Rest in Peace, Durum CRC

Increased T-Yields for some crops among crop insurance changes this year

By Tracy Sayler

There will be no controversy over crop revenue coverage for durum wheat this year. That’s because there will be no CRC for durum.

Durum CRC has been a source of contention the last few years. In 1999, an administrative amendment that changed the base price for durum CRC triggered a federal lawsuit. Durum CRC eligibility was downsized in 2000, with the policy offered in only 15 counties in northern ND, with bordering counties eligible for coverage through a written agreement.  Last year, durum CRC was not offered, as there was not enough volume of durum futures trading at the Minneapolis Grain Exchange to establish a price.

The company that developed durum CRC, American Agrisurance Inc, didn’t file with the USDA’s Risk Management Agency (RMA) to offer durum CRC in 2002, according to Doug Hagel, director of the RMA Regional Office, Billings, Mont. This means that the company no longer believes durum CRC is a viable product worth fixing. Hagel says the RMA has no means of offering written agreements for durum CRC either. 

“So if you’re a durum grower, you only have price protection under the spring wheat endorsement,” he says.  “You can still take CRC or Revenue Assurance coverage out on durum, but it’s going to be insured as spring wheat.”  However, bear in mind that this will result in a combined durum and spring wheat history. Thus, durum growers should consult with their crop insurance agents to discuss how available crop insurance coverage options may affect their spring wheat and durum histories, and their crop insurance options in the future.

Policy changes for small grains and for prevented planting can be expected in 2003 or 2004, but there are no changes to prevented planting coverage this year, and only minor policy changes to small grains policies in 2002.

According to Kevin Erickson, risk management specialist with the RMA in St. Paul, there are some minor changes this year for malting barley: Language for APH (actual production history) coverage has been changed to read “All varieties approved by the American Malting Barley Association or grown under a malting barley contract will be insurable.” Also, the rules for income protection (IP) coverage on malting barley option A have been expanded to include country elevators that handle malting barley.  “In the past, a grower was required to have a malting barley contract with a brewer or processor, and that excluded IP coverage on any malting barley contract that a grower would have with an elevator,” Erickson says.

Erickson says a policy change for Revenue Assurance adds 80/85% coverage levels for corn, soybeans, and wheat to all counties where these coverage levels are available for multi-peril crop insurance (MPCI).

The RMA has updated the county transitional yield or “T-yields” for corn and a number of broadleaf crops grown in the Northern Plains.  The T-yields for some of the crops that have been updated—including corn, soybeans, and canola—have increased by about 10-15%. The RMA uses the T-yield—the average county yield, established by the National Agricultural Statistics Service where data is available—as a check figure against farmers’ reported yields, and to help determine a production guarantee for land that doesn’t have production history. The T-yield can affect the rating of an insured, and can mean lower or higher premiums, depending on the insured’s APH.  The county T-yields are expected to be updated for small grains next year.

Price elections for APH insurance have increased this year for some crops, and remained the same for others.  The price election for spring wheat in 2002 is $3.15, an increase from $2.80 last year. The price for barley in 2002 is $1.95, an increase from $1.60 last year. The 2002 crop year malting barley additional value price election for Option A under the APH Malting Barley Price and Quality Endorsement is $0.60 per bushel.  The price election for canola and oil sunflower remain unchanged from last year at $9.30 per cwt.

The 2002 minimum price election now stands at $2.00 for corn ($2.05 in 2001) and $4.92 for soybeans ($5.26 in 2001).  However, the outcome of Congressional deliberations on a new farm bill could have a significant impact on commodity prices for the 2002 crop year. Thus, the RMA has not yet announced any additional price elections for these and other crops, and has extended the deadline by which producers may select an additional price.

APH Example        40 bushels per acre APH yield    x .65coverage level        26    bushel guarantee*    -  10 bushels per acre actually                 produced        16  bushels per acre loss x $3.15  price election $50.40  gross indemnity*   - 4.00  estimated premium per                   acre (varies by county) $46.40   net indemnity* Revenue Product Example            26 bushels* (see left)    x $3.35   base price (est. –                  announced in March)    $84.50 guarantee*            10 bushels per acre                actually produced    x $2.80 harvest price (est. –                announce in Sept.)    $28.00 revenue    $56.50    gross indemnity                 ($84.50 – 28.00 = 56.50)   - $5.00  estimated premium                (varies by county) $51.50   net indemnity*

*Figures shown on a per acre basis; yield guarantees and losses are paid on a unit basis. See policy provisions. Source:  RMA, St. Paul.

Some restrictions will apply to the use of the higher price elections. If the additional prices are announced, producers will have five days in which to elect the minimum price announced on November 30, 2001, or the additional price election and pay the additional premium, provided that:

1) The producer has not suffered a loss or was prevented from planting the eligible crops on or before the date that the additional price elections were announced; or

2) The producer does not suffer a loss or is prevented from planting within 10 days after the date that the additional price elections are announced.

Producers Buying Up
Since the 2001 growing season, producers have been able to receive better value in their crop insurance coverage, particularly at higher buy-up levels, thanks to increased federal subsidies for the federal crop insurance program through the Agricultural Risk Protection Act of 2000.

According to the latest estimate at the RMA’s office in St. Paul, about 1.877 million acres of wheat were insured in Minnesota last year. The breakdown by insurance plan: CRC - 925,918 acres; APH - 515,611 acres; RA - 425,913 acres; IP - 9,949 acres; GRP (Group Risk Plan) - 188 acres.

In North Dakota, about 9.778 million acres of wheat (all classes) were insured in 2001, according to the latest estimate of the RMA office in Billings.  The breakdown by insurance plan: CRC - 4.964 million acres; RA – 2.322 million acres; APH – 2.049 million acres; IP - 441,776 acres.

In South Dakota, about 2.503 million acres of wheat (all classes) were insured in 2001, according to the latest estimate of the RMA office in Billings.  The breakdown by insurance plan: CRC – 1.533 million acres; APH – 873,385 acres; RA – 95,000 acres; IP - 1,701 acres.

The tables below summarize acreage breakdown by insurance plan, according to estimates from RMA in Billings and St. Paul.  Percentage totals may not be 100% in all tables due to rounded estimates.

2001 MN Wheat Acres by Coverage Level for the CRC Plan of Insurance cov. level acres % of total 50% 52,878.5 5.7% 55% 6,740.0 0.7% 60% 136,341.6 14.7% 65% 453,774.0 49.0% 70% 221,647.9 23.9% 75% 46,653.7 5.0% 80% 6,813.0 0.7% 85% 1,048.2 0.1% Totals: 925,896.9 100.0%