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Crop Insurance Deadline Nears—Time to Check Coverage

September 19, 2011
By: Fran Howard, AgWeb.com Contributing Writer

Growers of some fall crops are running out of time to buy crop insurance or make changes in existing coverage, with only two weeks left until the Sept. 30 deadline.

According to USDA’s Risk Management Agency, 15 crops, including wheat, barley, canola and oats, have a crop insurance deadline of Sept. 30 in many states. Other affected crops are alfalfa seed, apiculture, cultivated wild rice, dry peas, forage production (pasture, rangeland and forage), potatoes, rye and sugarcane. Check to see which crops are affected in which states.

Sept. 30 is also the deadline for making changes to existing fall crop insurance policies. Changes producers might consider include increasing the percent of coverage taken, buying revenue protection and choosing a policy based on enterprise units.

"The Sept. 30 sales closing date pertains to fall crops only," says Greg Wheelock, agent and owner of Crop Insurance Services, Mankato, Minn. Wheelock’s agency serves the Midwest, including Minnesota, Iowa and Wisconsin. "For our area, the fall crops are primarily winter wheat and forage production." For those who already have RMA policies on fall crops, the policies will renew automatically if no action is taken.

USDA posted 2012 projected prices on Sept. 15. These prices are the new minimum prices for 2011-12 fall crops that insured growers will receive, regardless of whether they have crop policies protecting only historical yields or yields with revenue protection added.

If crop values are higher than in the past, or increase at harvesttime, growers with only 75% coverage might not be able to recoup enough if their fall planted crop were to sustain significant damage, so they might want to increase coverage to 80% or 85% where available, Wheelock says. "That way, they insure closer to the true value of the crop," he says.

Better yet would be to buy revenue protection, Wheelock notes. "Revenue protection accounts for about 98% of what we sell," he says. "It allows growers to forward market their crops, knowing they have replacement protection to fulfill contract obligations should the crop fail."

For instance, he says, if wheat prices were to rise to $10 or $12 per bushel next summer, a winter wheat grower who bought revenue protection would be paid the higher harvest price (not the projected price) in the event of a crop failure. "It’s like having replacement coverage on a house," Wheelock says. Even though the house was built for $100,000 a decade ago, insurance would pay out whatever it would cost today to rebuild a similar house. Whereas winter wheat producers with crop coverage based on just historical yields without revenue protection would receive only the 2012 projected price of $8.20 per bushel. Both types of coverage use at least the projected price to determine the minimum amount of protection purchased.

"Most of my producers have switched to revenue-based policies," Wheelock says. "It is a very sound business decision." While revenue protection is already an affordable risk management tool, Wheelock says there are ways to make it even more affordable. By insuring as an enterprise unit rather than by individual sections (optional units), producers get a significant discount on their premium, and many use that discount to purchase 85% coverage.

With an enterprise unit guarantee, for example, if a crop in one of several sections were damaged but yields were high in the other covered sections, a grower might not be able to collect on the policy, Wheelock says, depending on the average yield across all sections. But if the crop damage were to occur across all sections, the grower would receive payment if the blended yield were below the enterprise unit guarantee.

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