Prairie Grains Feb/March 98 Crop Insurance in 1998

Issue 12
Feb/March 1998
Crop Insurance in 1998: Strategies and Notes to Consider

By Tracy Sayler

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Prairie Grains is the
official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain
Growers Association,
South Dakota Wheat,
Inc., and the
Minnesota Barley
Growers Association.

Multiple Peril Crop Insurance - Coverage available on most crops at 50 to 75% of the actual production history for your farm, with an indemnity price election from 60% to 100% of the Federal Crop Insurance Corporation (FCIC) expected market price. At the minimum, there is the Catastrophic Risk Protection (CAT) coverage (yield at 50% of APH, 60% of the price election) available for an administrative fee of $50 per crop per county.
Group Risk Plan (GRP) - Based on the county expected yield rather than individual farm yields. Indemnity payment only when the county yield is less than the yield selected.
Crop Revenue Coverage (CRC) - Comprehensive wheat protection through a dollar guarantee based on 95 percent of the Minneapolis Grain Exchange's futures price. Protects against revenue losses from low prices, low yields, or a combination of the two. Final guarantee greater of either: 1) the minimum guarantee set at planting; or 2) guarantee based on price and yield at harvest. Minimum guarantee calculated using coverage level, APH, and a base price, which for wheat is 95% of the February average closing prices of the September Minneapolis Grain Exchange futures contract. Harvest price is calculated by coverage level, APH, and 95% of the average closing price of the September MGE futures contract during the month of August.
Other CRC notes
For crop revenue coverage on corn and soybeans, you can choose 100% of the applicable base and harvest price in 1998; previously, it was 95%.
Enterprise unit on corn and soybeans available. Similar to a basic unit, but includes all land regardless of share. Additional premium discount available.
Non-standard Classification is now eligible for CRC.
Income Protection (IP) - Similar to CRC, except IP is based on single-unit coverage versus optional multi-unit coverage offered through CRC. Guarantee is APH yield x projected price x level election. Like CRC, the IP plan establishes a minimum price floor. Unlike CRC, however, IP does not offer upward price protection. IP premium less than CRC. Limited availability.
Price Elections - $3.65 for spring wheat; $4.25 for durum; $2.20 for barley, with an additional 45 cents under the malting barley option; $2.60 for corn; $6.00 for soybeans.
Canola coverage - Canola crop insurance coverage will be offered this year in the following Minnesota and North Dakota counties: MN: Kittson, Roseau, Beltrami, Clearwater, Koochiching, Lake of the Woods, Mahnomen, Marshall, Norman, Pennington, Polk, and Red Lake. ND: Benson, Eddy, Foster, Grand Forks, McHenry, Nelson, Pembina, Renville, Stutsman, Walsh, Ward, Wells, Rolette, Bottineau, Pierce, Cavalier, Ramsey, Towner.
Dry beans - Not all types are eligible for coverage or listed on actuarial documents. Check county documents for published rates. Unpublished types and practices may be insurable by written agreement.
Alfalfa and other forage crops - MPCI (APH plan) and the Group Risk Plan is now offered in limited forage production areas; see your agent for availability. The APH plan is available as basic coverage (no protection against freeze damage or winter kill) or with a winter coverage endorsement. Insurable types are coded as "spring" with basic coverage and "fall" with the winter coverage endorsement. The GRP is based on county average yields and has a different fall reporting date and no spring/winter option. Note: forage crops in counties where these plans are offered are no longer eligible for the Non-insured crop disaster Assistance Program, even if you elect not to take APH or GRP coverage.
Non-Insured Crop Disaster Assistance Program (NAP) - Covers vegetables, trees, fruits, forage and specialty crops in counties where no other crop insurance program is offered. Good production and marketing records a must. There is no premium cost to the producer. To collect, however, there has to be a 35% loss of the particular crop in that area, and the individual producer must have at least a 50% loss. Contact your local Farm Service Agency for more program details.
Late Planting - Coverage reduction changed to 1% per day, maximum of 25 days and 25% reduction in coverage. Previously, the maximum reduction of coverage was 40%. Acreage planted after the 25-day late planting period will receive a production guarantee equal to the 60% guarantee, or 65% or 70%, if the insured elected one of those higher levels.
Prevented planting

PP acres now paid at 60% for wheat and most other crops. Previously paid at 50%.
You can buy up additional levels at 65% and 70%.
PP for sugar beets up to 45% from 35%, option to buy-up to 50 or 55 %.
The substitution provision (25% with ghost crop) no longer available. Cover crops not for harvest are the only ones permitted on prevented planting acreage. Producers may hay or graze the cover crop after the final planting date for the insured crop.
Agreements in writing to increase eligible PP acres are no longer allowed.
PP applies to CAT but only at 60% (no option to buy-up).
PP covers drought if planting area on the final planting date is classified by the Palmer Drought Severity Index as being in a severe or extreme drought.
Insured must notify insurance provider within 72 hours after final planting date if there are any PP acres.

