“Farmers need to consider the differences in coverage between plans to determine which will provide their operation the best risk management protection,” said Gary Anderson, Vice President, Insurance Sales Manager. “While some plans may appear to guarantee higher returns and have lower costs, it’s not always the case.”
With current market conditions, farmers are closely examining their insurance options – including: Actual Production History (APH) Insurance and Revenue Insurance. APH protects farmers when yields are below a yield guarantee. However, because commodity prices are trending down, many are considering Revenue Insurance, which guarantees a certain level of revenue rather than yield.
“Revenue plans provide both production and price protection and have proven their value, especially in 2008 where widespread claims were paid on price movement, in many cases without significant production decline,” said Anderson. “Farmers also need to consider the value of the harvest price election, which in a rising market can provide higher indemnities and increase their chance of a loss payout.”
With the government increasing its share of the premium cost, enterprise units may also play a greater role in a farmer’s decision. An enterprise unit combines all the acres of a single crop in a county and the farmer holds a financial interest in a single unit. Because this spreads risk over a greater area, average yields are unlikely to be low and premiums are typically lower.
“Enterprise units generally work best in areas with consistent weather and uniform crop production, and when the emphasis is on total production, not on individual farms or fields,” said Anderson. “In areas where there is concern about individual farm or field losses, especially from hail, the enterprise unit selection can be supplemented with a hail product.”
Biotechnology Endorsement Program
This year also marks an expanded Biotechnology Endorsement program, which provides discounts on federal crop insurance premiums for using approved hybrid seeds. In order to qualify, farmers must plant at least 75 percent of their fields with the hybrid seeds. However, the program is only available in the following states: Minnesota, Iowa, Illinois, Indiana, Wisconsin, Michigan, Ohio, South Dakota, Missouri, Nebraska and Kansas.
“While all of these programs provide options for lowering premiums, a licensed agent should fully examine the insurance plan, and tailor it to fit to the producer’s risk profile,” said Anderson.