and actual production history (APH). Based on at least four years of past farm yield data, these types of insurance pay growers for crop losses and cover 50-85% of the average yield.
Revenue protection (RP) guarantees a certain value of the commodity.
"Rather than just talking bushels, it's protecting what the crop is worth as opposed to the physical quantity," Patrick says. "If there was a really big crop and the price decreased from spring to harvesttime, it could trigger an indemnity, or payment."
In addition to crop insurance plans based on individual farm data, there are plans based on the county's yield and revenue data. County or group insurance can be advantageous for individual farmers who don't have records or cannot prove past yields.
The group data is based on trends, so as yields go up because of technology and plant breeding advancements, so does the guaranteed coverage.
"The downside is when you are the only farmer to experience low yields," says Patrick. "You might not be compensated if everybody else did well."
The county coverage does not cover prevented planting or replanting. On individual plans, growers unable to plant corn before June 5 or soybeans by June 20 may be eligible for compensation. Patrick says this is at an adjusted rate because of costs the farmer does not incur, such as seed and harvest costs.
Replanting coverage is an option for farmers with more than 20 acres or 20% of the crop destroyed from flooding. According to Patrick, this year's heavy rains might cause many farmers to use replanting insurance.
"Many times, people wonder whether crop insurance is worth it," Patrick says. "It costs, because they are carrying the risk you're not carrying. But usually, you are better off to do something rather than nothing."