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AN OVERVIEW OF FEDERAL AN OVERVIEW OF FEDERAL CROP INSURANCE IN CROP INSURANCE IN
WISCONSINWISCONSIN
PAUL D. MITCHELLPAUL D. MITCHELL
AGRICULTURAL AND APPLIED ECONOMICSAGRICULTURAL AND APPLIED ECONOMICSUNIVERSITY OF WISCONSIN-MADISONUNIVERSITY OF WISCONSIN-MADISON
UNIVERSITY OF WISCONSIN-EXTENSIONUNIVERSITY OF WISCONSIN-EXTENSION
Goal TodayGoal Today Overview major crop insurance policies Overview major crop insurance policies
available in Wisconsinavailable in Wisconsin Explain how they workExplain how they work General recommendations for General recommendations for
producersproducers You will leave withYou will leave with
Some new knowledge (hopefully)Some new knowledge (hopefully) Written materialsWritten materials Know where to go for more informationKnow where to go for more information
Crop InsuranceCrop Insurance
USDA’s Risk Management Agency (RMA) USDA’s Risk Management Agency (RMA) operates the Federal Crop Insurance operates the Federal Crop Insurance Corporation (FCIC) to manage the federal Corporation (FCIC) to manage the federal crop insurance programcrop insurance program
RMA “endorses” policies: makes subsidies RMA “endorses” policies: makes subsidies available for companies and farmersavailable for companies and farmers
Without RMA endorsement/subsidy, few Without RMA endorsement/subsidy, few crop insurance polices would be availablecrop insurance polices would be available
Insurable Crop Insurance Plans Apples GYC Barley APH Cabbage GYC
Cigar Binder Tobacco Tobacco (Guaranteed Production) Corn APH, CRC, GRP, GRIP Cranberries APH Dry Beans APH
Forage Production APH, GRP Forage Seeding Dollar Amount of Insurance Grain Sorghum APH, CRC
Green Peas GYC Hybrid Seed Corn GRP, GRIP, Yield-Based Dollar Amount of Insurance
Mint APH Nursery Dollar Amount of Insurance Oats APH Potatoes GYC
Processing Beans GYC Processing Sweet Corn APH, GRP, GRIP
Soybeans APH, CRC, GRP, GRIP Wheat APH, CRC Feeder Cattle LRP Fed Cattle LRP
Swine LRP
Insurable Crop Total Crop Acres % Insured Apples 6,400 17% Barley 45,000 10% Cabbage 2,270 100%
Cigar Binder Tobacco 1,820 65% Corn 3,750,000 56% Cranberries 16,300 95% Dry Beans 6, 600 27% Forage Production 2,400,000 15% Forage Seeding 550,000 10% Grain Sorghum -- 0% Green Peas 37,800 46% Hybrid Seed Corn 9,515 100%
Mint 3,900 56% Nursery 1730 farms 2% Oats 340,000 8% Potatoes 81,000 47%
Processing Beans 75,000 53% Processing Sweet Corn 92,800 43%
Soybeans 1,720,000 63% Wheat 247,000 33%
Why Low Participation in Why Low Participation in WI?WI?
