Crop insurance continues to provide valuable risk protection, and there are important changes for 2012 you need to understand. Closing date for spring-seeded crop insurance sales is March 15. Questions? Talk to your crop insurance agent as soon as possible.
One major change involves the APH (actual production history) Yield Trend Endorsement. This will allow growers who have the appropriate yield history to increase their APH above their current guarantees. The Federal Crop Insurance Corporation has approved this change for corn and soybeans in most of the Corn Belt.
A farmer's APH is the average of at least 4 and up to 10 years of actual historic yields, thus it's based on prior yields. The farmer elects an insurance level annually based upon his APH average to protect either expected yields (a yield protection policy) or expected revenue (a revenue protection policy). Improved crop genetics and management practices are boosting yields and many farmers feel that the APH yields used for crop insurance coverage don't accurately reflect their current yield potential.
Most growers will want to use the Trend Line Adjusted APH
The Trend Line Adjusted APH addresses this concern, explains Doug Burns, vice president of insurance for Farm Credit Services of America, a major provider of crop insurance to farmers in Iowa, Nebraska, South Dakota and Wyoming. He believes the majority of growers will want to take advantage of this new endorsement.
The rule change means a trend adjustment factor is estimated for each county. This factor is equal to the estimated annual rise in yield. It's based on county average yields determined by USDA each year. Each yield reported in the individual insurance unit's APH history is adjusted upward by the trend factor, times the number of years that have passed since the yield was recorded.
In some cases the land in the insurance unit may not have an actual yield for every year, if the crop was not planted that year or if no production records were available. The unit must have an actual yield for at least one year of the last four to be eligible for the yield trend adjustment. If actual yields are available for fewer than four years in the last 12, the annual trend adjustment factor is reduced.
In some cases a maximum cap will be applied to the trend-adjusted average yield. The cap is equal to the highest yield in the years of yield history for the unit, plus the annual trend adjustment.
The trend-adjusted APH is available for either yield protection policies, at all levels of guarantee except catastrophic, or CAT, coverage (50% yield guarantee). Group policies, such as GRP and GRIP, have used trend-adjusted county yields since they were introduced, so that won't change.
Premium rates have been lowered for 2012 in many cases
Another change is premium rates have been lowered in many cases for corn and soybeans, notes Burns. A study of historical crop insurance payments has concluded that loss payments in the Midwest have been decreasing in recent years, and a general reduction in premium rates is justified. USDA's Risk Management Agency or RMA has basically said Midwest farmers shouldn't have to pay for crop problems in Texas, for example.
Many counties across Iowa have lower premiums for 2012 but it varies by county. In southern Iowa, some have leveled off or have slightly increased.
There are also new county transitional yields. These have been released by RMA and most of the counties in central Iowa have about a 1 to 5 bushel per acre increase for corn and a 1 to 2 bushel increase for soybeans.
The biotech discount has been discontinued. This discount is now figured in the premium rate, so there's no need to turn in seed receipts anymore. RMA has determined that approved corn hybrids, which qualified for the biotech discount when the program started four years ago, are now planted on so many acres that it's no longer necessary to maintain a separate premium schedule for them.
Other changes for 2012: There are several. Your crop insurance agent can help you make the right decisions
Sod busting and wetlands are factors. "If you have new ground coming into row crop production or ground coming out of CRP, you need to let your insurance agent know by the sales closing date that you have this ground," says Burns. "For insurability, this needs to be in the written agreement."
The acreage reporting date is July 15. It's helpful RMA has moved it back a bit, but insurance companies do ask that you still report your planted acres in a timely manner. It all falls back to your billing date which is now August 15, tightening your schedule.
Soybean growers can take advantage of the Specialty Trait Soybean Endorsement for 2012. This is a new product to provide revenue protection for specialty-trait growers. Previously, specialty-trait soybeans were only insurable under yield protection. Payment was per bushel without regard to any added value of a crop. The new endorsement will help protect the underlying price mechanism of the contract, but not the grower premium.
"In these volatile times, risk management is more important than ever," sums up Burns. "Farmers need to understand their options as they plan their marketing and protection for the next crop. Risk management tools, such as crop insurance and marketing decisions, are vital to the success of farming operations."
Deadline to buy federal crop insurance in Iowa for 2012 is March 15. Contact your agent now if you haven't already.
There are a number of changes in crop insurance rules and coverage options to consider this year.
Your crop insurance agent can provide you with more details to make the right decisions for your farming operation.
For more information go to www.fcsamerica.com. Also, visit the following ISU Extension websites for more information on crop insurance and making crop insurance decisions.
For farm management information and analysis, go to ISU's Ag Decision Maker site www.extension.iastate.edu/agdm and ISU Extension farm management specialist Steve Johnson's site www.extension.iastate.edu/polk/farmmanagement.htm.