Insurance agents tell farmers ‘be proactive’
By CLAYTON RYEfirstname.lastname@example.org
MASON CITY – Crop insurance is like the spare tire -largely ignored until it’s needed.
Similarly, crop insurance is bought, but no plans are made to use it until there is an emergency and then a farmer hopes it will be adequate and ready for the job.
That was the reason for a meeting on crop insurance held at the Mason City Public Library on July 24 hosted by Farm Credit Services.
Crop insurance specialist Jason Fink summed up the purpose of the meeting in one sentence. “Be proactive and be prepared.”
Crop insurance specialist Kendra Hanson, of FCS’ Mason City office, provided an overview of current crop insurance. She said insurance is basically revenue protection and is a combination of what in the past was multi-peril crop insurance and revenue assurance.
With RP insurance, a guarantee is calculated by multiplying a farm’s annual production history with the projected price times the coverage level.
Last spring the projected price was $5.58 for corn and $12.55 for soybeans.
In her example for corn production, a farm with an APH of 175 bushels per acre, with the projected price of $5.68 and coverage purchased at the 80 percent level would have a guarantee of $795 an acre.
The projected price was derived from prices on the Chicago Board of Trade at a specific time during the year. Since then corn has moved higher in price and the projected price will change to reflect that increase.
Called the harvest option, if the price this fall is calculated to be $7 a bushel, the coverage will be adjusted to reflect this and the guarantee will be revised to $980 an acre, Hanson said.
Farmers expecting a loss this fall will have their payment figured by using their actual yield multiplied by the harvest price of $7. With an actual yield of 100 bushels per acre and a $7 a bushel results in $700 an acre.
The loss payment is figured using the guarantee minus the actual revenue. In this example that would be $980 less $700 for a loss payment of $280 an acre.
There is a 200 percent price cap on RP insurance. For corn the cap is $11.36 a bushel and $25.10 on soybeans.
If a producer has forward contracted grain, a payment can be calculated starting with the guaranteed bushels of coverage by multiplying the APH times the coverage level, or 175 times 80 percent, for a guarantee of 140 bpa.
If a farmer has sold 140 bushels per acre for $6 a bushel and harvested 100 bushels per acre with a $7 projected price, the payment is calculated using the higher price per bushel which would be the 40 bushels per acre (140 minus 100) and $7 a bushel for a payment of $280 an acre that can be used to buy back the shorted bushels on the spot market.
There is a risk involved with this approach when the basis turns positive.
Bushels need to be purchased in October and it is important to understand one’s contract specifics before selling.
What happens if prices actually fall this year?
Using our example, there was a guarantee of $795 per acre. Harvesting 100 bushels per acre with a price of $5 per bushel yields a $500 actual revenue. The guarantee of $795/acre less the $500 will result in a payment of $295 an acre.
Hanson said for farmers having any old crop in the bins at harvest time, a crop adjuster is required to measure the bins prior to harvest. A farmer can not make the measurement.
If the crop adjuster does not make the measurement, it can throw a producer out of a potential claim as the old crop is applied to the new crop.
If corn is to be chopped for silage, it is important to contact the crop insurance agent before starting to chop. Check strips may be required to process a claim.
Record keeping is important every year, but more so this year, Hanson said. Scale tickets are the first choice of records if possible.
Farmers are allowed to make their own bin measurements if needed for insurance purposes when separating production between units.
Yield monitors and grain cart scale records are called soft records, but are acceptable.
Records of crop fed to livestock are of last resort, Hanson said.
Anyone with a claim of over $200,000 by crop or county will trigger a three-year audit as required by the Risk Management Agency and has to be completed before a payment can be made.
Hanson cautioned anyone facing such a claim to start preparing for an audit now.
If aflatoxin is seen in a corn field, she said, contact a crop insurance agent immediately as samples need to be taken before harvest.
Hanson said crop insurance payments can not be deferred so consulting with a tax specialist may be a good idea.
Payment for crop insurance premiums will be made Aug. 15 and need to be paid by Sept. 30.
Hanson urged farmers to review the information on their crop insurance schedules to ensure accuracy in the numbers.
In a question and answer session, there was a discussion about what to do with crops between now and harvest, such as spraying for soybean aphids when yields are being reduced.
Hanson said that the insurance policy states the farmer agrees to use good farming practices that are common to the area.
The insurance companies will consult with people such as Extension services to determine these practices in the event of a dispute.
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