Crop insurance claims: What you need to know

November 1, 2016 09:21 AM

How will our region fare this crop insurance season?

Jason Alexander, Vice President-Crop Insurance | Farm Credit Mid-America

As the USDA projects record corn and soybean yields for 2016, our regional crop yields look good but variable across Indiana, Ohio, Kentucky and Tennessee. Though not widespread, we’ve seen pockets of drought and flooding that reduced yields and grain quality. Some hard-hit farms are posting corn yields at just 75 to 100 bushels per acre or less. They won’t be the only ones submitting crop loss insurance claims this year. For some farmers, low grain prices will be the biggest challenge that triggers a claim.

Nationwide, corn crop prices are looking like they will be well below the spring guarantee corn price of $3.86. If corn is in the $3.00 to $3.35 range, that will likely trigger many revenue-based crop insurance claims. In these market conditions, it’s a good idea to stay in contact with your insurance specialist to evaluate potential claims and their impact on your farm’s bottom line.

Claim Example

This year, most of our claims will almost certainly be a result of a low corn price. But depending on where you are, yield loss from weather could be a factor as well. Consider the following scenarios.

To start, let’s say you have an approved production history (APH) of 180 bushels per acre at 80 percent revenue coverage, which guarantees you 144 bushels per acre. The 2016 spring price guarantee was $3.86. 144 bushels X $3.86 = a spring guarantee of $555 an acre.

Now, let’s look at how $3.00 corn this fall can put you under your guarantee even if you are right at your APH.

Say your average harvest this year is 180 bushels an acre, which is the same as your APH, and the fall price sits at $3.00. 180 bushels X $3.00 price = $540 an acre, or $15 below your spring guarantee, which will trigger a revenue claim.

What if you face a combination of low price and below-average yield? Let’s say your harvest is 160 bushels per acre and the corn price is at $3.33. 160 bushels X $3.33 price = $532 an acre, or $23 below your spring guarantee, also triggering a claim.

There are plenty of crop insurance questions to answer. For example, what if your yield is at or somewhat above your guarantee but the corn price is low? What is your coverage level? Is your policy on enterprise units or optional units? Did you choose 80 percent or 85 percent coverage? These details and others can make a big difference in determining if you should be getting an insurance payment and, if so, how much. Working closely with your crop insurance provider can help shed light on your unique situation this season.

For additional financial tips, insights and perspectives, visit Farm Credit Mid-America Insights.

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Spell Check

North Bend, NE
11/1/2016 09:33 AM

  The fall price is Chicago futures average which was $3.50 for corn.


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