Clock Ticking on Crop Insurance

February 24, 2012 03:32 AM
Clock Ticking on Crop Insurance

2012 offers better coverage for less money.


Corn and soybean producers who don’t already have their 2012 crop insurance in place would be well advised to speed dial their insurance agent. The deadline to get coverage is March 15 and this year’s changes are making coverage more affordable.

Moreover, if drought continues in the Midwest, good crop insurance coverage becomes all the more critical. Earlier this month Minnesota Agriculture Commissioner Dave Frederickson and the state’s Commerce Commissioner Mike Rothman teamed up to advise growers to buy crop insurance before the deadline due to dry conditions heading into planting season.

Dry conditions now cover the Dakotas, Minnesota, northeastern Wisconsin, and northwestern Iowa, and severe drought has taken hold in the prime corn and soybean growing regions of southern Minnesota and northwestern Iowa. Fortunately, this year a couple of changes allow producers to effectively increase coverage without paying more.

"Some clients are increasing the level of coverage by 5% or so," says Greg Wheelock, Crop Insurance Services, Mankato, Minn. "If they are at 75 or 80% coverage now, maybe they are bumping it up to 80 or 85%."

Two things are important to remember this year. First, insurance premiums for most coverage levels for corn and soybeans in the Midwest will be lower than premiums paid for comparable coverage in 2011. Lower premiums are the result of adjustments that the Risk Management Agency (RMA) made based on updated crop insurance actuarial data for several years. Minnesota crop insurance premiums for 2012, for instance, are expected to drop by an average of 10 to 12% for corn and 7 to 9% for soybeans, according to RMA.

Another beneficial change this year is the Trend-Adjusted (TA) Actual Production History (APH) Yield option. The option allows producers with qualifying APH databases in eligible counties to chose to have their APH yield, used to determine crop insurance guarantee coverages, adjusted based on their county’s historical yield trend.


"In combination with RMA’s rerating, the use of TA allows many producers to buy more protection than they had last year, and in many cases, for less money they paid last year," says Wheelock.


Many Upper Midwest producers are finding that the option is bumping up their corn yield by up to 2.5 bushels per acre per year, or more. Calculated over a 10-year period means the trend-adjusted yield can increase by 13 bushels per acre on average for corn. With an every other year rotation, for example, some producers are seeing a much higher adjusted yield. "I had a client whose corn yield increased by 31 bushels per acre," notes Wheelock.
Wheelock says that nearly all of his clients are choosing the Trend-Adjusted option. "It is the cheapest way to buy additional coverage," he adds. "The Trend-Adjusted option lets you buy the equivalent of upwards of 90% of your historical average."
Here are the product options under the Common Crop Insurance Policy, also known as COMBO.
  • Yield protection: This option provides yield-only insurance protection based on actual production history on a given farm unit. Yield protection prices are based on average Chicago Board of Trade (CBOT) prices for December corn futures and November soybean futures during February. Coverage levels range between 50% and 85%. If actual yields on a farm unit fall below the yield guarantees, producers can collect on the policy.
  • Revenue protection: This option provides guaranteed minimum gross revenue per acre based on yield history and the average CBOT prices for December corn futures and November soybean futures during February. The revenue guarantee is increased when average October CBOT prices are higher than February prices. Coverage levels range between 50% and 85%. If final crop revenue falls below the revenue guarantee, producers can collect on the policy.
  • Revenue protection with harvest price exclusion: With this option, the minimum revenue guarantee is fixed, based on the February CBOT prices for corn and soybeans. It cannot be increased later if October prices prove higher.
RMA will release its yield protection and revenue guarantee prices March 1. Estimates this week were near $5.70 per bushel for corn, about 30 cents lower than last year, and $12.45 for soybeans, about $1.05 lower than a year ago.



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