Home > News > Crop Insurance Payments Likely in Many Areas

It is likely that a significant number of corn and soybean producers in many areas of southern and western Minnesota, as well as adjoining areas of Iowa and South Dakota, will qualify for crop insurance indemnity payments this year.

Much of this region dealt with planting delays last spring, excessive rain this summer and severe storms at different points during the growing season. These weather issues will likely result in yield reductions, which together with the price declines from the crop insurance base prices on March 1, increase the likelihood of insurance payments.

With Federal Crop Insurance, every year is different, and there are many variable results from crop insurance. THis year will be no different, with some producers choosing Yield Protection (YP) policies (yield only) versus Revenue Protection (RP) policies (yield and price), and producers having different levels of coverage on various crops. Producers also vary on having “optional units” versus “enterprise units” for their crop insurance coverage.”

In the Midwest, most corn and soybean producers have tended to secure some level of revenue (RP) crop insurance coverage, rather than standard yield-only (YP) policies. Producers like the flexibility of the RP policies that provide insurance coverage for reduced yields, as well as in instances where the harvest price drops below initial base price. In 2019, corn crop insurance loss calculations with YP policies and RP policies will function differently, due to the likely Chicago Board of Trade (CBOT) harvest price for corn and soybeans likely being below the 2019 crop insurance base prices, which were finalized on March 1.

The established 2019 base prices for 2019 YP and RP crop insurance policies were $4.00 per bushel for corn and $9.54 per bushel for soybeans These base prices will be the payment rate for YP policies for corn and soybeans. These base prices will also likely serve as the final price to calculate revenue guarantees for calculating potential RP crop insurance indemnity payments for both corn and soybeans.

The final harvest price for RP insurance policies with harvest price protection is based on the average CBOT December corn futures and CBOT November soybean futures during October, with prices finalized on Nov. 1. If the final harvest CBOT price for December corn futures or November soybean futures is higher than the established base prices, the harvest price would then be used to determine the RP insurance guarantees, which is not likely in 2019. The harvest price is also used to calculate the value of the actual harvested bushels for all RP insurance policies. As of Sept. 27, the crop insurance harvest price estimates were approximately $3.70 per bushel for corn and $8.80 per bushel for soybeans.

Corn and soybean producers had the option of selecting crop insurance policies ranging from 60% to 85% coverage levels. The level of insurance coverage can result in some producers receiving crop insurance indemnity payments, while other producers receive no indemnity payments, even though both producers had the same adjusted APH yield and the same final yield. For example, at an adjusted APH corn yield of 190 bushels per acre, a producer with 85% RP coverage would have a yield guarantee of 161.5 bushel per acre, and a revenue guarantee of $646 per acre, while a producer with 75% coverage would have a yield guarantee of 142.5 bushels per acre, and a guarantee of $570 per acre. If the actual 2019 yield was 155 bushels per acre, with a $3.70 per bushel harvest price, the producer with 85% coverage would receive a gross indemnity payment of $72.50 per acre, while the producer with 75% coverage would receive no indemnity payment.

Many growers purchased upgraded levels of Revenue Protection (RP) crop insurance, which included the higher “trend-adjusted” (TA) yields that were available. The lower CBOT prices increase the likelihood of crop insurance indemnity payments on some Upper Midwestern farms that have 80% and 85% RP insurance policies for 2019. Indemnity payments will be most likely to occur when there was a yield loss, due to some type of weather problem during the 2019 growing season; however, the lower price levels also enhance the payment likelihood.

A large majority of Midwest corn and soybean producers utilize “enterprise units” for their crop insurance coverage, which combines all acres of a crop in a given county into one crop insurance unit. By comparison, “optional units” allow producers to insure crops separately in each township section. Premium rates are somewhat higher with optional units. Enterprise units work quite well with RP policies to protect against price drops during the growing season, and when a producer has most of their land in the same general area. Optional units are preferable when a producer has a variety of land that is spread across a wide area in a county, or when producers have individual farms that are highly susceptible to natural disasters, such as flooding, drought, etc.

Your crop insurance agent is the best source of information.

Kent Thiesse is a farm management analyst and senior vice president at MinnStar Bank, Lake Crystal, Minn.

Source: Kent Thiesse, AgriNews

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