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Integrating ACRE, SURE, and Crop Integrating ACRE, SURE, and Crop Insurance: Producer Strategies for Insurance: Producer Strategies for
20102010Paul D. MitchellPaul D. Mitchell
Agricultural and Applied EconomicsAgricultural and Applied EconomicsUniversity of Wisconsin-MadisonUniversity of Wisconsin-Madison
(608) 265-6514 [email protected](608) 265-6514 [email protected] Insurance Group’s Silveus Insurance Group’s
Winter Ag ConferenceWinter Ag ConferenceArlington, WIArlington, WI
January 21, 2010January 21, 2010
Overview of TalkOverview of Talk
Overview Farm Bill’s new programsOverview Farm Bill’s new programs ACRE: Average Crop Revenue ElectionACRE: Average Crop Revenue Election SURE: Supplemental Revenue SURE: Supplemental Revenue
Assistance PaymentsAssistance Payments Thoughts on how to integrate these Thoughts on how to integrate these
new programs with crop insurancenew programs with crop insurance
ACRE is Like GRIP Crop ACRE is Like GRIP Crop InsuranceInsurance
Give up certain premium for uncertain Give up certain premium for uncertain paybackpayback Premium = 20% DP + CCP & 30% lower loan ratePremium = 20% DP + CCP & 30% lower loan rate
Basis RiskBasis Risk State level yields and USDA Marketing Year Avg State level yields and USDA Marketing Year Avg
priceprice Basis risk like GRIP, just larger/different basisBasis risk like GRIP, just larger/different basis
No guarantee that get back your premiumNo guarantee that get back your premium Farm must establish historical yields, keep Farm must establish historical yields, keep
records, follow lots of rules, just as for records, follow lots of rules, just as for traditional crop insurancetraditional crop insurance
ACRE is Like GRIP Crop ACRE is Like GRIP Crop Insurance: Not QuiteInsurance: Not Quite
At 2009 ACRE signup, did not know state or At 2009 ACRE signup, did not know state or farm ACRE guarantee for 2009farm ACRE guarantee for 2009 2009 MYA price finalized in Oct. 20102009 MYA price finalized in Oct. 2010 Know how calculated, but not actual levelsKnow how calculated, but not actual levels
Will not know if ACRE payments due until Will not know if ACRE payments due until 2009 state yields (3/15/2010) and 2009 MYA 2009 state yields (3/15/2010) and 2009 MYA price (10/15/2010) are determinedprice (10/15/2010) are determined
ACRE payments not come until well after ACRE payments not come until well after crop season, no advance payments madecrop season, no advance payments made
Expect late October of 2011 for 2010 ACRE Expect late October of 2011 for 2010 ACRE payments, like counter-cyclicalspayments, like counter-cyclicals
ACRE is a Complicated ACRE is a Complicated ProgramProgram
More rules, terms, acronyms to figure outMore rules, terms, acronyms to figure out Benchmark State Yield, Olympic Average, Benchmark State Yield, Olympic Average,
Farm Level Trigger, National MYA Prices, Farm Level Trigger, National MYA Prices, State ACRE GuaranteeState ACRE Guarantee
Remember 1st time you bought crop Remember 1st time you bought crop insurance or revenue insurance?insurance or revenue insurance? Very popular now, but slow adoption at start Very popular now, but slow adoption at start
because new and seemed more complicatedbecause new and seemed more complicated ACRE will be clearer after a little workACRE will be clearer after a little work
ACRE is a “no brainer”—sign ACRE is a “no brainer”—sign up!up!
