2007 Crop Insurance Notebook

RMA Online Tool Calculates RA, CRC Prices
The USDA Risk Management Agency now has a price discovery reporting tool that tracks and calculates prices for crops covered by Crop Revenue Coverage (CRC) and Revenue Assurance (RA).  Prices are accumulated anddisplayeddaily during the price discovery periods outlined by the terms of these insurance contracts. Final approved prices are indicated at the conclusion of each discovery period.  View the daily calculated prices of a commodity and view the final price when the discovery period has ended.  Go to www.rma.usda.gov – ‘RMA Releases Price Discovery Tool.’

RMA Regional Service Offices Online
North Dakota, South Dakota, andMontana are among states that fall under the regulatory jurisdiction of the RMA Billings RSO, online at www.rma.usda.gov/aboutrma/fields/mt_rso/ - andMinnesota falls under the St. Paul RMA RSO, online at www.rma.usda.gov/aboutrma/fields/mn_rso/.  At both web sites, there is contact information and crop insurance fact sheets for individual crops and by state. 

Aflatoxin Fact Sheet
The St. Paul RSO web site has a fact sheet on aflatoxin, a fungal-related mycotoxin that can occur in corn.  Aflatoxin losses are an insurable cause of loss as long as the grain is tested before being moved into commercial or on-farm storage, or the insured has arranged with the insurance provider to leave representative areas of unharvested crop from which the adjuster can obtain samples for aflatoxin testing. If you suspect your insured crop has aflatoxin, the key is to contact your crop insurance agent before you put the grain in storage or deliver it for sale.

APH Price Elections Bumped Up
The RMA has increased APH price elections for several spring crops, to reflect higher market prices compared to when price elections were initially established.  The adjustments include:

Crop	Additional Price Election	Initial Price Elections
Spring Wheat	$4.45	$3.25
Durum	$4.60	$3.25
Canola	$13.30 cwt	$10.50 cwt
Corn	$3.50	$3.30
Soybeans	$7.00	$6.50
Feed Barley	$2.80	$2.15
Oil Sunflower	$14.20 cwt	$11.55 cwt
Confection Sunflower	$18.70 cwt	$16.05 cwt
Navy Beans	$19.00 cwt	$16.00 cwt
Pinto Beans	$20.00 cwt	$16.00 cwt
Other dry bean classes: www.rma.usda.gov/bulletins/rd/2007/07-009.pdf

Overview of Insurance Units (for Spring Wheat/Billings Region)

Basic Unit: A basic unit includes all of your acreage in the county by share arrangement. Premiums are reduced by 10% for a basic unit.

Optional Units: If a basic unit consists of two or more sections, irrigated/non-irrigated acreage, or two or more crop types (winter/spring/durum) and certain record-keeping criteria are met, you may apply for optional units. The 10% discount will not apply.

Enterprise Units: Includes all insurable acreage of wheat in the county (in which you have a share) as a single unit, if requested by the sales closing date and certain criteria apply. An enterprise discount, which varies by number of acres insured, applies in addition to the 10% discount for basic units.

Overview of Crop Insurance Plans
Actual Production History (APH) — Production guarantee based on individual yield history. Optional, basic, and enterprise units are available.

Crop Revenue Coverage (CRC) — APH plus price protection with optional, basic, and enterprise units.

Group Risk Plan (GRP) — Insures against widespread loss of production based on county average yields. No individual loss protection available.

Group Risk Income Protection (GRIP) — Combines GRP with price protection to insure against widespread loss of revenue due to a combination of low yields and/or low prices. No individual protection available.

Income Protection (IP) - APH plus price protection with enterprise units only.

Revenue Assurance (RA) — APH plus price protection with optional, basic, enterprise, and whole farm units.

Personal T Yields in N.D.

Personal T (transition) yields – the option of using one’s own crop yield history on similar land for insuring the crop on another unit that doesn’t have a yield history – is available in N.D. beginning this year as a pilot program.

In the past policyholders have expressed concern that crop rotations limit their ability to provide four years of actual records and eliminate the use of T -Yields. In fact, if crops are rotated as recommended (e.g., three or more crops, types, or practices are grown in rotation), it may take up to 20 years to accumulate four years of actual yields in all databases.  Thus, this is an option that can make sense, and particularly beneficial for building yield history for rotation crops. 

For example, let’s say you planted sunflower in 2004 and it performed poorly, yielding 1,200 cwt/acre. If you’re interested in growing sunflower again, maybe you consider planting it in 2007, hoping for a better yield that will replace that lower yield in 2004 and put you in a better spot for building your personal T yield to be used on land where you don’t have a yield history.