More diversified production, so less More diversified production, so less need for external risk management need for external risk management toolstools More crops per farmMore crops per farm Livestock/Dairy commonLivestock/Dairy common
Rates seem higher: Premiums jump Rates seem higher: Premiums jump when cross state borderwhen cross state border McHenry to Walworth: 40%-75%McHenry to Walworth: 40%-75% Washington to St. Croix: 17%-35%Washington to St. Croix: 17%-35% Allamakee to Crawford: 16%Allamakee to Crawford: 16%
Overview of PoliciesOverview of Policies
Quick description of major policiesQuick description of major policies APH, CRC, GRP, GRIP, Dollar PlanAPH, CRC, GRP, GRIP, Dollar Plan
How each determines Coverage How each determines Coverage (Liability)(Liability)
How each Triggers an IndemnityHow each Triggers an Indemnity
Overview of PoliciesOverview of Policies Actual Production History (APH)Actual Production History (APH)
The fundamental crop insurance policyThe fundamental crop insurance policy Yield guarantee based on actual yield Yield guarantee based on actual yield
historyhistory If harvested yield is less than yield If harvested yield is less than yield
guarantee, farmer receives an indemnityguarantee, farmer receives an indemnity Multiple Peril Crop Insurance (MPCI)Multiple Peril Crop Insurance (MPCI) Grower Yield Certification (GYC)Grower Yield Certification (GYC) Catastrophic Coverage (CAT) is the Catastrophic Coverage (CAT) is the
minimum APH coverage anyone can buyminimum APH coverage anyone can buy
Overview of PoliciesOverview of Policies
Crop Revenue Coverage (CRC)Crop Revenue Coverage (CRC) Revenue guarantee based on actual yield Revenue guarantee based on actual yield
history and futures markets prices at history and futures markets prices at plantplant
If harvest revenue is less than revenue If harvest revenue is less than revenue guarantee, farmer receives an indemnityguarantee, farmer receives an indemnity
Essentially combines APH yield coverage Essentially combines APH yield coverage with price coveragewith price coverage
More popular than APHMore popular than APH
Overview of PoliciesOverview of Policies
Group Risk Protection (GRP)Group Risk Protection (GRP) If USDA-NASS county average yield less If USDA-NASS county average yield less
than chosen guarantee, farmer receives than chosen guarantee, farmer receives indemnityindemnity
Like APH, but for county yieldLike APH, but for county yield Group Risk Income Protection (GRIP)Group Risk Income Protection (GRIP)
If county average revenue less than chosen If county average revenue less than chosen guarantee, farmer receives indemnityguarantee, farmer receives indemnity
Adds low price coverage to GRPAdds low price coverage to GRP Like CRC, but for county average yieldLike CRC, but for county average yield
Overview of PoliciesOverview of Policies
Dollar Amount of Insurance (Dollar Dollar Amount of Insurance (Dollar Plans)Plans) RMA determines available dollar amounts of RMA determines available dollar amounts of
coverage and producer chooses amountcoverage and producer chooses amount If stand kill/yield loss occurs, then grower If stand kill/yield loss occurs, then grower
receives indemnityreceives indemnity Like APH, but RMA, not grower yield history, Like APH, but RMA, not grower yield history,
determines available coverage. determines available coverage. Forage Seeding, Hybrid Seed CornForage Seeding, Hybrid Seed Corn
Policies Policies NOTNOT available in WI available in WI Revenue Assurance (RA)Revenue Assurance (RA)
Like CRC, but lower premium for same Like CRC, but lower premium for same coveragecoverage
More popular than CRC when both availableMore popular than CRC when both available Available for corn and soybeans in 19 states Available for corn and soybeans in 19 states
(ND to CO to OK to LA-TN-NC to MI)(ND to CO to OK to LA-TN-NC to MI) Adjusted Gross Revenue (AGR) and AGR-LiteAdjusted Gross Revenue (AGR) and AGR-Lite
Whole farm income insurance for diversified Whole farm income insurance for diversified producers of under-served commodities in producers of under-served commodities in under-served statesunder-served states
Income Protection (IP): farm level income Income Protection (IP): farm level income insurance for few crops in few statesinsurance for few crops in few states
How APH WorksHow APH Works
Unit StructureUnit Structure APH yield calculationAPH yield calculation Coverage Level and Price ElectionCoverage Level and Price Election PremiumsPremiums Late and Prevented PlantingLate and Prevented Planting Farmer ResponsibilitiesFarmer Responsibilities
Insurance UnitInsurance Unit
If yield for the whole unit is less than the If yield for the whole unit is less than the unit’s yield guarantee, triggers indemnityunit’s yield guarantee, triggers indemnity A 300 acre unit with a 100 bu/ac guarantee A 300 acre unit with a 100 bu/ac guarantee
would have to yield less than 100 x 300 = would have to yield less than 100 x 300 = 30,000 bu to trigger an indemnity30,000 bu to trigger an indemnity
100 ac with 0 yield + 200 ac with 150 bu/ac = 100 ac with 0 yield + 200 ac with 150 bu/ac = 30,000 bu, triggers no indemnity30,000 bu, triggers no indemnity
Each unit is possibly/likely several fieldsEach unit is possibly/likely several fields Farmers do better with more/smaller unitsFarmers do better with more/smaller units
Unit StructureUnit Structure
RMA has rules for unit structureRMA has rules for unit structure Each unitEach unit
Planted to same crop during insurance Planted to same crop during insurance periodperiod
Cannot cut across a county lineCannot cut across a county line Separate production records for each unit Separate production records for each unit
Three unit typesThree unit types Basic Unit, Optional Unit, Enterprise UnitBasic Unit, Optional Unit, Enterprise Unit
Basic UnitBasic Unit
OneOne basic unit for all acres planted to the basic unit for all acres planted to the insured crop on land producer owns/cash insured crop on land producer owns/cash rentsrents
OneOne additional basic unit designation for all additional basic unit designation for all acres planted to the insured crop on land the acres planted to the insured crop on land the producer share rents with a producer share rents with a differentdifferent landlordlandlord
Producers insuring all acreage of a crop as Producers insuring all acreage of a crop as basic units receive a 10% premium discount. basic units receive a 10% premium discount.
