When you’re trying to cut every input you can, crop insurance seems like a good place to look for savings, especially given current farm bill safety next programs.
But slicing your coverage could easily end up being penny-wise and pound-foolish, according to Gary Schnitkey of the University of Illinois in a recent farmdoc Daily article.
He arrived at that conclusion after looking at likely harvest prices, county yields, ARC-county payments and crop insurance payments for a handful of policy types at varying coverage levels for corn farmers in McLean County, Ill.
“This analysis suggests lowering coverage levels may be imprudent,” Schnitkey said.
Why? Because ARC-county only provides a limited amount of protection. “The presence of ARC-CO increases the average and lower revenue levels,” Schnitkey said. “However, there still are considerable amounts of downside risk,” especially given the variability of individual farm yields.
That’s worrisome since achieving profitability is expected to be tough this year for many growers. “Expectations are for costs to exceed revenue even with the inclusion of ARC-CO and crop insurance payments,” Schnitkey said. “This is not a year in which crop insurance can be used to assure a profit. Rather, crop insurance this year will limit losses to hopefully more manageable levels.”
For the full article, please visit farmdoc Daily: http://farmdocdaily.illinois.edu/2016/01/prospective-arc-co-payments-2016-crop-insurance.html.