Here’s what to keep in mind as you pencil out your crop insurance options.
Luckily, the 2014 farm bill doesn’t change this year’s crop insurance programs, so it doesn’t need to impact this year’s decisions. That won’t be the case in 2015.
But, for now, University of Illinois ag economist and crop insurance specialist Gary Schnitkey, says the 2014 farm bill left previous products and subsidy levels intact. Also, the same Combo and the Area Risk Protection Insurance (ARPI) policies that exist in 2014 will exist in 2015 and onward.
Compared to last year, Schnitkey says, there are two large changes between the 2013 and 2014 crop insurance decision environments. "The 2014 projected prices will be much lower than 2013 projected prices," he says. "The projected price for corn was $5.65 in 2013, and is likely to be around $4.60 in 2014." He says the soybean project price will be around $11.35, which is lower than last year’s $12.87. (Prices are set on settlement prices during the month of February.)
"This decrease in projected price will lower guarantees," he says. Based on research at the University of Illinois, Schnitkey says, that lower projected prices should not influence coverage level choices. "Most farmers will find taking RP at an 80% and 85% coverage level advisable," he says.
The other major change is a new policy for providing county-level insurance. Schnitkey says the Agricultural Risk Protection (ARPI) policy was introduced and replaces Group Risk Plan and Group Risk Income Plan.
"Under ARPI, there are different plans that result in different types of insurance," he says. "The ARPI plan called Area Risk Protection (ARP) provides the equivalent coverage as offered by Group Risk Income Plan with the Harvest Revenue option (GRIP-HR)."
While there are differences between ARPI plans and previous Group insurances, Schnitkey says most farmers will find ARPI plans as useful substitutes for previous plans.
Even with lower projected prices, Schnitkey’s 2014 crop insurance recommendations include:
- Revenue Protection (RP) used at a 75% through 85% coverage level (most farms will find 80% and 85% coverage levels beneficial),
- Use of enterprise units, and
- Use the Trend Adjustment Actual Production History (TA-APH) Yield Endorsement.
"This choice will provide cost effective protection based on farm yields," he says. "It has a harvest price increase provision, which provides useful protection to those farmers who hedge or price grain prior to harvest."
More detail on 2014 crop insurance are available in the crop insurance section of farmdoc. There you will find access to online tools providing premiums and evaluations of crop insurance payouts. Also, a Microsoft Excel tool entitled the 2014 Crop Insurance Decision Tool is available for download from the website.
Want to learn more?
Register now for a free AgWeb webinar: "How to Avoid Getting Caught in the New Farm Safety Net." It will take place on Thursday, March 6 at noon CST.
Jonathan Coppess of the University of Illinois will highlight the key provisions of the new farm bill, sorting through the critical decisions farmers need to make so that they don’t get ensnared in the new farm safety net. Several of these decisions will be set in stone for the next five years.