Optional UnitOptional Unit OneOne optional unit for all acres in different optional unit for all acres in different
township sections planted to the insured crop township sections planted to the insured crop on land that the producer owns/cash rentson land that the producer owns/cash rents
Possibly separate optional units for different Possibly separate optional units for different practices or crop typespractices or crop types Dryland and irrigated acreage of the same cropDryland and irrigated acreage of the same crop Corn for grain and corn for silageCorn for grain and corn for silage Alfalfa, alfalfa-grass mix, and red cloverAlfalfa, alfalfa-grass mix, and red clover
Producers usually want as many optional Producers usually want as many optional units as possibleunits as possible
Enterprise UnitEnterprise Unit
Combines all of a producer’s acreage Combines all of a producer’s acreage for the insured crop in the county for the insured crop in the county into a single unit, whether it is into a single unit, whether it is owned, cash, or share rentedowned, cash, or share rented
Producers using an enterprise unit Producers using an enterprise unit pay lower premiums pay lower premiums
Farms A-G: Same operator planting the same crop Basic Units
1) A, C, D, and F
2) B and E
3) G
Optional Units
1) A and C
2) B
3) D
4) E
5) F
6) G
Enterprise Unit
1) A thru GAdapted from W. Edwards, “Insurance Units for Crop Insurance.” Iowa State University Extension A1-56, February 2003.
www.extension.iastate.edu/agdm/crops/pdf/a1-56.pdf
Farm B 50-50 crop share lease from Smith
Farm D cash rent
lease from Jones
Farm A Owned
Township Section 1
Farm C cash rent
lease from Smith
Farm E 50-50 crop share lease from Smith
Township Section 2
Farm F Owned
Farm G 60-40 crop share lease from Black
Township Section 12
Township Section 11
APH Yield CalculationAPH Yield Calculation
Use actual yield history for unit to Use actual yield history for unit to determine unit’s average yield and determine unit’s average yield and calculate unit’s yield guaranteecalculate unit’s yield guarantee
Up to 10 years of continuous recordsUp to 10 years of continuous records No missing years (can file for exception)No missing years (can file for exception) If less than 4 years, use Transition YieldsIf less than 4 years, use Transition Yields Use a Yield Cup, Cap, and FloorUse a Yield Cup, Cap, and Floor
Transition (T) YieldsTransition (T) Yields Need 4 years of yield historyNeed 4 years of yield history If only have 3 yearsIf only have 3 years
Add one 1 year of 100% county T-yieldAdd one 1 year of 100% county T-yield If only have 2 yearsIf only have 2 years
Add one 2 years of 90% county T-yieldAdd one 2 years of 90% county T-yield If only have 1 yearIf only have 1 year
Add one 3 years of 80% county T-yieldAdd one 3 years of 80% county T-yield If have no yield historyIf have no yield history
Have 65% of county T-yieldHave 65% of county T-yield
Year 4 Years 3 Years 2 Years 1 Year None
2004 143 143 143 143112 x 0.65
= 73
2003 128 128 128112 x 0.80
= 90112 x 0.65
= 73
2002 101 101112 x 0.90
= 101112 x 0.80
= 90112 x 0.65
= 73
2001 122112 x 1.00
= 112112 x 0.90
= 101112 x 0.80
= 90112 x 0.65
= 73
APH Yield 124 121 118 103 73
Yield Cup, Cap, and FloorYield Cup, Cap, and Floor Yield Cup: APH yield cannot decrease more Yield Cup: APH yield cannot decrease more
than 10% in any 1 yearthan 10% in any 1 year Yield Cap: APH yield cannot increase more Yield Cap: APH yield cannot increase more
than 20% in any 1 yearthan 20% in any 1 year Note: Good/bad years eventually work their Note: Good/bad years eventually work their
way into APH yield, cup/cap prevent rapid way into APH yield, cup/cap prevent rapid changeschanges
Yield FloorYield Floor 0 years of Yield History: 65% of the county T-yield0 years of Yield History: 65% of the county T-yield 1 year of Yield History: 70% of the county T-yield1 year of Yield History: 70% of the county T-yield 2-4 years of Yield History: 75% of the county T-2-4 years of Yield History: 75% of the county T-
yieldyield 5 or more years of Yield History: 80% of the 5 or more years of Yield History: 80% of the
