THE LAND — FEBRUARY 18/FEBRUARY 25, 2022
PAGE 15
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Don’t leave crop insurance decisions to the last minute The deadline for farm operators to purtion on which counties, crops, and years chase crop insurance for the 2022 groware eligible for yield exclusion, go the U.S. ing season is March 15. The 2022 Spring Department of Agriculture’s Risk prices for corn and soybean are likely to Management Agency web site: https:// be near or above the highest base price www.rma.usda.gov/ levels in the past decade. This will Historical harvest prices for corn and enhance the available crop insurance soybeans guarantees for 2022 compared to recent An analysis for the past 15 years (2007years. However, due to the higher insur2021) shows the final crop insurance harance guarantees, premium costs are also FARM PROGRAMS vest price for corn has been lower than likely to be higher than a year ago for the Spring base price in 10 of the 15 By Kent Thiesse similar crop insurance products. years — including from 2013-2019. That Producers have several crop insurtrend was reversed in 2020 when the ance policy options to choose from, harvest price for corn was $3.99 per including yield protection policies bushel, which was 11 cents above and revenue protection policies, supplemental crop the Spring price. This occurred again in 2021 when option, enhanced coverage option, and other private the Spring price was $4.58 per bushel, compared to insurance policy options. a harvest price of $5.37 per bushel (an increase of 79 cents per bushel). The only other years which In recent years, most farm operators have chosen saw an increase in the harvest price were 2010, revenue protection insurance policy options which provide a guaranteed minimum dollars of gross rev- 2011 and 2012. The range has been from an increase of $1.82 per bushel in the harvest price in enue per acre (yield multiplied by Spring price). 2012 to a decline of $1.27 per bushel in 2008 and a This minimum guarantee is based on yield history on a farm unit times the Spring (base) price. Spring decline of $1.26 per bushel in 2013. price is the average of the Chicago Board of Trade For soybeans, the harvest price has increased in prices during the month of February for December seven years (2007, 2009, 2010, 2012, 2016, 2020 and corn futures, and November soybean futures. As of 2021), decreased in seven years (2008, 2011, and Feb. 11, the 2022 estimated crop insurance Spring 2014-2019) and stayed the same in 2013. The range prices in the upper Midwest for yield protection and has been from an increase of $2.84 per bushel in revenue protection policies were estimated at $5.79 2012 to a decline of $3.00 per bushel in 2008. In per bushel for corn and $14.07 per bushel for soy2021, the final harvest price was $12.30 per bushel, beans. The 2021 crop insurance Spring prices will which was an increase of 43 cents per bushel from be finalized on March 1. the Spring price of $11.87 per bushel. The current 2022 base price estimates compare to Enterprise units and optional units 2021 base prices of $4.58 per bushel for corn and Enterprise units combine all acres of a crop in a $11.87 per bushel for soybeans. The final crop reve- given county into one crop insurance unit, while nue for 2022 will be the actual yield on a farm unit optional units allow producers to insure crops sepatimes the final crop insurance harvest price, which rately in each individual township section. is the average CBOT prices in the month of October Enterprise units usually have considerably lower for December corn futures and November soybean premium costs (approximately $8-$12 per acre) comfutures. pared to optional units for comparable revenue protection policies. Producers should be aware that Another insurance option which carries a lower enterprise units are based on larger coverage areas, premium than a typical revenue protection policy and do not necessarily cover losses from isolated with harvest price protection is a harvest price exclusion policy. This functions similar to a standard storms or crop damage that affect individual farm units — such as damage from hail, wind or heavy revenue protection policy except the guarantees on harvest price exclusion policies are fixed at the base rains. So additional insurance, such as hail or wind insurance, may be required to insure against these price level and are not affected by harvest prices types of losses. It is also important for producers to that exceed the base price. The revenue guarantee for standard revenue protection policies is increased run “what if” scenarios when analyzing the comparison between enterprise units and optional units. for final insurance calculations if average CBOT prices during the month of October are higher than Many times, producers automatically opt for enterthe February CBOT prices. This has occurred for prise units every year, due to the lower premium cost corn and soybeans in both 2020 and 2021. per acre for similar coverage. It is important to understand the differences in coverage between Many producers in the upper Midwest have been able to significantly enhance their insurance protec- enterprise units and optional units. It is important to analyze the yield risk on each individual farm unit tion in recent years by utilizing the trend-adjusted yield endorsement, with only slightly higher premi- when determining if paying the extra premium for um costs. The actual production history yield exclu- insurance coverage with optional units makes sense. sion option allows specific years with low production If a producer has uniform soil types and drainage, in to be dropped from crop insurance actual production a close geographical area, and is primarily concerned with a price decline, a revenue protection policy with history yield guarantee calculations. For informa-
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enterprise units is probably a good option. However, if a producer has farm units which are more spread out geographically, with more variation in soil types and drainage, and has greater concerns with yield variability, they may want to consider a revenue protection policy with optional units. SCO and ECO insurance coverage for 2022 The Supplemental Coverage Option coverage is only available to producers that choose the Price Loss Coverage farm program option for the 2022 crop year. The deadline for 2022 farm program signup is March 15 (which is the same as the enrollment deadline for 2022 crop insurance). As a result, farm operators will need to consider Supplemental Coverage Option insurance coverage at the same time they are finalizing their 2022 farm program choice. The federal government subsidizes 65 percent of the premium for Supplemental Coverage Option coverage, so farm-level premiums are quite reasonable, which may make Supplemental Coverage Option a viable option for producers that choose the price loss coverage farm program option. Supplemental Coverage Option allows producers to purchase additional county-level crop insurance coverage up to a maximum of 86 percent coverage. For example, a producer who purchases an 80 percent revenue protection policy could purchase an additional 6 percent Supplemental Coverage Option coverage. Supplemental Coverage Option is a county revenuebased insurance product which is somewhat similar to some of the area risk protection crop insurance products available. The calculations for Supplemental Coverage Option function very similarly to revenue protection insurance policies, since they utilize the same crop insurance base price and harvest price. The biggest difference is that Supplemental Coverage Option uses county level average yields, rather than the farm-level average production history yields typically used for most revenue protection and yield protection policies. As a result, the Supplemental Coverage Option and revenue protection insurance policies may achieve different results. The Enhanced Coverage Option was a new crop insurance option in 2021 and will again be available for 2022. Enhanced Coverage Option provides areabased insurance coverage from 86 percent up to 95 See THIESSE, pg. 16
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