Spring revenue guarantees for crop insurance will not be close to last year. Long gone are the days of near $6 corn guarantees. This year farmers may be facing the mid-$4 range. Some corn growers are assessing coverage levels, especially during a year when margins could be tight.
Gary Schnitkey, University of Illinois Agriculture Economics professor, offered his perspective on determining what are the best risk management options for farmers this year. Below is an excerpt of his “Coverage Level Choices for Revenue Protection in 2014.” The full report can be found at here.
There are two large changes between the 2013 and 2014 crop insurance decision environments. First, 2014 projected prices will be much lower than 2013 projected prices. The projected price for corn was $5.65 in 2013, and is likely to be around $4.58 in 2014. This decrease in projected price will lower guarantees.
The other change has been a new policy for providing county-level insurance. The Agricultural Risk Protection (ARPI) policy was introduced and replaces Group Risk Plan and Group Risk Income Plan. Under ARPI, there are different plans that result in different types of insurance. The ARPI plan called Area Risk Protection (ARP) provides the equivalent coverage as offered by Group Risk Income Plan with the Harvest Revenue option (GRIP-HR). While there are differences between ARPI plans and previous Group insurances, most farmers will find ARPI plans as useful substitutes for previous plans. Farmers who purchased GRIP-HR will find ARP a good substitute.
Schnitkey’s 2014 Crop Insurance Recommendations
Lower projected prices and introduction of ARPI does not change the basic crop insurance product recommendations offered for 2014 decisions. According to Schnitkey, a basic product that is appropriate in most situations is:
•RP used at a 75% through 85% coverage level (most farms will find 80% and 85% coverage levels beneficial)
•Use of enterprise units,
•and Use the Trend Adjustment Actual Production History (TA-APH) Yield Endorsement.
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