ACRE benefits will differ for each farm & ACRE benefits will differ for each farm & farmerfarmer Your benchmark farm yields, probability your yield Your benchmark farm yields, probability your yield
below farm benchmark, your farm:state yield ratiobelow farm benchmark, your farm:state yield ratio Number of base acres, base acre crops, and actual Number of base acres, base acre crops, and actual
acres of each planted cropsacres of each planted crops Other programs: SURE, CRP, EQIP, etc.Other programs: SURE, CRP, EQIP, etc. Landlord personalities and relationshipsLandlord personalities and relationships
““Every producer will have a totally different Every producer will have a totally different situation and the ACRE rules will work situation and the ACRE rules will work differently for each of them.” (Greg Biba, WI differently for each of them.” (Greg Biba, WI FSA)FSA)
ACRE OverviewACRE Overview
ACRE Payment TriggersACRE Payment Triggers ACRE payments have two triggersACRE payments have two triggers
Actual State Revenue must be Actual State Revenue must be less less thanthan State ACRE Guarantee State ACRE Guarantee
Actual Farm Revenue must be Actual Farm Revenue must be less less thanthan Farm ACRE Guarantee Farm ACRE Guarantee
Purpose: tie payments to local Purpose: tie payments to local conditions and pay farmers only conditions and pay farmers only when have losseswhen have losses
State ACRE GuaranteeState ACRE Guarantee
5-Year Olympic average of state yield per 5-Year Olympic average of state yield per planted acre x 2-Year national price for planted acre x 2-Year national price for marketing year x 90%marketing year x 90% USDA-NASS Yield per USDA-NASS Yield per plantedplanted acre acre Olympic average: drop highest & lowestOlympic average: drop highest & lowest Marketing year price: Sept 1 to Aug 31Marketing year price: Sept 1 to Aug 31
Finish 2009 marketing year Sept 2010Finish 2009 marketing year Sept 2010
ACRE State YieldsACRE State Yields
NASS yield/planted acre fine for most cropsNASS yield/planted acre fine for most crops Corn the exception, NASS counts silage as Corn the exception, NASS counts silage as
planted acres, but does not yield any grainplanted acres, but does not yield any grain 20%-30% WI planted acres are silage20%-30% WI planted acres are silage NASS corn yield per planted acre low in WI NASS corn yield per planted acre low in WI
= 108 bu for 2004-2008= 108 bu for 2004-2008 FSA adjusted NASS data for silage, so more FSA adjusted NASS data for silage, so more
reasonable, 138 bu/ac for 2004-2008reasonable, 138 bu/ac for 2004-2008
WI ACRE State YieldsWI ACRE State Yields
YearYear CornCorn SoybeanSoybeanss
WheatWheat OatsOats
20042004 135135 33.533.5 55.455.4 6565
20052005 148148 43.043.0 52.252.2 6464
20062006 142142 43.543.5 76.176.1 6363
20072007 135135 40.040.0 66.866.8 6767
20082008 136136 34.534.5 63.463.4 6262
ACREACRE 138138 39.039.0 61.961.9 64642 or 32 or 3 times out of the last 5 years, times out of the last 5 years, actual state yield below ACRE actual state yield below ACRE benchmark yieldbenchmark yield
What happened in 2009?What happened in 2009? Bizarre weather in 2009Bizarre weather in 2009
Wet spring—Reduced planted acresWet spring—Reduced planted acres Cool summer and fall—Worry about early frostCool summer and fall—Worry about early frost Wet fall—Delayed harvest, some still standingWet fall—Delayed harvest, some still standing
NASS announced preliminary estimates of NASS announced preliminary estimates of 2009 yields on Jan 13, 20102009 yields on Jan 13, 2010 Record yield for corn (153), high yields for Record yield for corn (153), high yields for
soybeans (40), wheat (68) and oats (68)soybeans (40), wheat (68) and oats (68) Actual State Yields higher than ACRE Actual State Yields higher than ACRE
benchmarksbenchmarks
32
34
36
38
40
42
44
46
2003 2004 2005 2006 2007 2008 2009 2010
Sta
te S
oyb
ean
Yie
lds
134
136
138
140
142
144
146
148
150
152
154
2003 2004 2005 2006 2007 2008 2009 2010
Sta
te C
orn
Yie
lds
Corn
Soybeans
61
62
63
64
65
66
67
68
69
2003 2004 2005 2006 2007 2008 2009 2010
Sta
te O
at Y
ield
s
50
55
60
65
70
75
80
2003 2004 2005 2006 2007 2008 2009 2010
Sta
te W
hea
t Y
ield
s
Wheat
Oats
NationalNational Marketing Year Average Marketing Year Average PricePrice
Corn & Soy marketing year Sep 1 to Aug 31Corn & Soy marketing year Sep 1 to Aug 31 For 2009, ACRE uses avg of 2007 and 2008For 2009, ACRE uses avg of 2007 and 2008
2007: $4.20 corn & $10.10 soybeans2007: $4.20 corn & $10.10 soybeans 2008: $4.06 corn & $9.97 soybeans2008: $4.06 corn & $9.97 soybeans
2009 ACRE guarantees2009 ACRE guarantees $4.13 corn and $10.04 soy $4.13 corn and $10.04 soy $6.63 wheat and $2.89 oat prices$6.63 wheat and $2.89 oat prices
