Managing risk on the farm is a lot like putting together a jigsaw puzzle. Done properly, a variety of tools can provide widespread coverage against crop losses. But this year’s weather disasters and questions surrounding a new farm bill leave farmers with more unknowns than usual.
Wrap up this season and plan for 2018 by compiling yield information in an easy-to-access location.
“Get your records in order so you can report the number of bushels produced by insurance unit,” advises Art Barnaby, ag economist at Kansas State University.
Begin to calculate revenue to determine what kind of an indemnity check you might receive if current market prices are lower, causing your harvest revenue calculations to be lower than the guarantee.
“Depending on what those figures are, and what your viewpoint is on price movement in October, there may be producers that want to try and lock in some of that possible indemnity payment by putting positions on via the [Chicago] Board of Trade,” adds Jamie Wasemiller of the Gulke Group and owner of Wasemiller Insurance.
This year’s weather conditions underscore the need for producers to be proactive about insurance.
“Insurance gives us a revenue floor per acre, and if I can do this while utilizing a subsidy from the government, I need to seriously consider that,” Wasemiller explains.
Many producers use products beyond multi-peril crop insurance to protect revenues, such as Agriculture Risk Coverage (ARC) and other shallow-loss programs. The future of those products is unclear as Congress begins work on the farm bill.
“ARC will be in place on the 2018 crop even though producers won’t get paid until October 2019,” Barnaby explains. “The first time you’d see any changes would be on the 2019 crop.”
The new farm bill needs to win approval by April 2018 to give stakeholders a chance to weigh in on needed changes. From there, the Farm Service Agency requires about six months to write new rules and regulations, Barnaby says. If progress isn’t possible, Congress will likely extend the current farm bill until 2020.
“The best approach we as producers can probably take is to continue to utilize crop insurance as a safety net because the other safety nets may be less attractive than ever,” Wasemiller says. “It is likely we will see money move toward the cotton and dairy industries, which could come out of the monies directed toward the main row crops.”
Spotlight On Supplementary Policies
Producers can take advantage of several insurance products that complement existing coverage in volatile seasons. “The main selling point is they simplify the farmer’s life from the standpoint that a lot of these have additional price protection in them,” says Art Barnaby, ag economist at Kansas State University. Here are a few more examples shared by Jamie Wasemiller of the Gulke Group and Wasemiller Insurance.
Production Cost Insurance. This product provides a guarantee in the spring. “But if your input costs, like seed for replanting or extra fertilizer, go up during the year, this policy’s guarantee will also go up without a premium increase,” Wasemiller explains.
Gross Revenue/Margin Insurance. A variety of new products cover gross revenue on an operation or insure against margins. “These programs should be given more consideration and will actually have a real value moving forward,” Wasemiller says. “I also think that bankers might prefer this method of insurance.”
Whole Farm Revenue Protection. This policy covers both crops and livestock on an operation up to a certain level. “But the main benefit may be more from a premium cost savings as opposed to a big insurance check,” Wasemiller says.