With the market hollering "corn, corn, corn", it appears that farmers are planning to plant more corn acres this spring. Early warm and dry weather could encourage even more corn acres over usual rotations to soybeans.
"It's April, so many farmers put crop insurance out of their minds as they prepare for planting," notes Steve Griffin, a crop insurance consultant based in West Des Moines. "However, they should not forget the qualifications for enterprise unit (EU) discounts that made the higher levels of coverage that farmers signed up for in March much more affordable."
An enterprise unit combines all of the insurable acreage of the same insured crop in the county in which you have a share of the crop, own, or cash lease. Griffin advises "the part that you need to remember is that to qualify for the EU discount, the EU must contain acreage in two or more sections (i.e., optional units or OU) and the acreage in each of these sections must be at least the lesser of 20 acres or 20% of the insured acreage in the EU."
Decisions you make at planting time can affect your premium
Planting more corn may not affect your EU discount for corn, "but if you happen to plant one of your only two optional units for soybeans to corn or plant soybeans below the 20 acre/20 percent rule in your second optional unit, you may lose your EU discount on the soybeans," he cautions. The enterprise subsidy at the 70% coverage level is 80% compared to 59% for basic units. Losing the EU discount effectively doubles the premium the farmer pays on the affected acres (from 20% to 41% of the gross unsubsidized premium).
"Crop insurance should not determine entirely what and where you plant, but if you aren't careful about this at planting time, then you should not be surprised in July when your acreage report is processed and it comes back with basic units instead of enterprise units and you owe substantially more premium," adds Griffin. "If farmers have any questions about how changes in their planting intentions will affect their crop insurance premium, they should consult with their crop insurance agent before they put the planter in the ground."
Steve Griffin is an independent crop insurance consultant (not an agent) based in West Des Moines, IA. He consults with USDA's Risk Management Agency, crop insurers and with farmers on crop insurance issues and disputes. He can be contacted at www.aggiexpert.com.