Will not know prices when/if sign up for Will not know prices when/if sign up for ACRE 2010ACRE 2010
2009 State ACRE Guarantee2009 State ACRE Guarantee 90% x Benchmark State Yield x 2-Year 90% x Benchmark State Yield x 2-Year
National MYA priceNational MYA price 2009 State ACRE Guarantee set Oct 2009 State ACRE Guarantee set Oct
20092009 Corn: 90% x $4.13 x 138 = Corn: 90% x $4.13 x 138 = $512.95/ac$512.95/ac Soybeans: 90% x $10.04 x 39 = Soybeans: 90% x $10.04 x 39 = $352.40/ac$352.40/ac Wheat: 90% x $6.63 x 61.9 = Wheat: 90% x $6.63 x 61.9 = $369.36/ac$369.36/ac Oats: 90% x $2.89 x 64 = Oats: 90% x $2.89 x 64 = $166.46/ac$166.46/ac
State ACRE Guarantee cannot change State ACRE Guarantee cannot change more than 10% from previous yearmore than 10% from previous year
Farm ACRE GuaranteeFarm ACRE Guarantee
5-year Olympic avg farm yields x 2-5-year Olympic avg farm yields x 2-year avg national price + year avg national price + crop crop insurance premiums paidinsurance premiums paid
Same prices, your yields instead of Same prices, your yields instead of state’s, plus add crop insurance state’s, plus add crop insurance premiumspremiums
Farm ACRE GuaranteeFarm ACRE Guarantee Establish historical farm yields 2004-2008Establish historical farm yields 2004-2008
Crop insurance or similar recordsCrop insurance or similar records Silage: number of loads, or other Silage: number of loads, or other
measures, then FSA help convert to grain measures, then FSA help convert to grain equivalentsequivalents
Silage & Grain: Carry grain yields over to Silage & Grain: Carry grain yields over to silage acressilage acres
Continuity rules apply: Cannot drop or Continuity rules apply: Cannot drop or “lose” records for bad years“lose” records for bad years
Farm ACRE Guarantee for Farm ACRE Guarantee for Farmers without yield recordsFarmers without yield records
Use yield “plugs” = 95% of NASS county Use yield “plugs” = 95% of NASS county avg yield, officially posted by FSAavg yield, officially posted by FSA
Get max of own yield & plug for each Get max of own yield & plug for each yearyear
Give “benefit of the doubt” for sign-upGive “benefit of the doubt” for sign-up Begin keeping production recordsBegin keeping production records Each year FSA drops one plugEach year FSA drops one plug Accurate reporting of acreage intentionsAccurate reporting of acreage intentions
Dane County ACRE Yield Dane County ACRE Yield PlugsPlugs
YearYear CornCorn SoybeaSoybeansns
WheaWheatt
OatsOats
20042004 154.154.33
42.242.2 52.352.3 56.056.0
20052005 152.152.99
49.649.6 60.960.9 62.562.5
20062006 163.163.66
49.649.6 82.982.9 74.974.9
20072007 145.145.00
46.446.4 70.370.3 74.474.4
20082008 126.126.11
34.334.3 60.460.4 59.259.2
Olympic Olympic AvgAvg
151151 4646 6464 6565
ACRE PaymentsACRE Payments If If BOTHBOTH triggers satisfied, then ACRE triggers satisfied, then ACRE
payment calculated as Planted Acres x 83.3% payment calculated as Planted Acres x 83.3% x (Farm Yield/State Yield) x (State x (Farm Yield/State Yield) x (State Guarantee – Actual State Revenue)Guarantee – Actual State Revenue)
Planted or considered planted acresPlanted or considered planted acres 83.3% (or 85%) standard multiplier83.3% (or 85%) standard multiplier (Farm Yield/State Yield) adjusts for your (Farm Yield/State Yield) adjusts for your
farms’ greater yield potentialfarms’ greater yield potential ““Income Loss” = State Guarantee – Actual Income Loss” = State Guarantee – Actual
State RevenueState Revenue
ACRE payments for 2009?ACRE payments for 2009? State yields: 150 corn & 40 soybeanState yields: 150 corn & 40 soybean State guarantees: $512.95 and $352.40State guarantees: $512.95 and $352.40 Need national MYA prices below $3.42 Need national MYA prices below $3.42
and $8.81 to meet and $8.81 to meet state triggersstate triggers Still need to meet Still need to meet farm triggerfarm trigger too too
Prices Sep-Dec 2009: corn averaged Prices Sep-Dec 2009: corn averaged $3.53 and soybeans averaged $9.67$3.53 and soybeans averaged $9.67 With high state yields, need avg prices With high state yields, need avg prices
of $3.36 and $8.38 for rest of market of $3.36 and $8.38 for rest of market year for ACRE payments for 2009 crop year for ACRE payments for 2009 crop yearyear
ACRE Flexibility Advantage:ACRE Flexibility Advantage:Base Acres vs Planted AcresBase Acres vs Planted Acres
Base acres establish total acres eligible for Base acres establish total acres eligible for ACRE payments, but not your eligible cropsACRE payments, but not your eligible crops