Eligible PP acres - Generally, the maximum number of acres of the crop planted or insured in any one of four most recent crop years. The minimum number of acres that must be affected before a prevented planting payment may be made is the lesser of 20 acres (minimum must be contiguous, not an accumulation of affected acres from here and there) or 20 percent of the acreage in the insurance unit. Eligible acres may be increased if producers provide proof that additional acreage was purchased or leased in time to plant it for the current crop year.
The same crop in the same unit may now both qualify as planted and preventive plant acres. Example: 160-acre wheat unit with 100 acres planted and 60 acres not planted due to insurable cause. Insured would get paid, on a per-acre basis, on the 60 acres of PP wheat and the production from the 100 planted acres would not apply to the PP acres.
Land out of CRP - If possible, track down pre-CRP production records; prior history will be beneficial in establishing APH. The APH yield is determined from producer production records for a minimum of 4, up to 10 consecutive crop years. For producers who provide less than 4 years of actual yields, transitional T-yields are used to complete history. However, the approved APH yield for producers who don't supply any records is limited to 65% of the applicable T-yield for the first year the producer is insured.
Visit with your agent about crop insurance coverage for land released from CRP, to discuss best coverage options. You may be able to attach land coming out of CRP to an existing unit, and use the history of the existing unit. Example: You have 100 acres: 80 acres coming out of CRP and 20 acres of cropland with a wheat history. The 80 may be eligible to receive the same history as the 20.
At this point the rules state that if CRP land is not worked, it will not be eligible for PP payment. Timing of CRP release may also be a PP factor.
T-yield calculation change - Beginning with the 1998 crop year, transitional yields will no longer be based on Farm Service Agency program yields. County T-yields are now published in the county actuarial tables. The change comes from a provision in the 1996 Farm Bill. Officials say using the county T-yield will more accurately reflect current production levels.
Policy and service - Double check coverage details, and keep accurate records of your production history. After signup, double check coverage details after policy is returned to you, for any changes or mistakes. If your agent has not been helpful in the past in explaining which available options may best fit your farm, make it a point this year to get a new agent.
Appeals - Crop insurance contracts usually contain an arbitration clause. This means that if disputes arise with the provider that cannot be worked out between the agent and the farmer, those disagreements go to an arbitrator.
Deadlines - March 15: deadline to sign up for coverage, add crops, and change levels of coverage.
April 30: deadline for reporting 1997 actual production. Assigned or reduced yield applied after this date, based on 75% of your APH yield from the previous year.
Other dates to note: final planting date, planted acreage reporting date, payment due dates, when to report crop damage, and insurance expiration.
Did we miss anything? - Probably. That's why you should make an appointment with your agent to go over crop insurance details, well before the March 15 signup deadline.n

Checklist of key risk management questions
4 What are the major risks for my farm and the likelihood of them occurring?
4 What reliable sources of outlook information do I have?
4 Do I have four or more years of production records to prove my yields?
4 Have I certified my production history with my crop insurance agent?
4 Does my landlord/partner have adequate insurance coverage on their portion of exposure?
4 What coverage level do I need, and can I afford?
4 Have I learned about all of the products that are available, including supplementals?
4 What percentage of my crop can I sell with confidence before harvest?
4 Does my operating loan include enough money to cover my crop insurance premium?
4 What size of loss can I experience and still meet my cash flow requirements?
4 What will the impact on my net worth be if I don't have adequate crop insurance coverage?
4 Have I prepared a written marketing plan that includes:

Production cost estimates and break-even prices at various yield levels?
Minimum selling price under various strategies?
A clear pricing objective?
A clear profit objective?

4 What is my:

Expected local harvest price?
Expected high market-price level for futures and local contracts?
Expected seasonal high month?

4 How many bushels for each crop do I expect?
4 How many are MPCI or CRC guaranteed?
4 What is the maximum price guarantee of my insured bushels?
4 How many uninsured bushels do I have? (expected bu. - guaranteed)
4 How many bushels do I currently have contracted or priced?
4 How many bushels do I have remaining available for sale?
4 What are my forward contract objectives, or other marketing alternatives to be employed?

From information by National Crop Insurance Services and Kansas State University extension grain marketing specialist Bill Tierney.

