Tax Tips: Don't Sleep on this Crop Insurance Option

January 3, 2017 07:26 AM
 
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Crop insurance is a never-ending struggle between being cost-effective and having ample coverage. It’s a balancing act that could leave you either short on cash or short on coverage, neither of which are desirable. Paul Neiffer, CPA with CliftonLarsonAllen and author of The Farm CPA blog on AgWeb, believes there might be a glimmer of hope in a fairly new program and clears up misperceptions that might bring a pleasant surprise to many farmers currently in the ARC program.

The 2014 Farm Bill brought into place a new crop insurance program called the Whole-Farm Revenue Protection (WFRP) plan, which allows a producer to cover several crops in one plan. According to RMA, Whole-Farm provides a risk management safety net for all commodities under a single insurance policy. Neiffer thinks farmers should take a serious look at this program with their crop insurance agent.

“In some situations, the cost savings could be substantial,” he says.

Neiffer says farmers who are looking to reduce their costs but lock in a decent amount of margin – especially if they grow at least three crops – could benefit from this program.

The Whole-Farm program allows a producer to lock in revenue at a lower rate because RMA is subsidizing it even greater than typical indemnity crop insurance. It can also insure a fairly high volume of crop production—upwards of $10 million of coverage—and you can go up to 85% with at least three crops. It’s an option farmers could use to help shave costs in lean times without compromising their risk management plan.

The other programs offered in the 2014 Farm Bill are the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs. Neiffer says there is a common misperception when it comes to the ARC program. With low prices, many farmers believe there won’t be any ARC payments for the 2017 or even 2016 crops.

Although soybeans might not see much of an ARC payment, especially if prices continue to rally, most counties will likely see a payment with corn. Neiffer believes many counties will see potential payments of $50 to $75 per acre in corn. This is still a low payment, but it’s a pleasant surprise for those who were expecting nothing.

Listen to the full interview with Paul Neiffer:

 

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