Suppose farm has 50 ac of oat base, but Suppose farm has 50 ac of oat base, but plants 100 ac of cornplants 100 ac of corn Give up 20% of oat DP & enroll 50 corn acres in Give up 20% of oat DP & enroll 50 corn acres in
ACRE, even if farm has no corn base acresACRE, even if farm has no corn base acres Suppose farm has 50 ac of corn base, but Suppose farm has 50 ac of corn base, but
just seeded it down to alfalfajust seeded it down to alfalfa Can’t enroll alfalfa in ACRE, stay in DCP until Can’t enroll alfalfa in ACRE, stay in DCP until
laterlater Note: Cannot establish new base acresNote: Cannot establish new base acres
ACRE SummaryACRE Summary Very quick overview, work out ACRE vs DCP Very quick overview, work out ACRE vs DCP
details for your farmsdetails for your farms FSA ACRE calculator to enter your farm information FSA ACRE calculator to enter your farm information
www.fsa.usda.gov/dcpwww.fsa.usda.gov/dcp See county FSA office for more helpSee county FSA office for more help
ACRE will have an annual signup periodACRE will have an annual signup period 2010 currently open until June 1, 2010 2010 currently open until June 1, 2010
ACRE irrevocable choice, be sure want to do itACRE irrevocable choice, be sure want to do it All landowners & tenants must sign election All landowners & tenants must sign election
formform After that, then fill out ACRE enrollment formAfter that, then fill out ACRE enrollment form
Questions on Questions on How ACRE works?How ACRE works?
Quick Overview ofQuick Overview of
ACRE Sign-up Data & ACRE Sign-up Data & ResearchResearch
Farm Survey of ACRE Farm Survey of ACRE IntentionsIntentions
Risk management survey of farmers Risk management survey of farmers in WI, TX, NC, MS in Mar-Apr 2009in WI, TX, NC, MS in Mar-Apr 2009
ACRE Question: ACRE Question:
““Which of the following farm program Which of the following farm program options are you more likely to options are you more likely to choose?” choose?”
WIWI MSMS NCNC TXTXSwitch to ACRE Switch to ACRE in 2009in 2009
13 13 (3%)(3%)
4 4 (2%)(2%)
10 10 (5%)(5%)
2 2 (1%)(1%)
Wait, maybe Wait, maybe switch after switch after 20092009
124 124 (32%(32%
))
41 41 (24%(24%
))
60 60 (27%(27%
))
75 75 (26%(26%
))Stay in DCP for Stay in DCP for this Farm Billthis Farm Bill
205 205 (54%(54%
))
112 112 (67%(67%
))
127 127 (58%(58%
))
194 194 (68%(68%
))Not in Not in Commodity Commodity ProgramsPrograms
41 41 (11%(11%
))
11 11 (7%)(7%)
23 23 (10%(10%
))
14 14 (5%)(5%)
TotalTotal 383383 168168 220220 285285
If you were hesitant and unsure, you were not If you were hesitant and unsure, you were not alone!alone!
2009 Sign-up Data2009 Sign-up Data
2,601 WI FSA farms 2,601 WI FSA farms signed up for ACRE signed up for ACRE (3.5% of eligible)(3.5% of eligible)
371,433 base acres 371,433 base acres enrolled (7.5%)enrolled (7.5%)
Survey estimate Survey estimate close to actual close to actual number of WI number of WI farmsfarms
CropCropFarmFarm
ssBase Base
AcAc
CornCorn2,572,57
99275,62275,62
33
SoybeaSoybeansns
1,871,8788 73,28673,286
OatsOats1,061,06
77 11,45711,457
WheatWheat 641641 8,7198,719
BarleyBarley 343343 2,2722,272
ACRE SimulationsACRE Simulations Keith Coble, Ag Econ, Mississippi StateKeith Coble, Ag Econ, Mississippi State Robert Dismukes and Christine Arriola, USDA-Robert Dismukes and Christine Arriola, USDA-
ERSERS Simulate counties to predict ACRE payments Simulate counties to predict ACRE payments
Representative farms with county average Representative farms with county average yield and variability to match APH premiumsyield and variability to match APH premiums
Price variability based on CBOT Dec corn Price variability based on CBOT Dec corn futures historical variability over last few futures historical variability over last few yearsyears
Run to predict 5 years into the future 1000 Run to predict 5 years into the future 1000 timestimes
National Avg
$7.94/ac
National Avg
$8.48/ac
National Avg
$9.77/ac
http://www.ers.usda.gov/Publications/ERR84/ERR84.pdfhttp://www.ers.usda.gov/Publications/ERR84/ERR84.pdf
Direct Payments ($/ac)Direct Payments ($/ac)WI 20% DP =
$3.20 to $5/ac
Main PointMain Point
ACRE looks valuable for Wisconsin farmersACRE looks valuable for Wisconsin farmers Farm with average yield and typical variability on Farm with average yield and typical variability on
average should receive ACRE payments > 20% average should receive ACRE payments > 20% DPDP
Farms with higher average yields will get Farms with higher average yields will get even more, since have the Farm:State even more, since have the Farm:State average yield ratio multiplieraverage yield ratio multiplier But are they less likely to meet farm trigger???But are they less likely to meet farm trigger???