county T-yieldcounty T-yield
Coverage LevelCoverage Level
Pick percent of APH yield to guarantee: Pick percent of APH yield to guarantee: 50%, 55%, 60%, 65%, 70%, and 75%50%, 55%, 60%, 65%, 70%, and 75% 80% and 85% for some counties/crops80% and 85% for some counties/crops
Unit yield below this yield guarantee Unit yield below this yield guarantee triggers an indemnitytriggers an indemnity
100% – Coverage Level ~= Deductible100% – Coverage Level ~= Deductible Higher coverage level has higher Higher coverage level has higher
premiumpremium
Price ElectionPrice Election Crop price used to pay indemnitiesCrop price used to pay indemnities
Each bushel the unit’s yield is less than the Each bushel the unit’s yield is less than the yield guarantee is compensated at this priceyield guarantee is compensated at this price
RMA announces price elections at sign-RMA announces price elections at sign-up, usually based on futures pricesup, usually based on futures prices
Available options: 55% to 100% by 1% Available options: 55% to 100% by 1% increments of announced price electionincrements of announced price election
Usually best to take max price election Usually best to take max price election and adjust coverage leveland adjust coverage level
APH ExampleAPH Example 100 ac corn unit, APH yield = 120 bu/ac100 ac corn unit, APH yield = 120 bu/ac Chooses 65% coverage levelChooses 65% coverage level Yield guaranteeYield guarantee
120 x 0.65 = 78 bu/ac120 x 0.65 = 78 bu/ac 78 bu/ac x 100 ac = 7,800 bu for the 78 bu/ac x 100 ac = 7,800 bu for the
unitunit Price Election $2.15/bu, chooses 100%Price Election $2.15/bu, chooses 100% Harvest for unit = 6,500 buHarvest for unit = 6,500 bu Indemnity: 7,800 – 6,500 = 1,300 buIndemnity: 7,800 – 6,500 = 1,300 bu 1,300 bu x $2.15/bu = $2,7951,300 bu x $2.15/bu = $2,795
Premium SubsidiesPremium Subsidies Company receives A&O subsidy, so it Company receives A&O subsidy, so it
cannot add a load to premiumcannot add a load to premium Producer Premium SubsidyProducer Premium Subsidy
Main Point: producers Main Point: producers on averageon average should make money with crop should make money with crop insuranceinsurance
Coverage Level (%) 50 55 60 65 70 75 80 85 Premium Subsidy (%) 67 64 64 59 59 55 48 38 Producer Share (%) 33 36 36 41 41 45 52 62
Catastrophic Coverage Catastrophic Coverage SubsidySubsidy
CAT: 50% coverage, 55% price CAT: 50% coverage, 55% price electionelection
CAT premium completely subsidizedCAT premium completely subsidized Producer pays $100 administrative Producer pays $100 administrative
fee per crop in each countyfee per crop in each county CAT cost can be waived for limited-CAT cost can be waived for limited-
resource farmersresource farmers
Premium CalculationPremium Calculation Consult with crop insurance agentConsult with crop insurance agent RMA Premium CalculatorRMA Premium Calculator
www3.rma.usda.gov/apps/premcalc/indexwww3.rma.usda.gov/apps/premcalc/index.cfm.cfm Requires login ID and passwordRequires login ID and password Saves calculations for later useSaves calculations for later use Provides useful print outProvides useful print out
Farmdoc Premium EstimatorFarmdoc Premium Estimatorhttp://http://www.farmdoc.uiuc.edu/cropins/index.htmlwww.farmdoc.uiuc.edu/cropins/index.html
Both are useful for planning and Both are useful for planning and comparing insurance optionscomparing insurance options
Special Issues in APHSpecial Issues in APH
Late and Prevented PlantingLate and Prevented Planting Replant ProvisionsReplant Provisions Farmer ResponsibilitiesFarmer Responsibilities Fraud and Program AbuseFraud and Program Abuse
Late and Prevented PlantingLate and Prevented Planting Many crops/policies have Late and Prevented Many crops/policies have Late and Prevented
Planting provisionsPlanting provisions If weather prevents planting by required date If weather prevents planting by required date
Tell the crop insurance agentTell the crop insurance agent Plant anyway, but with reduced coveragePlant anyway, but with reduced coverage Plant a different crop, possibly with reduced Plant a different crop, possibly with reduced
