Before You Buy Crop Insurance: 4 Things You Need to Know

March 12, 2015 05:29 AM
 
Before You Buy Crop Insurance: 4 Things You Need to Know

Now that projected prices have been established, it’s time for farmers to focus on another big financial decision: crop insurance, which has a sales deadline of March 15.

Not everyone buys crop insurance, of course, but it has become increasingly commonplace in major corn and soybean states.

After some peaks and valleys in the 1990s, the percentage of insured corn, wheat and soybean acres has steadily risen to more than 80%, according to a University of Illinois farmdoc Daily webinar on Wednesday.

In Illinois, for example, 87% of corn acres and 84% of soybean acres were insured in 2014, with a growing share at higher and higher coverage levels. That same year, for example, 62.7% of corn acres and 53.7% of soybean acres were insured at 80% to 85%.

For those who do buy crop insurance, this year brings a new twist: Supplemental Coverage Option, or SCO, which is a new farm bill program intended to make up the difference between a producer’s farm-level coverage and the 86% level.

As you evaluate the options for your farm, here are a few things you might want to consider, according to remarks by University of Illinois professors Gary Schnitkey, Bruce Sherrick and Nick Paulson.

  1. Yes, your crop insurance premiums may have gone up. There are several reasons, but according to the farmdoc Daily team, the main reason is the increase in the volatility factor in crop insurance pricing.
     
  2. Don’t sign up for SCO on any acres that you plan to put—or think you might put—in the ARC (Agricultural Risk Coverage) farm commodity program. Only FSA acres enrolled in the PLC (Price Loss Coverage) farm commodity program are eligible for SCO, so if you switch those acres after you sign up for SCO, you could forfeit 20% of your premium as a penalty.
     
  3. Yes, if yield exclusion is offered for corn in your county, you probably want to take it and drop that bad year. Run the numbers with your crop insurance agent just to make sure, though. Should you take yield exclusion for soybeans?  If it’s available and increases your yield, probably yes—but once again, you’ll want to check the numbers on your own operation with your crop insurance agent.
     
  4. No, you probably shouldn’t try to pinch pennies by reducing your more expensive farm-level crop insurance coverage and making up the difference with a cheaper SCO policy. (New in this farm bill, SCO covers the gap between the coverage level—i.e., 70%—of an individual farm-level crop insurance policy up to 86%.) “We are continuing to caution people against doing that, because you have to think about that from a risk management perspective,” according to the farmdoc Daily team. “You’re trading off much better, higher farm-level protection for county- triggered revenue protection. … . It is not farm-level yield or revenue losses that will determine if you receive an SCO payment in any given year. It is all determined at the county level.”

Want to explore your coverage options and see how they vary? The University of Illinois has several crop insurance tools on its farmdoc Daily website.

Get more information and resources regarding the farm bill programs at AgWeb's Farm Bill Decision Time page.

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Comments

 
Spell Check

Callie Marie
Westville, MT
6/30/2015 02:30 PM
 

  Crop insurance is an interesting subject. I wonder how much acreage you must own before you qualify for insurance. My grandparents own a small ranch and they have been thinking about growing wheat on their land for a little bit of extra income. I will suggest they look into insurance options. http://meyersinsurance.com/home-insurance.html

 
 

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