Copyright Prairie
Grains Magazine
Feb-March 1998

Issue 12 Feb/March 1998	Crop Insurance in 1998: Strategies and Notes to Consider By Tracy Sayler

Library Home E-Mail Back Prairie Grains is the official publication of the Minnesota Association of Wheat Growers, North Dakota Grain Growers Association, South Dakota Wheat, Inc., and the Minnesota Barley Growers Association.	Multiple Peril Crop Insurance - Coverage available on most crops at 50 to 75% of the actual production history for your farm, with an indemnity price election from 60% to 100% of the Federal Crop Insurance Corporation (FCIC) expected market price. At the minimum, there is the Catastrophic Risk Protection (CAT) coverage (yield at 50% of APH, 60% of the price election) available for an administrative fee of $50 per crop per county. Group Risk Plan (GRP) - Based on the county expected yield rather than individual farm yields. Indemnity payment only when the county yield is less than the yield selected. Crop Revenue Coverage (CRC) - Comprehensive wheat protection through a dollar guarantee based on 95 percent of the Minneapolis Grain Exchange's futures price. Protects against revenue losses from low prices, low yields, or a combination of the two. Final guarantee greater of either: 1) the minimum guarantee set at planting; or 2) guarantee based on price and yield at harvest. Minimum guarantee calculated using coverage level, APH, and a base price, which for wheat is 95% of the February average closing prices of the September Minneapolis Grain Exchange futures contract. Harvest price is calculated by coverage level, APH, and 95% of the average closing price of the September MGE futures contract during the month of August. Other CRC notes For crop revenue coverage on corn and soybeans, you can choose 100% of the applicable base and harvest price in 1998; previously, it was 95%. Enterprise unit on corn and soybeans available. Similar to a basic unit, but includes all land regardless of share. Additional premium discount available. Non-standard Classification is now eligible for CRC. Income Protection (IP) - Similar to CRC, except IP is based on single-unit coverage versus optional multi-unit coverage offered through CRC. Guarantee is APH yield x projected price x level election. Like CRC, the IP plan establishes a minimum price floor. Unlike CRC, however, IP does not offer upward price protection. IP premium less than CRC. Limited availability. Price Elections - $3.65 for spring wheat; $4.25 for durum; $2.20 for barley, with an additional 45 cents under the malting barley option; $2.60 for corn; $6.00 for soybeans. Canola coverage - Canola crop insurance coverage will be offered this year in the following Minnesota and North Dakota counties: MN: Kittson, Roseau, Beltrami, Clearwater, Koochiching, Lake of the Woods, Mahnomen, Marshall, Norman, Pennington, Polk, and Red Lake. ND: Benson, Eddy, Foster, Grand Forks, McHenry, Nelson, Pembina, Renville, Stutsman, Walsh, Ward, Wells, Rolette, Bottineau, Pierce, Cavalier, Ramsey, Towner. Dry beans - Not all types are eligible for coverage or listed on actuarial documents. Check county documents for published rates. Unpublished types and practices may be insurable by written agreement. Alfalfa and other forage crops - MPCI (APH plan) and the Group Risk Plan is now offered in limited forage production areas; see your agent for availability. The APH plan is available as basic coverage (no protection against freeze damage or winter kill) or with a winter coverage endorsement. Insurable types are coded as "spring" with basic coverage and "fall" with the winter coverage endorsement. The GRP is based on county average yields and has a different fall reporting date and no spring/winter option. Note: forage crops in counties where these plans are offered are no longer eligible for the Non-insured crop disaster Assistance Program, even if you elect not to take APH or GRP coverage. Non-Insured Crop Disaster Assistance Program (NAP) - Covers vegetables, trees, fruits, forage and specialty crops in counties where no other crop insurance program is offered. Good production and marketing records a must. There is no premium cost to the producer. To collect, however, there has to be a 35% loss of the particular crop in that area, and the individual producer must have at least a 50% loss. Contact your local Farm Service Agency for more program details. Late Planting - Coverage reduction changed to 1% per day, maximum of 25 days and 25% reduction in coverage. Previously, the maximum reduction of coverage was 40%. Acreage planted after the 25-day late planting period will receive a production guarantee equal to the 60% guarantee, or 65% or 70%, if the insured elected one of those higher levels. Prevented planting PP acres now paid at 60% for wheat and most other crops. Previously paid at 50%. You can buy up additional levels at 65% and 70%. PP for sugar beets up to 45% from 35%, option to buy-up to 50 or 55 %. The substitution provision (25% with ghost crop) no longer available. Cover crops not for harvest are the only ones permitted on prevented planting acreage. Producers may hay or graze the cover crop after the final planting date for the insured crop. Agreements in writing to increase eligible PP acres are no longer allowed. PP applies to CAT but only at 60% (no option to buy-up). PP covers drought if planting area on the final planting date is classified by the Palmer Drought Severity Index as being in a severe or extreme drought. Insured must notify insurance provider