coveragecoverage Leave fallow and receive prevented planting Leave fallow and receive prevented planting
indemnityindemnity Several rules/restrictions, ask crop insurance Several rules/restrictions, ask crop insurance
agent to explain options and their impactagent to explain options and their impact Can exclude from policy to reduce premiumCan exclude from policy to reduce premium
Replant ProvisionsReplant Provisions
Crop severely damaged early in season so Crop severely damaged early in season so projected yield < 90% of yield guaranteeprojected yield < 90% of yield guarantee
Indemnity for actual replant costsIndemnity for actual replant costs Maximum = chosen price election x 20% Maximum = chosen price election x 20%
yield guarantee; up to 8 bu for corn, 3 bu yield guarantee; up to 8 bu for corn, 3 bu for soybeans, and 1 ton for corn silage for soybeans, and 1 ton for corn silage
Replanted yield guarantee as for original Replanted yield guarantee as for original plant date (no reduction for late planting)plant date (no reduction for late planting)
Farmer ResponsibilitiesFarmer Responsibilities Know all dates and required activitiesKnow all dates and required activities
Sales closing/cancellationSales closing/cancellation Acreage reportsAcreage reports File Notice of Crop DamageFile Notice of Crop Damage Submit ClaimSubmit Claim
Variety/Hybrid and Practice Variety/Hybrid and Practice RestrictionsRestrictions Hybrid maturity restrictionsHybrid maturity restrictions No early cutting alfalfa and planting No early cutting alfalfa and planting
corncorn
Farmer ResponsibilitiesFarmer Responsibilities Use “good farming practices … generally Use “good farming practices … generally
recognized by agricultural experts for the recognized by agricultural experts for the area”area” Extension often definesExtension often defines No coverage for losses due to negligence, No coverage for losses due to negligence,
mismanagement, etc. (long list) mismanagement, etc. (long list) Soybean Rust: would have to treat if experts say soSoybean Rust: would have to treat if experts say so
Alternative Crop UsesAlternative Crop Uses Get permission from agent firstGet permission from agent first Can chop for silage corn insured as grainCan chop for silage corn insured as grain Mow “weeds” in flooded out cropMow “weeds” in flooded out crop Graze remainder of hailed cropGraze remainder of hailed crop
Farmer ResponsibilitiesFarmer Responsibilities
When a loss occursWhen a loss occurs File notice of damage within 72 hours of File notice of damage within 72 hours of
discovery (not occurrence), but no later than discovery (not occurrence), but no later than 15 days after the end of the insurance period15 days after the end of the insurance period
Continue to protect crop from further Continue to protect crop from further damagedamage
Follow Agent’s guidance, leave unharvested Follow Agent’s guidance, leave unharvested strips as requested, provide documents, strips as requested, provide documents, cooperate with loss adjustorscooperate with loss adjustors
Fraud and Program AbuseFraud and Program Abuse
RMA very serious about fraud, federal RMA very serious about fraud, federal prosecution if they detect fraudprosecution if they detect fraud
Latest statistical and monitoring technologyLatest statistical and monitoring technology Random audits, audit suspicious claimsRandom audits, audit suspicious claims Everyone asked to report fraud or program Everyone asked to report fraud or program
abuse (USDA-FSA, Extension faculty)abuse (USDA-FSA, Extension faculty) If suspect, contact USDA's Office of Inspector If suspect, contact USDA's Office of Inspector
General: (800) 424-9121General: (800) 424-9121
Other Crop PoliciesOther Crop Policies
Quick overview of other policies and Quick overview of other policies and how they differ from APHhow they differ from APH
CRCCRC GRPGRP GRIPGRIP Dollar PlansDollar Plans
Crop Revenue Coverage Crop Revenue Coverage (CRC)(CRC)
