Expect slightly lower crop insurance premiums
Most Iowa farmers will benefit from lower 2018 crop insurance premiums.
The USDA Risk Management Agency (RMA) has started posting December ’18 corn and November ’18 soybean futures price averages used to calculate the projected prices for crop insurance. So far, these 2018 projected price averages are around $3.95 per bushel for corn and $10.13 per bushel for soybeans, respectively.
That corn projected price is nearly the same as the 2017 level and that soybean price is slightly lower.
However, another factor used to determine final premiums are price volatility factors for December corn and November soybean futures options. This volatility factor is determined the last 5 trading days of February. In early February, these volatility factors for corn and soybeans are at some of the lowest levels in 20 years, especially corn.
Since it’s the last 5 trading days of February that determine these volatility levels, rates and thus final premiums will not be known until after February 28. Farmers should communicate with their crop insurance agent prior to the March 15 final sales closing date for spring crops.
Consider buying crop insurance at similar high levels in 2018 since premiums will reflect these lower volatility factors. Some farmers may have been considering the idea of saving money by lowering crop insurance coverage in 2018, but the numbers indicate they may want to hold firm or even increase coverage levels. At the very least they could be paying less for the same level of coverage as last year. Potential savings could also be used to add additional hail coverage.
Other crop insurance changes
Think about discussing with your crop insurance agent some additional 2018 changes.
If you are adding ground in a new county, you must notify your crop insurance agent prior to the March 15 deadline. The period deemed “practical to replant” has been shortened from 25 days to 10 days after the final planting dates. In Iowa the new late planting periods will run from May 31 through June 10 for corn and from June 15 through June 25 for soybeans.
Rules regarding damage to crops from actions caused by a third party (such as dicamba drift) have changed. The insured farmer can protect his or her Actual Protection History (APH) for the affected farm. Insured farmers will still need to provide timely Notice of Loss (NOL) that would only affect production and acres that are damaged. The loss from a situation such as chemical drift is not covered by crop insurance. However, the affected farmer can benefit from eliminating the lower production numbers for those acres when their APH average yield is determined.
Use of Revenue Protection
Expect 2018 crop insurance premiums to go down slightly due primarily to lower price volatility factors. In Iowa, over 95 percent of all insured row crop acres are covered by Revenue Protection plans where farmers are guaranteed revenue per acre using their APH yield times a price guarantee.
This price guarantee is determined annually as the higher of the projected price (February’s simple average) or the harvest price (October’s simple average) for December corn futures and November soybean futures.
Farmers can choose coverage levels ranging from 50 percent to 85 percent.
Farmers may want to take some time to review with their crop insurance agent existing unit structure, level of coverage and related crop insurance changes well in advance of the March 15 deadline. Consider an appointment with your crop insurance agent after final crop insurance premiums are known or the week of March 5.
Steve Johnson is an Iowa State University Extension farm management specialist. Contact him at firstname.lastname@example.org.
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