within 72 hours after final planting date if there are any PP acres. Eligible PP acres - Generally, the maximum number of acres of the crop planted or insured in any one of four most recent crop years. The minimum number of acres that must be affected before a prevented planting payment may be made is the lesser of 20 acres (minimum must be contiguous, not an accumulation of affected acres from here and there) or 20 percent of the acreage in the insurance unit. Eligible acres may be increased if producers provide proof that additional acreage was purchased or leased in time to plant it for the current crop year. The same crop in the same unit may now both qualify as planted and preventive plant acres. Example: 160-acre wheat unit with 100 acres planted and 60 acres not planted due to insurable cause. Insured would get paid, on a per-acre basis, on the 60 acres of PP wheat and the production from the 100 planted acres would not apply to the PP acres. Land out of CRP - If possible, track down pre-CRP production records; prior history will be beneficial in establishing APH. The APH yield is determined from producer production records for a minimum of 4, up to 10 consecutive crop years. For producers who provide less than 4 years of actual yields, transitional T-yields are used to complete history. However, the approved APH yield for producers who don't supply any records is limited to 65% of the applicable T-yield for the first year the producer is insured. Visit with your agent about crop insurance coverage for land released from CRP, to discuss best coverage options. You may be able to attach land coming out of CRP to an existing unit, and use the history of the existing unit. Example: You have 100 acres: 80 acres coming out of CRP and 20 acres of cropland with a wheat history. The 80 may be eligible to receive the same history as the 20. At this point the rules state that if CRP land is not worked, it will not be eligible for PP payment. Timing of CRP release may also be a PP factor. T-yield calculation change - Beginning with the 1998 crop year, transitional yields will no longer be based on Farm Service Agency program yields. County T-yields are now published in the county actuarial tables. The change comes from a provision in the 1996 Farm Bill. Officials say using the county T-yield will more accurately reflect current production levels. Policy and service - Double check coverage details, and keep accurate records of your production history. After signup, double check coverage details after policy is returned to you, for any changes or mistakes. If your agent has not been helpful in the past in explaining which available options may best fit your farm, make it a point this year to get a new agent. Appeals - Crop insurance contracts usually contain an arbitration clause. This means that if disputes arise with the provider that cannot be worked out between the agent and the farmer, those disagreements go to an arbitrator. Deadlines - March 15: deadline to sign up for coverage, add crops, and change levels of coverage. April 30: deadline for reporting 1997 actual production. Assigned or reduced yield applied after this date, based on 75% of your APH yield from the previous year. Other dates to note: final planting date, planted acreage reporting date, payment due dates, when to report crop damage, and insurance expiration. Did we miss anything? - Probably. That's why you should make an appointment with your agent to go over crop insurance details, well before the March 15 signup deadline.n Checklist of key risk management questions 4 What are the major risks for my farm and the likelihood of them occurring? 4 What reliable sources of outlook information do I have? 4 Do I have four or more years of production records to prove my yields? 4 Have I certified my production history with my crop insurance agent? 4 Does my landlord/partner have adequate insurance coverage on their portion of exposure? 4 What coverage level do I need, and can I afford? 4 Have I learned about all of the products that are available, including supplementals? 4 What percentage of my crop can I sell with confidence before harvest? 4 Does my operating loan include enough money to cover my crop insurance premium? 4 What size of loss can I experience and still meet my cash flow requirements? 4 What will the impact on my net worth be if I don't have adequate crop insurance coverage? 4 Have I prepared a written marketing plan that includes: Production cost estimates and break-even prices at various yield levels? Minimum selling price under various strategies? A clear pricing objective? A clear profit objective? 4 What is my: Expected local harvest price? Expected high market-price level for futures and local contracts? Expected seasonal high month? 4 How many bushels for each crop do I expect? 4 How many are MPCI or CRC guaranteed? 4 What is the maximum price guarantee of my insured bushels? 4 How many uninsured bushels do I have? (expected bu. - guaranteed) 4 How many bushels do I currently have contracted or priced? 4 How many bushels do I have remaining available for sale? 4 What are my forward contract objectives, or other marketing alternatives to be employed? From information by National Crop Insurance Services and Kansas State University extension grain marketing specialist Bill Tierney.
Copyright Prairie Grains Magazine Feb-March 1998

Crop Insurance in 1998: Strategies and Notes to Consider

Copyright Prairie Grains Magazine Feb-March 1998

Copyright Prairie
Grains Magazine
Feb-March 1998