Revenue insurance, not yield insuranceRevenue insurance, not yield insurance Most policy provisions same as APHMost policy provisions same as APH Price Election: 100% or 95% of Base Price Election: 100% or 95% of Base
PricePrice Base Price: Average of daily closing Base Price: Average of daily closing
price of harvest time futures contract price of harvest time futures contract for the month before normal plantingfor the month before normal planting
Corn CRC Base Price: February average Corn CRC Base Price: February average closing price of CBOT December corn closing price of CBOT December corn futures contract futures contract
CRC Revenue GuaranteeCRC Revenue Guarantee Preliminary revenue guaranteePreliminary revenue guarantee
100% or 95% of Base Price x APH Yield100% or 95% of Base Price x APH Yield Harvest Price: Average new crop closing Harvest Price: Average new crop closing
futures price for month before expiration futures price for month before expiration of harvest future contractof harvest future contract
Corn Harvest Price: November average Corn Harvest Price: November average closing price for CBOT December futuresclosing price for CBOT December futures
Final guarantee: calculated with Final guarantee: calculated with whichever price is higher—base price or whichever price is higher—base price or harvest priceharvest price
CRC ExampleCRC Example 300 acre corn unit, APH yield is 140 bu/ac300 acre corn unit, APH yield is 140 bu/ac Announced CRC Base Price is $2.32/buAnnounced CRC Base Price is $2.32/bu 70% coverage level and a 100% price election70% coverage level and a 100% price election APH yield guarantee: 140 x 0.70 = 98 bu/ac, APH yield guarantee: 140 x 0.70 = 98 bu/ac,
then 98 x 300 = 29,400 bu for the unit then 98 x 300 = 29,400 bu for the unit Preliminary revenue guarantee 29,400 bu x Preliminary revenue guarantee 29,400 bu x
$2.32/bu = $68,208 for the unit$2.32/bu = $68,208 for the unit Harvest = 29,800 bu, Harvest price = $2.05/buHarvest = 29,800 bu, Harvest price = $2.05/bu Harvest Revenue for unit = 29,800 bu x Harvest Revenue for unit = 29,800 bu x
$2.05/bu = $61,090, which triggers indemnity $2.05/bu = $61,090, which triggers indemnity of $68,208 – $61,090 = $7,118of $68,208 – $61,090 = $7,118
APH in this case, no indemnityAPH in this case, no indemnity
Group Risk Plan (GRP)Group Risk Plan (GRP)
Indemnity received if NASS county Indemnity received if NASS county average yield is below chosen trigger average yield is below chosen trigger yieldyield
Coverage level: % county average yieldCoverage level: % county average yield 65%, 70%, 75%, 80%, 85%, and 90%65%, 70%, 75%, 80%, 85%, and 90% Price Election: wide range available, Price Election: wide range available,
choose 100% to 60% (1% increments), choose 100% to 60% (1% increments), or 45% as CATor 45% as CAT
GRP ExampleGRP Example Assume 500 corn acres in Adams CountyAssume 500 corn acres in Adams County 2005 expected county average yield: 117.5 2005 expected county average yield: 117.5
bu/acbu/ac 100% level of protection: $414.19 ($3.53/bu)100% level of protection: $414.19 ($3.53/bu) Choose 90% coverage yield, implying a Choose 90% coverage yield, implying a
trigger yield of 117.5 x 0.90 = 105.8 bu/actrigger yield of 117.5 x 0.90 = 105.8 bu/ac Assume 2005 Adams County NASS yield = Assume 2005 Adams County NASS yield =
100.0 bu/ac, which triggers an indemnity100.0 bu/ac, which triggers an indemnity Indemnity Calculation: Yield loss 105.8 – Indemnity Calculation: Yield loss 105.8 –
100.0 = 5.8 bu/ac, or 5.8/105.8 = 5.5% loss 100.0 = 5.8 bu/ac, or 5.8/105.8 = 5.5% loss Indemnity ($/ac) 0.055 x $414.19/ac = Indemnity ($/ac) 0.055 x $414.19/ac =
$22.78/ac$22.78/ac Total Indemnity: 500 ac x $22.78/ac = Total Indemnity: 500 ac x $22.78/ac =
$11,390 $11,390
GRPGRP
County yields not finalized until April, County yields not finalized until April, so indemnities come much laterso indemnities come much later
Must file acreage report, no yield Must file acreage report, no yield history needed, use good farming history needed, use good farming practices, etc.practices, etc.
