Technically Speaking: 2018 Crop Insurance in Review

January 9, 2019 01:53 PM
 
Jamie Wasemiller of the Gulke Group discusses crop Insurance and other related topics including private products available that are often unknown or not discussed by the conventional insurance agent.  

The following is a review by Jamie Wasemiller of the Gulke Group who is an expert on Crop Insurance and related topics including private products available that are often unknown or not discussed by the conventional insurance agent.  

If you have questions or comments Jamie’s contact info is cell 707-365-0601 or email Jamie@gulkegroup.com. If you are attending the Top Producer Conference next week, be sure to attend Jamie’s breakout session.

 

A positive thing I noticed in 2018 was that revenue guarantees were pretty good because we had good spring prices but also because individual APH’s are improving because we are starting to eliminate some of the lower yielding years that have burdened many of the 10-year APH’s. I would say that I have seen a bigger APH improvement in soybeans compared to other crops.

We also saw the expansion for a private product that shrunk the deductible by as much as 10% less than if just buying an MPCI policy. It became available in additional states and by additional companies in 2018 and will also be expanding in 2019.

SOYBEANS:

In 2018 we saw the Insurance Spring Price set at $10.16 while the Harvest Price settle at $8.60. This price drop accounted for 15% of the insurance deductible.

This means that if a producer had purchased an 85% MPCI policy it would only collect an insurance indemnity if the actual soybean production came in below the APH and most likely the yield would have to come in 4%-6% below the APH to cover the initial cost of buying MPCI insurance.

At the 80% MPCI policy level even with the price drop the yield would have had to come in about 6% below the APH to receive an indemnity and 8% - 10% below to cover the insurance premium.

RAMP/ICE Private Product on Soybeans:

This private product gave the producer the ability to buy a band of coverage above their normal MPCI coverage up to 95% leaving the producer with only a 5% deduction before insurance would start paying. 

This means that insurance could start to kick in at $9.65 if the actual production matched the APH. Another way to look at it is that due to this year’s price drop the policy insurance would start to kick in if production was anything less than 10% above the APH.

This policy has an additional cost on top of the MPCI payment and to cover the cost production had to come in less than 6%-7% above the APH.

If both the MPCI and RAMP/ICE was purchased this year in order to recoup the insurance premiums production needed to come in in a range from 3% above the APH to equal the APH depending on the location.

Price Flex on Soybeans in 2018: Price Flex is the option I have talked about for many years where we can try to determine a higher Spring Price for our grain using an alternative time period

I did not make any recommendations to purchase Price Flex in 2018. We could have received a higher Spring Price if we had purchased Price Flex for the months of March ($10.33), April ($10.40) or May ($10.32). In the past years I have generally only purchased Price Flex in the summer month in case there is a summer rally. In 2018 the summer months would have all been lower than the government Spring Price meaning that the Price Flex Policy would not have enhanced the 2018 insurance coverage. Even if we had purchased those higher months the cost of this private product would have taken away most of the additional coverage.

CORN:

In 2018 we saw the Insurance Spring Price set at $3.96 while the Harvest Price settle at $3.68. This price drop accounted for 7% of the insurance deductible. 

This means that if a producer had purchased an 85% MPCI policy it would only collect an insurance indemnity if the actual corn production came in 8% below his APH and most likely the yield would have to come in 12%-15% below the APH to cover the initial cost of buying MPCI insurance.

At the 80% MPCI policy even with the price drop the yield would have had to come in 13% below the APH to receive an indemnity and 15%-18% below the APH to cover the insurance premium.  

RAMP/ICE Private Product on Corn:

This means that insurance could start to kick in at $3.76 if the production matched the APH. Another way to look at it is that due to the price drop the policy insurance would start to kick in if production was anything less than 2% above the APH.

This policy has an additional cost on top of the MPCI payment to cover the cost production had to come in less than 3%-5%% above the insureds APH. If both the MPCI and RAMP/ICE was purchased this year in order to recoup your insurance premiums production needed to come in in a range from 6% below the APH to 10% below the APH depending on the location.

Price Flex on Corn in 2018: Price Flex is the option I have talked about for many years where we can try to determine a higher Spring Price for our grain using an alternative time period. 

I did not make any recommendations to buy Price Flex in 2018. We could have received a higher Spring Price if we had purchased Price Flex for the months of March ($4.03), April ($4.10) or May ($4.19). In the past years I have generally only purchased Price Flex in the summer month in case there is a summer rally. In 2018 the summer months would have all been lower than the government Spring Price meaning that the Price Flex Policy would not have enhanced the 2018 insurance coverage. Even if we had purchased those higher months the cost of this private product would have taken away most of the additional coverage.

SPRING WHEAT: 

In 2018 we saw the Insurance Spring Price set at $6.31 while the Harvest Price settle at $5.95. This price drop accounted for 6% of the insurance deductible. 

This means that if a producer had purchased an 85% MPCI policy it would only collect an insurance indemnity if the actual production came in 10% below the APH and most likely the yield would have to come in 19% below the APH to cover the initial cost of buying MPCI insurance.

At the 80% MPCI policy even with the price drop the yield would have had to come in 15% below the APH to receive an indemnity and 23% below the APH to cover the insurance premium. 

At the 75% MPCI policy even with the price drop the yield would have had to come in 20% below the APH to receive an indemnity and 25% below the APH to cover insurance premium. 

COTTON:

In 2018 we saw the Insurance Spring Price set at $.75 while the Harvest Price settle at $77. Since the Harvest Price came in above the spring price the policy essentially turns into a yield policy meaning the yield loss would have to make up for the entire deductible in order for the policy to pay out.

At the 80% MPCI policy the yield would have had to come in 21% below the APH to receive an indemnity and 25% below the APH to cover the insurance premium. 

SUNFLOWERS:

In 2018 we saw the Insurance Spring Price set at $.18 while the Harvest Price settle at $.15 This price drop accounted for 17% of the insurance deductible. 

This means that if a producer had purchased an 85% MPCI policy it would only collect an insurance indemnity if the actual production came in below 2% above the APH and the yield would have to come in 12% below the APH to cover the insurance premium.

At the 80% MPCI policy even with the price drop the yield would have had to come in about 3% below the APH to receive an indemnity and 12% below to cover the insurance premiums.

At the 75% MPCI policy even with the price drop the yield would have had to come in about 11% below the APH to receive an indemnity and 16% below to cover the insurance premiums.  

 


Join Top Producer in Chicago: 4 Events in 1 Week

If you have a resolution to improve your farm business skills, join Top Producer in Chicago, Jan. 14-17. During the week, Top Producer is hosting four events, which are collectively known as the Top Producer Summit. Bring your team to maximize learning—there’s something for everyone. View the agenda for all four events and register now!

 

tpsummit

Back to news


Comments

 
Spell Check

No comments have been posted to this News Article

Close