Layer Your Protection: Shallow Loss Crop Insurance Products
Consider these crop insurance products for 2022
“We’re heading for March Madness, and it has nothing to do with college basketball,” says Steve Johnson, retired Iowa State University Extension farm management field specialist.
The madness farmers will face in March is centered on crop insurance decisions, with a looming deadline of March 15 for most parts of the Corn Belt.
2022 crop prices are projected prices to be the highest in eight years, thus they should provide a look at higher revenue guarantees and, of course, higher premiums versus 2021. High prices mean more risk, which is why Johnson is encouraging farmers to be proactive with their 2022 crop insurance decisions.
SCO AND ECO
He recommends farmers analyze two products: Supplemental Coverage Option (SCO) and Enhanced Coverage Option (ECO).
“They were created to do exactly what they are called, cover shallow losses,” Johnson says. “Both provide county- based coverage for a portion of the insured’s underlying crop insurance policy deductibles.”
SCO and ECO can be used to extend crop insurance coverage, such as revenue protection (RP), to higher levels that can make it easier to trigger revenue losses. Both can be purchased annually from your crop insurance agent and use the same expected county yields and then actual county yields.
The key differences are:
- SCO provides coverage across a band below 86% of the county level coverage.
- ECO provides coverage below either 90% or 95% triggers to 86% of expected county revenue or yield.
In 2021, crop insurance premiums were much higher than 2020. That could be the same pattern for 2022, says Gary Schnitkey, University of Illinois ag economist.
“Farmers wishing to reduce premiums from RP-85% could pair RP-80% with SCO or ECO-90%,” he says. “Both provide a narrower band of farm level coverage and county coverage than when SCO and ECO-90% are used together but will also result in lower premium cost.”
SCO and ECO are not replacements for revenue protection crop insurance, Johnson says.
“These are add-ons — you are adding these on to your existing revenue protection coverage,” he says.
To use ECO and SCO, you must purchase an individual plan of insurance. They can’t be used with other area coverage (area risk protection insurance, margin protection, etc.). SCO is limited to acres enrolled in the PLC program, but ECO can be used with PLC or ARC.
Shallow Loss Product Basics
Picture a farm pond, says Iowa State University’s Steve Johnson. “You fill your pond up with an 80% revenue protection policy,” he says. “Then you can cover shallow layers of risk with SCO and/or ECO. Margin protection works, but it needed to be purchased by Sept. 30, 2021, for the 2022 crop.”