North Dakota has the only statewide PTY pilot. Applicable crops are barley, canola, corn, dry beans, dry peas, flax, grain sorghum, millet, mustard, oats, rye, safflower, soybeans, sunflowers, and wheat.  It does not apply to CAT policies. Insureds must elect, by county crop policy, the PTY option in writing no later than the earliest applicable crop production reporting date for the crop year.

Change in Malt Barley Quality Statement
Language in the malt barley quality statement has been added, that “sprout damaged” includes “injured by sprout.” Some graders were making a distinction between these two terms, which were resulting in some inequities.  This correction makes federal crop insurance standards more reflective of malting industry quality standards.

APH Loss Example for Wheat
An APH loss occurs when the bushels of wheat produced for the unit fall below the production guarantee as a result of damage from a covered cause of loss. This example assumes a 40 bu/ac APH yield, 65% coverage level, 100% of the additional price, and basic unit coverage.

40 bushels per acre APH yield
x .65 coverage level
26 bushel guarantee*
- 10 bushels per acre actually produced
16 bushels per acre loss
x $3.90 price election
$62.40 gross indemnity*
- $5.00 estimated premium per acre (varies)
$57.40 net indemnity*

* Figures shown on a per acre basis; guarantees and losses paid are on a unit basis. See policy provisions.

Revenue Product Example for Wheat
26 bushels* (see prior example)
x $4.50 base price (est. - announced in March)
$117.00 guarantee*
10 bushels per acre actually produced
x $4.20 harvest price (est. - announced in Sept.)
$42.00 revenue
$75.00 gross indemnity ($117.00 - $42.00)
- $6.50 estimated premium (varies)
$68.50 net indemnity*

* Figures shown on a per acre basis; guarantees and losses paid are on a unit basis. See policy provisions.

Corn Grain Expansion in N.D. a Double-Edged Sword
The good news is that Burleigh, Emmons, Kidder, McHenry, McIntosh, McLean, Logan, Pierce, Sheridan, and Ward counties in N.D. now have corn for grain coverage – no more written agreements in these 10 counties. The bad news: the coverage comes with increased premium rates. According to the RMA, “rates in the expansion counties are substantial, but appear to be necessary to be actuarially sound.” It’s sort of a Catch-22: RMA officials say that the expansion in coverage is indicative of more corn grain being grown, outgrowing written agreements (there were 100 requests for written agreements in Emmons County alone last year).  However, the lack of corn for grain production history means higher initial rates.  RMA officials say the rates will be reviewed and adjusted with good experience.

Corn Maturity Statements Removed for Northern MN
Since 1996, there have been corn maturity restrictions in a number of northern Minnesota counties. RMA specified maximum maturity restrictions on corn planted in various northern counties, in the special provisions section of the crop insurance policy.  This year, all statements were removed and replaced with crop policy language advising corn hybrids “adapted to the area based on days to maturity and compatible with agronomic and weather conditions in the area” as well as guidelines under the good farming practice determination.

AGR-Lite Now Available in MN
Adjusted Gross Revenue Lite (AGR-Lite) is now available as a pilot program in Minnesota.  It’s a whole-farm revenue protection package based on the 5-year average revenue reported on IRS Schedule F. All crop and livestock commodities on the Minnesota commodity list are eligible for AGR-Lite coverage, except timber, forest/forest products, and animals for sport, show, or pets.  It’s an option for growers to consider who:

• Grow otherwise uninsurable crops.
• Consider other plans too expensive.
• Want umbrella protection over selected individual crop coverages.
• Want organic or direct-marketed production protected at actual prices.
• Want bottom line protection from severe economic loss.
• Desire to simplify their risk management program, with coverage based on their operation’s history.
• Wish to protect the bottom line of their operation from severe economic loss.
• Have poor yield records.
• Know their gross income has survived droughts better than actual production history (APH).
• Want individual protection based on your yield, quality and price history plus low price protection.
• Want catastrophic animal health protection as part of your risk management program.

Issues of concern: Indemnities from other insured losses count as income for AGR-Lite.

Young farmers need five years plus skip year before they can participate.  Crops fed to animals counts as animal income (not crop income).  AGR -Lite is based on gross income, no allowance is made for additional feed purchases to make up for low-yielding feed crops.