Each farm and farmer is different, no one is Each farm and farmer is different, no one is typical or averagetypical or average
Integrating Crop Insurance Integrating Crop Insurance and ACREand ACRE
Most WI farmers use crop insurance, Most WI farmers use crop insurance, percentage grows each yearpercentage grows each year
How to best use this new programs How to best use this new programs with crop insurance?with crop insurance?
ACRE provide some protection from ACRE provide some protection from bad income years, a safety net so US bad income years, a safety net so US maintains a productive ag sectormaintains a productive ag sector
Use them to your advantage within Use them to your advantage within the rulesthe rules
ACRE: not really much of a risk ACRE: not really much of a risk management benefitmanagement benefit
Coble et al.’s simulation analysis Coble et al.’s simulation analysis shows, ACRE reduces farm income shows, ACRE reduces farm income variability very little—CRC helps variability very little—CRC helps much moremuch more
ACRE a subsidy program, not a risk ACRE a subsidy program, not a risk management programmanagement program Money paid late, weakly tied to actual Money paid late, weakly tied to actual
prices & yieldsprices & yields How much did counter cyclical How much did counter cyclical
payments help your risk management?payments help your risk management?
ACRE and Crop InsuranceACRE and Crop Insurance Don’t sweat too much about ACRE Don’t sweat too much about ACRE
decisiondecision Some benefit to ACRE on average over the Some benefit to ACRE on average over the
long run, but not large $/ac changelong run, but not large $/ac change Doubt that DP/ACRE payments are what’s Doubt that DP/ACRE payments are what’s
keeping you farmingkeeping you farming Treat ACRE/DP as nice side dish/condiment, Treat ACRE/DP as nice side dish/condiment,
not the meat and potatoes of farmingnot the meat and potatoes of farming ACRE payments mostly driven by lower than ACRE payments mostly driven by lower than
average prices over the marketing year, but average prices over the marketing year, but hopefully you can do a better job marketing hopefully you can do a better job marketing than national average pricethan national average price
Any Final Questions on Any Final Questions on ACRE?ACRE?
Let’s Start SURELet’s Start SURE
SURE: Supplemental Revenue SURE: Supplemental Revenue Assistance PaymentsAssistance Payments
New comprehensive New comprehensive permanentpermanent disaster disaster program for crop farmers to replace ad hoc aidprogram for crop farmers to replace ad hoc aid
Whole farmWhole farm revenue guarantee added on top of revenue guarantee added on top of crop insurance guaranteescrop insurance guarantees
If actual farm revenue below SURE guarantee, If actual farm revenue below SURE guarantee, SURE pays up to 60% of the differenceSURE pays up to 60% of the difference $100,000 SURE guarantee, $90,000 actual revenue, $100,000 SURE guarantee, $90,000 actual revenue,
receive 60% of ($100,000 – $90,000) = $6,000receive 60% of ($100,000 – $90,000) = $6,000 Free increase in your crop insurance Free increase in your crop insurance
coverage, but coverage, but at whole farm levelat whole farm level
SURE GuaranteeSURE Guarantee Sum of all crop insurance guarantees for Sum of all crop insurance guarantees for
whole farm increased by 15%, capped at 90%whole farm increased by 15%, capped at 90% If only a one crop farm, then If only a one crop farm, then
75% coverage now 75% x 1.15 = 86.25%75% coverage now 75% x 1.15 = 86.25% 80% coverage now 80% x 1.15 = 92%, cap at 90%80% coverage now 80% x 1.15 = 92%, cap at 90% 85% coverage now 85% x 1.15 = 97.75%, cap at 85% coverage now 85% x 1.15 = 97.75%, cap at
90%90% NAP policies use 120%, not 115%NAP policies use 120%, not 115% American Recovery and Reinvestment Act American Recovery and Reinvestment Act
Higher than 115% for 2008 SURE guaranteesHigher than 115% for 2008 SURE guarantees Especially for low coverage levelsEspecially for low coverage levels
SURE Actual RevenueSURE Actual Revenue
Actual yields x USDA marketing year Actual yields x USDA marketing year average price (Sept-Aug) (average price (Sept-Aug) (Not CBOTNot CBOT))
Plus crop insurance indemnities, Plus crop insurance indemnities, including replant and prevented including replant and prevented plantingplanting
Plus 15% of DP’s, all CCPs & ACRE Plus 15% of DP’s, all CCPs & ACRE payments, all proceeds from payments, all proceeds from Marketing Assistance LoansMarketing Assistance Loans
Plus other disaster payments receivedPlus other disaster payments received
The devil is SURE in the The devil is SURE in the details!details!
