THE LAND — FEBRUARY 18/FEBRUARY 25, 2022
www.thelandonline.com — “Where Farm and Family Meet”
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Don’t leave crop insurance decisions to the last minute The deadline for farm operators to purto be dropped from crop insurance actual chase crop insurance for the 2022 growproduction history yield guarantee calcuing season is March 15. The 2022 Spring lations. For information on which counprices for corn and soybean are likely to ties, crops, and years are eligible for yield be near or above the highest base price exclusion, go the U.S. Department of levels in the past decade. This will Agriculture’s Risk Management Agency enhance the available crop insurance web site: https://www.rma.usda.gov/ guarantees for 2022 compared to recent Historical harvest prices for corn and years. However, due to the higher insursoybeans FARM PROGRAMS ance guarantees, premium costs are also An analysis for the past 15 years (2007likely to be higher than a year ago for 2021) shows the final crop insurance harBy Kent Thiesse similar crop insurance products. vest price for corn has been lower Producers have several crop insurthan the Spring base price in 10 of ance policy options to choose from, the 15 years — including from 2013including yield protection policies 2019. That trend was reversed in and revenue protection policies, supplemental crop 2020 when the harvest price for corn was $3.99 per option, enhanced coverage option, and other private bushel, which was 11 cents above the Spring price. insurance policy options. This occurred again in 2021 when the Spring price was $4.58 per bushel, compared to a harvest price of In recent years, most farm operators have chosen $5.37 per bushel (an increase of 79 cents per bushel). revenue protection insurance policy options which provide a guaranteed minimum dollars of gross rev- The only other years which saw an increase in the harvest price were 2010, 2011 and 2012. The range enue per acre (yield multiplied by Spring price). has been from an increase of $1.82 per bushel in the This minimum guarantee is based on yield history on a farm unit times the Spring (base) price. Spring harvest price in 2012 to a decline of $1.27 per bushel in 2008 and a decline of $1.26 per bushel in 2013. price is the average of the Chicago Board of Trade prices during the month of February for December For soybeans, the harvest price has increased in corn futures, and November soybean futures. As of seven years (2007, 2009, 2010, 2012, 2016, 2020 and Feb. 11, the 2022 estimated crop insurance Spring 2021), decreased in seven years (2008, 2011, and prices in the upper Midwest for yield protection and 2014-2019) and stayed the same in 2013. The range revenue protection policies were estimated at $5.79 has been from an increase of $2.84 per bushel in per bushel for corn and $14.07 per bushel for soy2012 to a decline of $3.00 per bushel in 2008. In beans. The 2021 crop insurance Spring prices will 2021, the final harvest price was $12.30 per bushel, be finalized on March 1. which was an increase of 43 cents per bushel from The current 2022 base price estimates compare to the Spring price of $11.87 per bushel. 2021 base prices of $4.58 per bushel for corn and Enterprise units and optional units $11.87 per bushel for soybeans. The final crop reveEnterprise units combine all acres of a crop in a nue for 2022 will be the actual yield on a farm unit given county into one crop insurance unit, while times the final crop insurance harvest price, which optional units allow producers to insure crops sepais the average CBOT prices in the month of October rately in each individual township section. for December corn futures and November soybean Enterprise units usually have considerably lower futures. premium costs (approximately $8-$12 per acre) compared to optional units for comparable revenue proAnother insurance option which carries a lower tection policies. Producers should be aware that premium than a typical revenue protection policy enterprise units are based on larger coverage areas, with harvest price protection is a harvest price exclusion policy. This functions similar to a standard and do not necessarily cover losses from isolated storms or crop damage that affect individual farm revenue protection policy except the guarantees on harvest price exclusion policies are fixed at the base units — such as damage from hail, wind or heavy rains. So additional insurance, such as hail or wind price level and are not affected by harvest prices insurance, may be required to insure against these that exceed the base price. The revenue guarantee for standard revenue protection policies is increased types of losses. It is also important for producers to run “what if” scenarios when analyzing the comparfor final insurance calculations if average CBOT ison between enterprise units and optional units. prices during the month of October are higher than the February CBOT prices. This has occurred for Many times, producers automatically opt for entercorn and soybeans in both 2020 and 2021. prise units every year, due to the lower premium cost per acre for similar coverage. It is important to Many producers in the upper Midwest have been able to significantly enhance their insurance protec- understand the differences in coverage between enterprise units and optional units. It is important to tion in recent years by utilizing the trend-adjusted yield endorsement, with only slightly higher premi- analyze the yield risk on each individual farm unit um costs. The actual production history yield exclu- when determining if paying the extra premium for sion option allows specific years with low production insurance coverage with optional units makes sense. If a producer has uniform soil types and drainage, in
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a close geographical area, and is primarily concerned with a price decline, a revenue protection policy with 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 percent coverage, utilizing county yields similar to Supplemental Coverage Option coverage. Producers can choose between 90 or 95 percent Enhanced Coverage Option coverage. Unlike Supplemental Coverage Option coverage, the purchase of Enhanced Coverage Option coverage is available with selection of either the price loss coverage or agriculture risk coverage farm program choice for 2022. Producers can utilize both Enhanced Coverage Option and Supplemental Coverage Option together, See THIESSE, pg. 16