GRP good if no or poor yield history, GRP good if no or poor yield history, yield closely track county averageyield closely track county average
Often combine with Hail/Fire policy for Often combine with Hail/Fire policy for localized losseslocalized losses
Group Risk Income Protection Group Risk Income Protection (GRIP)(GRIP)
Trigger indemnity of county revenue Trigger indemnity of county revenue less than county revenue guaranteeless than county revenue guarantee
Yield: NASS county yield (just as GRP)Yield: NASS county yield (just as GRP) Expected County Price: average Expected County Price: average
futures contract closing price for 5 futures contract closing price for 5 days before the sales closingdays before the sales closing
Actual County Price: average futures Actual County Price: average futures contract closing price for month contract closing price for month before harvest (just as CRC harvest before harvest (just as CRC harvest price)price)
Dollar Plans: Forage Seeding Dollar Plans: Forage Seeding and Hybrid Seed Cornand Hybrid Seed Corn
List available dollar amounts of coverageList available dollar amounts of coverage Indemnity if annual crop value less than Indemnity if annual crop value less than
chosen amount of insurancechosen amount of insurance Key: How is annual crop value calculatedKey: How is annual crop value calculated Forage Seeding: plant stand >75% Forage Seeding: plant stand >75%
normal, crop value = dollar amount of normal, crop value = dollar amount of coveragecoverage
Hybrid Seed Corn: yield at contract pricesHybrid Seed Corn: yield at contract prices
10 Recommendations10 Recommendations
1.1. Use as many optional units as possibleUse as many optional units as possible
2.2. Avoid 80% and 85% coverage levels for Avoid 80% and 85% coverage levels for CRC and APH: generally over pricedCRC and APH: generally over priced
3.3. Consider getting at least CATConsider getting at least CAT
4.4. Choose max price election and vary Choose max price election and vary coverage level to get desired premiumcoverage level to get desired premium
5.5. If no yield history or poor yield history, If no yield history or poor yield history, consider GRP/GRIP with hail coverageconsider GRP/GRIP with hail coverage
10 Recommendations10 Recommendations
6.6. Know hybrid and practice restrictionsKnow hybrid and practice restrictions
7.7. Know late and prevented planting and Know late and prevented planting and replant provisions and restrictionsreplant provisions and restrictions
8.8. Talk to crop insurance agent before Talk to crop insurance agent before implement alternative crop usesimplement alternative crop uses
9.9. Keep good yield & management Keep good yield & management recordsrecords
10.10. Don’t Cheat! Very likely caught and Don’t Cheat! Very likely caught and federally prosecutedfederally prosecuted
Additional ResourcesAdditional Resources USDA-RMA: USDA-RMA: www.rma.usda.govwww.rma.usda.gov
Premium CalculatorPremium Calculator State Fact Sheets, Events/ConferencesState Fact Sheets, Events/Conferences Official Announcements/RulingsOfficial Announcements/Rulings
National Ag Risk Education LibraryNational Ag Risk Education Library
www.agrisk.umn.eduwww.agrisk.umn.edu Clearinghouse for Extension risk management Clearinghouse for Extension risk management
materials from all states: largematerials from all states: large Farmdoc: Farmdoc: www.farmdoc.uiuc.eduwww.farmdoc.uiuc.edu
Publications, Spreadsheet Tools, Income Publications, Spreadsheet Tools, Income SimulatorsSimulators
Premium Premium EstimatorEstimator for available crops in a county for available crops in a county
Contact MeContact Me Paul D. MitchellPaul D. Mitchell
Agricultural and Applied EconomicsAgricultural and Applied EconomicsUniversity of Wisconsin-MadisonUniversity of Wisconsin-Madison
Office: (608) 265-6514Office: (608) 265-6514 Cell: (608) 320-1162Cell: (608) 320-1162 Email: Email: [email protected]@wisc.edu Extension Web Page: Extension Web Page:
www.aae.wisc.edu/mitchell/extensionwww.aae.wisc.edu/mitchell/extension.htm.htm