This the general idea, lots of detailsThis the general idea, lots of details 19 page explanation in Federal Register19 page explanation in Federal Register 11 page SURE Backgrounder white paper11 page SURE Backgrounder white paper
Farm Bill late, took time to work out detailsFarm Bill late, took time to work out details American Recovery & Reinvestment Act American Recovery & Reinvestment Act
made changesmade changes I’ll cover a few that I think matter, but are I’ll cover a few that I think matter, but are
moremore Your county FSA office should have all Your county FSA office should have all
details, were finalized a few weeks agodetails, were finalized a few weeks ago
SURE Eligibility DetailsSURE Eligibility Details Produce in a disaster county or Produce in a disaster county or
contiguous county or suffer 50% contiguous county or suffer 50% production lossproduction loss
Suffer at least 10% production loss on Suffer at least 10% production loss on at least 1 crop from a at least 1 crop from a natural disasternatural disaster(Price drops alone will not trigger SURE)(Price drops alone will not trigger SURE)
Satisfy the Risk Management Purchase Satisfy the Risk Management Purchase RequirementRequirement Buy crop insurance!Buy crop insurance!
Risk Management Purchase Risk Management Purchase Requirement DetailsRequirement Details
Must have insurance for Must have insurance for all crops of all crops of economic significance on farmeconomic significance on farm Economic Significance: crop contributes Economic Significance: crop contributes
at least 5% of expected total farm at least 5% of expected total farm cropcrop revenuerevenue
Need not insure forage for grazing, but Need not insure forage for grazing, but hay must be insuredhay must be insured
Exclusions: NAP fee exceeds 10% of the Exclusions: NAP fee exceeds 10% of the value of NAP policyvalue of NAP policy
Losses not Covered DetailsLosses not Covered Details
Not a natural disasterNot a natural disaster Poor managementPoor management Due to conditions outside applicable yearDue to conditions outside applicable year Crop not to be harvested during applicable Crop not to be harvested during applicable
yearyear Electrical brown outElectrical brown out Losses of crop by-products (stover, straw)Losses of crop by-products (stover, straw) First year seedlings of forage cropsFirst year seedlings of forage crops More details: contact county FSA officeMore details: contact county FSA office
SURE CalculatorSURE Calculator
National FSA web page has many details, National FSA web page has many details, but likely need county FSA offices to helpbut likely need county FSA offices to help
http://www.fsa.usda.gov/FSA/webapp?http://www.fsa.usda.gov/FSA/webapp?area=home&subject=diap&topic=surearea=home&subject=diap&topic=sure
New New SURE Producer CalculatorSURE Producer Calculator on web for on web for farmers to use (Jan 11, 2009)farmers to use (Jan 11, 2009)
Be sure have the newer SURE calculatorBe sure have the newer SURE calculator
Questions?Questions?
Integrating Crop Insurance Integrating Crop Insurance and SUREand SURE
Sign-up for SURE!!!Sign-up for SURE!!! Free increase in crop insurance Free increase in crop insurance
coverage at the whole farm level—a coverage at the whole farm level—a real risk management benefitreal risk management benefit Safety net for your Safety net for your farm incomefarm income, what , what
really mattersreally matters Some farm situations make SURE Some farm situations make SURE
eligibility difficult or cumbersome, but eligibility difficult or cumbersome, but likely worth itlikely worth it
Integrating Crop Insurance Integrating Crop Insurance and SUREand SURE
Made rules so SURE not so Made rules so SURE not so cumbersome as it seemed at firstcumbersome as it seemed at first Don’t have to insurance your pasture Don’t have to insurance your pasture
now!!!now!!! Economic significance check nowEconomic significance check now
Sweetens crop insurance so farmers Sweetens crop insurance so farmers rely on crop insurance for disaster rely on crop insurance for disaster aid, not ad hoc programsaid, not ad hoc programs
Using SURE with InsuranceUsing SURE with Insurance
SURE increases your effective coverage SURE increases your effective coverage at farm level for free, so can cut back at farm level for free, so can cut back on crop coverage level you pay foron crop coverage level you pay for 60% CRC + SURE = 69% farm coverage60% CRC + SURE = 69% farm coverage 65% CRC + SURE = 74.75% farm coverage65% CRC + SURE = 74.75% farm coverage 70% CRC + SURE = 80.5% farm coverage 70% CRC + SURE = 80.5% farm coverage 75% CRC + SURE = 86.25% farm coverage75% CRC + SURE = 86.25% farm coverage 80% CRC + SURE = 90% farm coverage80% CRC + SURE = 90% farm coverage 85% CRC + SURE = 90% farm coverage85% CRC + SURE = 90% farm coverage
75% CRC + SURE gives you slightly better 75% CRC + SURE gives you slightly better than 85% CRC alone, so why buy 85% CRC?than 85% CRC alone, so why buy 85% CRC?