Don’t Overlook Group Risk Income Protection (GRIP)
The Group Risk Income Protection (GRIP) plan of insurance provides protection against an unexpected decline in revenues, whether due to low yields, low prices, or some combination thereof. GRIP combines the group, or county average, yield coverage of the Group Risk Plan (GRP) with commodity exchange-based price coverage similar to the Revenue Assurance and Crop Revenue Coverage policies.  It’s available in some but not all counties in the Northern Plains. The example prepared by Craig Rice of the RMA-RSP St Paul office illustrates that GRIP can provide better value and coverage for corn in Clay County than RA. It’s a particularly good option for growers who have much or all of their insured cropland in one county that’s eligible for GRIP. A backgrounder on GRIP can be found online at www.rma.usda.gov/policies - click on the FAQs under GRIP.

Plan	APH Yield	Coverage Level	Liability Per Acre	Producer Premium Per Acre
RA	127.00	75	$343	$26
RA		80	$366	$37
RA		85	$389	$55
GRIP	127.00	90	$686	$29

Buy Hail? Buy Up and Not Buy Hail?
Hail is the one catastrophe that is most likely to totally destroy a part of your crop and leave the rest looking fine, according to National Crop Insurance Services. The part hail takes out may well be less than the deductible of your MPCI policy, or it may not lower your yield enough for a revenue insurance policy to kick in. Crop-hail insurance can fill that gap. While MPCI and revenue protection policies protect you against losses severe enough to significantly drop the yield per insured unit, crop-hail insurance gives you acre-by-acre protection that can be up to the actual cash value of the crop.

If you buy 65/100 (65% of yield and 100% of price) or greater for your MPCI, you can delete the hail coverage and replace it with private hail coverage. Many find it more effective to leave MPCI hail coverage in place and get a companion crop-hail policy to cover their MPCI deductible. You can also buy additional crop-hail coverage during the growing season (prior to damage, and hail signup deadline, July 1 for a number of companies.) to protect added profit potential from bumper crop yields or higher-than-normal crop values.

Some areas just seem like “hail alleys” – if you have cropland that seems prone to hail damage, it may be prudent to have adequate hail coverage.  Other growers might consider buying up to 70-75% and reducing or not carrying hail. Even if your frequency of hail damage is low, remember that crop-hail coverage is rated for your area. Consult with your crop insurance agent to discuss your best options. 

Online Premium and “What-If” Calculators
The University of Illinois Farmdoc (farm decision outreach central) Project has useful online calculators to estimate insurance premiums per acre as well as a payment simulator, historical payments, and a ‘what if’ analyzer that estimates 2007 crop insurance payments based on farmer-paid premiums and yield/price scenarios input by the user. Go to www.farmdoc.uiuc.edu/cropins/index.asp.

USDA RMA 2007 Crop Insurance Handbook online:
www.rma.usda.gov/FTP/Publications/directives/18000/PDF/07_18010.pdf

NDSU Crop Insurance Conference Presentations Online
Presentations from the 14th annual Crop Insurance Conference held Jan. 15, 2007 in Fargo sponsored by NDSU are posted at www.ag.ndsu.nodak.edu/aginfo/cropmkt/cic.htm - scroll down to the Powerpoint presentations from the following presenters:

• The Future of Crop Insurance.
  Bill Murphy, Deputy Administrator, USDA RMA
  Insurance Services
• Linking Crop Insurance to Grain Marketing.
  Art Barnaby, Professor, Kansas State University Ag Economics
• Biofuels Impact on Ag.
  Dwight Aakre, Farm Management Specialist, NDSU Extension Service
• Crop Insurance Issues in the Next Farm Bill.
  Art Barnaby, Professor, Kansas State University Ag Economics
• Personal T-Yield and other Pilot Programs.
  Doug Hagel, Director, USDA RMA Billings Regional Office
• Interpretation of Policies and Procedures at RMA   (with maps that show % increase in APH and change in loss ratios from 1998-2006 for corn, soybeans, and wheat in the Dakotas and MN)
  Craig Rice, Regional Director, USDA RMA
• Regional Weather for the Coming Crop Season.
  Dennis Todey, SDSU Extension Climatologist

Report Crop Insurance Fraud 1-800-424-9121
“Less than two-tenths of one percent of all the producers, agents, and adjusters involved in the crop insurance program try to defraud their neighbors and their fellow taxpayers. But those few hurt us all. If you see someone damaging your reputation and robbing from the public’s trust in the crop insurance program, call the USDA toll-free hotline, 1-800-424-9121 or e-mail usda_hotline@oig.usda.gov ” – National Crop Insurance Services .

Income Protection (IP) — APH plus price protec