2011 crop insurance considerations offer usual variability
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cies with enterprise units were much more favorable than for policies utilizing “optional units.” Prior to 2009, most producers used optional units, which allow producers to insure corn and soybeans separately in each township section. Many more producers are now taking advantage of the lower premium levels with enterprise units, allowing them to upgrade to 80 percent or 85 percent RP coverage. Producers who have 2011 crop losses on individual farms, and have crop insurance coverage with optional units, may be able to collect crop insurance indemnity payments on their 2011 corn or soybean crop on some farm units, while not on others. Meanwhile, producers with crop insurance policies with enterprise units in 2011, may be less likely to qualify for 2011 crop insurance indemnity payments, unless they had crop losses on a significant portion of crop acres in a county. Due to the recent drop in CBOT crop prices, along with the low corn and soybean yields in some areas due to poor 2011 weather conditions, there are likely to be more producers with enterprise units that qualify for crop insurance indemnity payments in 2011, as compared to 2010. Many producers saw some significant savings in crop insurance premium costs in the past couple of years by switching to enterprise units, which work quite well when a producer incurs general yield reductions due to drought or poor growing conditions, or when the harvest price drops lower than the initial base price. See PROGRAMS, pg. 4B
THE LAND, OCTOBER 14, 2011
Every year is different with federal crop The CBOT average price for October insurance, and with the multiple options will be used to calculate the value of the available to producers, there are many actual harvested bushels in 2011 for RP variable results from crop insurance covpolicies. As of Oct. 10, the average CBOT erage at harvest time. futures prices in October were $5.99/bu. for corn and $11.65/bu. for soybeans. This year will be no different, with some producers choosing Yield Protection poliCorn and soybean producers have the cies (yield only) versus Revenue Protecoption of selecting crop insurance policies tion policies (yield and price). Producers ranging from 60 percent to 85 percent coveralso have differences in the level of coverage levels. While 85 percent coverage levels FARM PROGRAMS are fairly common with YP policies, coverage age, and some producers chose “optional units,” while other producers chose “enterlevels of 75 percent and 80 percent are more By Kent Thiesse prise units” for 2011. common with RP insurance policies, due to more affordable premium costs. In the Midwest, most corn and soybean producers in recent years have The level of insurance coverage can tended to secure some level of revresult in some producers receiving crop enue crop insurance coverage, rather than standard insurance indemnity payments, while other producers yield-only policies. Producers like the flexibility of receive no indemnity payments, even though both producthe RP policies that provide insurance coverage for ers had the same guarantee and the same final yield. reduced yields, as well as in instances where the har- For example, at a proven corn yield of 180 bushels vest price drops below initial base price. per acre, a producer with 85 percent coverage would In 2011, corn and soybean yield losses with YP polihave a 153 bu./acre guarantee, while a producer with cies and RP policies will function differently, due to the 75 percent coverage would have a yield guarantee of recent drop in Chicago Board of Trade grain prices. 135 bu./acre. Enterprise units or optional units The established base prices for 2011 YP and RP In recent years, the U.S. Department of Agriculture crop insurance policies was $6.01 per bushel for corn Risk Management Agency increased the federal suband $13.49/bu. for soybeans. This will be the payment rate for 2011 YP policies for corn and soybeans, sidy for purchasing YP or RP insurance coverage and will serve as the final price to calculate revenue under “enterprise units,” which combines all acres of guarantees to calculate potential RP crop insurance a crop in a given county into one crop insurance unit. indemnity payments at current price levels. As a result, crop insurance premium levels for poliThe final harvest price for RP insurance policies is based on the average CBOT December corn futures and CBOT November soybean futures during October. If the 2011 CBOT price in October is below $6.01/bu. for corn and $13.49/bu. for soybeans, the initial base price is used to calculate the RP guarantees; otherwise, the October price is used.
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