SummarySummary Think about ACREThink about ACRE
Probably will increase your government Probably will increase your government payments on average over the long term payments on average over the long term a few dollars per base acrea few dollars per base acre
Not a big risk management benefit, but Not a big risk management benefit, but the extra money will be nicethe extra money will be nice
Sign up for SURESign up for SURE Clearly worth the free increase in Clearly worth the free increase in
coveragecoverage Evaluate whether want to cut back on Evaluate whether want to cut back on
crop insurance coverage levelscrop insurance coverage levels
Questions?Questions?
Paul D. MitchellPaul D. Mitchell
UW-Madison Ag & Applied EconomicsUW-Madison Ag & Applied Economics
Office: (608) 265-6514Office: (608) 265-6514
Cell: (608) 320-1162Cell: (608) 320-1162
Email: [email protected]: [email protected]
Extension Web Page:Extension Web Page:
www.aae.wisc.edu/mitchell/extension.htmwww.aae.wisc.edu/mitchell/extension.htm
WI vs. neighboring statesWI vs. neighboring states% planted acres insured in % planted acres insured in
20072007StateState CornCorn SoybeansSoybeans WheatWheat
IAIA 92%92% 75%75% 24%24%
ILIL 78%78% 71%71% 47%47%
MNMN 91%91% 93%93% 91%91%
MIMI 67%67% 66%66% 56%56%
WIWI 64%64% 70%70% 41%41%
WI in 2004: 54% corn, 63% Soybeans, 33% WI in 2004: 54% corn, 63% Soybeans, 33% WheatWheat
WI corn policies in 2008WI corn policies in 2008% %
planted planted acresacres
% % insured insured acresacres
% % policies policies
soldsold
Avg. Avg. Units/PolicUnits/Polic
yy
APH CATAPH CAT 6.5%6.5% 9.8%9.8% 9.7%9.7% 1.031.03APH APH BuyUpBuyUp
12.2%12.2% 18.5%18.5% 37.9%37.9% 2.432.43
CRC CRC BuyUpBuyUp
40.7%40.7% 61.6%61.6% 55.4%55.4% 3.243.24
GRIP GRIP BuyUpBuyUp
4.9%4.9% 7.5%7.5% 4.2%4.2% 1.211.21
GRP CATGRP CAT 0.2%0.2% 0.3%0.3% 0.1%0.1% 1.001.00GRP GRP BuyUpBuyUp
1.5%1.5% 2.3%2.3% 2.8%2.8% 1.111.11
All TotalAll Total 66.1%66.1% 2.832.83
WI soybean policies in 2008WI soybean policies in 2008% %
planted planted acresacres
% % insured insured acresacres
% % policies policies
soldsold
Avg. Avg. Units/PolicUnits/Polic
yy
APH CATAPH CAT 4.9%4.9% 6.9%6.9% 6.7%6.7% 1.051.05APH APH BuyUpBuyUp
9.0%9.0% 12.6%12.6% 20.2%20.2% 1.931.93
CRC CRC BuyUpBuyUp
51.2%51.2% 71.7%71.7% 67.5%67.5% 2.662.66
GRIP GRIP BuyUpBuyUp
4.4%4.4% 6.1%6.1% 3.7%3.7% 1.191.19
GRP CATGRP CAT 0.1%0.1% 0.1%0.1% 0.1%0.1% 1.001.00GRP GRP BuyUpBuyUp
1.8%1.8% 2.6%2.6% 1.9%1.9% 1.011.01
All TotalAll Total 71%71% 2.412.41
Corn Coverage Levels in Dane County Corn Coverage Levels in Dane County 20082008
CRCCRC APHAPH
CvCvgg
PoliciePoliciess
AcresAcres PoliciePoliciess
AcresAcres
5050 11 215215 7878 17,8617,8688
5555 11 9494 22 8989
6060 66 777777 11 285285
6565 4444 9,0659,065 5252 5,9575,957
7070 147147 32,5832,5888
4040 3,6513,651
7575 146146 33,3233,3299
1919 1,4861,486
8080 2020 6,8026,802
8585 1212 5,1925,192
Most PopularMost Popular
CRC: 70%-75%CRC: 70%-75%
APH: 50% CAT APH: 50% CAT and then 65%and then 65%
Soybean Coverage Levels in Dane Soybean Coverage Levels in Dane County 2008County 2008
CRCCRC APHAPH
CvCvgg
PoliciePoliciess
AcresAcres PoliciePoliciess
AcreAcress
5050 22 433433
5555 11 6060
6060 66 896896 11 9696
6565 2828 3,5793,579 2727 1,921,9233
7070 101101 11,0211,0200
2222 1,771,7700
