Best-Kept Farm Bill Secrets

October 24, 2015 02:25 AM
Best-Kept Farm Bill Secrets

In the many months leading up to the approval of the 2014 farm bill, the most widely discussed components were the new Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs. For the most part, insurance, which is just as important, if not more important, was overlooked. When exploring insurance options, consider these three provisions tucked in the farm bill: 

1. The Actual Production History (APH) Yield Exclusion allows for the exclusion of an actual yield for a crop year when the Risk Management Agency (RMA) determines the county per planted acre yield for a crop year was at least 50% below the simple average of the per planted acre yield for the crop in the county for the previous 10 consecutive crop years. When a county is eligible for yield exclusion for a crop, producers in contiguous counties are also eligible to exclude actual yield for that crop year. This provision can make a big difference in APH yields for producers in Missouri, Minnesota and parts of the eastern U.S. after a less-than-ideal 2015 production season. The yield exclusion must be elected by the producer, so don’t forget about this option.

2. Another provision is the pilot insurance policy called Margin Protection. Since this was a pilot program for 2016 it was only available in a few states, but as with most pilot programs, they tend to expand the following year. For most, the deadline to sign up was Sept. 30, but rice producers still have time to research this policy. Margin Protection provides coverage against an unexpected decrease in operating margin (revenue less input costs). The policy is area-based, using county-level estimates of average revenue and input costs to establish the amount of coverage and indemnity payments. Because the deductible is determined based on your operating margin and not just revenue like most current revenue policies, it might have a smaller deductible before insurance kicks in. As a result, it should pay out more frequently and in greater amounts than other policies.

3. Probably the most important provision in the farm bill is the Whole-Farm Revenue Protection expanded insurance policy. It provides a risk management safety net in one insurance policy for all commodities on the farm and is available in every county. This plan is tailored for any farm entity with up to $8.5 million in insured revenue, including farms with specialty or organic commodities, including crops and livestock, or those marketing to local, regional, identity preserved, specialty or direct markets. Each entity must have five years of historic farm tax records unless you qualify as a beginning farmer or rancher, in which case you only need three years of tax records. This policy is not intended for a producer who only grows one crop. In fact, the more crops or livestock, the better. 

RMA rewards diversified farmers with a higher subsidy rate than previously available. For example, with 750 acres each of corn, soybeans and wheat, based on projected futures prices, the premium at the 85% level could insure $750,000 for about $7 an acre at a 56% subsidy rate. At the 80% level, $713,000 could be insured for about $3.72 an acre at an 80% subsidy rate. 

Whole Farm Revenue Protection can be purchased as a stand-alone policy, but if the farmer purchases Revenue Protection or Yield Protection insurance as well, the premium for Whole Farm Revenue Protection is discounted further. 

With yield expectations much higher than current APHs, insurance can be difficult to justify when prices are on the low side. However, the new provisions in the farm bill coupled with private products creates more insurance options than ever. Do your research or work with your insurance agent to see how you can mitigate risk.

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Spell Check

leroy, MN
10/19/2015 03:42 PM

  I can't get this to print, can you email the article directly? Thanks.

michael veit
lasalle, IL
10/20/2015 06:12 AM

  What else is new. The same as in the past. USDA writes a farm bill that takes a lawyer 6 mo to figure out, and farmers a left holding a hand full of crap. Try to find one farmer who knows the difference between PLC/ARC off the top of their head. Where do they come up with this stuff?

Kearney, NE
10/20/2015 09:41 AM

  Michael - Yes, the programs are confusing, but you should have people available to help you navigate these programs and decisions. Ask your Risk Management Specialist or Crop Insurance Agent, they should be able to describe these programs in an easy to understand fashion. That's why you pay them a commission...for services; they are your employee. If they aren't able to provide these services, maybe you need to re-evaluate their employment. LKilmer - You can rest assured knowing you haven't missed out. All three of these programs highlighted in the article are related to the farm bill, but apply to crop insurance. Each is available for you to elect or deny on an annual basis. (Margin protection is only available in select states at this time.) Again, your Crop Insurance agent should be helping you navigate these options. Find me on Twitter @CropInsurer if you still have questions


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