7575 130130 16,4516,4555
1818 938938
8080 4646 4,5504,550 11 8989
8585 2121 4,5624,562 22 5050
Most PopularMost Popular
CRC: 70%-75%CRC: 70%-75%
APH: 65% and APH: 65% and no CATno CAT
GRP/GRIP Coverage Levels in Dane County GRP/GRIP Coverage Levels in Dane County 20082008
CornCorn SoybeansSoybeans
PlanPlan CvCvgg
PoliciePoliciess
AcreAcress
PoliciePoliciess
AcreAcress
GRIP GRIP 7070 11 238238
8585 11 8484
9090 2323 6,056,0588
66 595595
GRP GRP 7070 11 3333
7575 11 101101
9090 44 488488 22 132132Most PopularMost Popular: GRP/GRIP: : GRP/GRIP: 90%90%
SummarySummary Lots of grain acres insured, more could beLots of grain acres insured, more could be CRC most popular among those buying CRC most popular among those buying
insuranceinsurance Slightly larger than average sized farms Slightly larger than average sized farms
buy itbuy it Use more than average number of unitsUse more than average number of units 70-75% coverage level popular70-75% coverage level popular
APH popular among smaller farms (cheap)APH popular among smaller farms (cheap) Use fewer than average number of unitsUse fewer than average number of units CAT (corn) and 65% coverage level CAT (corn) and 65% coverage level
popularpopular GRIP (and GRP) used by some of larger farmsGRIP (and GRP) used by some of larger farms
90% coverage level most popular90% coverage level most popular
Experience with Crop Experience with Crop InsuranceInsurance
Loss Ratio measures insurance Loss Ratio measures insurance performanceperformance
Loss Ratio = Indemnities/PremiumsLoss Ratio = Indemnities/Premiums Loss Ratio of 1.5 means, Loss Ratio of 1.5 means, on averageon average, $1.50 in , $1.50 in
indemnities paid for every $1.00 of premiumsindemnities paid for every $1.00 of premiums Crop insurance: Subsidized premiums, Crop insurance: Subsidized premiums,
farmers and government each pay partfarmers and government each pay part ProgramProgram loss ratio = Indemnity/(Govt. + Farmer Premium) loss ratio = Indemnity/(Govt. + Farmer Premium) FarmerFarmer loss ratio = Indemnity/Farmer Premium loss ratio = Indemnity/Farmer Premium
Farmers care about Farmers care about farmerfarmer loss ratio loss ratio
WI Crop Insurance for Corn in WI Crop Insurance for Corn in 20072007
total total prem. /prem. /
AA
farmer farmer prem. /Aprem. /A
indem./Aindem./A
prograprogram loss m loss ratioratio
farmer farmer loss loss ratioratio
APH CATAPH CAT 7.487.48 ---- 1.971.97 0.260.26 ----
APH APH BuyUpBuyUp
28.3028.30 11.4811.48 29.6429.64 1.051.05 2.582.58
CRC CRC BuyUpBuyUp
53.0353.03 23.1623.16 42.7542.75 0.810.81 1.851.85
All TotalAll Total 45.4845.48 19.5019.50 30.9730.97 0.680.68 1.591.59
WI Crop Insurance for Soybeans in WI Crop Insurance for Soybeans in 20072007
total total prem. /prem. /
AA
farmer farmer prem. /Aprem. /A
indem./Aindem./A
prograprogram loss m loss ratioratio
farmer farmer loss loss ratioratio
APH CATAPH CAT 2.862.86 ---- 0.640.64 0.220.22 ----
APH APH BuyUpBuyUp
12.7712.77 5.285.28 10.4810.48 0.820.82 1.991.99
CRC CRC BuyUpBuyUp
26.3626.36 11.8711.87 23.7423.74 0.900.90 2.002.00
All TotalAll Total 23.4423.44 10.4010.40 18.1218.12 0.770.77 1.741.74
APH+CRC+RA Average County APH+CRC+RA Average County ProgramProgram Loss Ratios for Loss Ratios for CornCorn 1995- 1995-
20072007
0.65 – 1.00
Loss Ratio
0.00 – 0.65
1.00 – 1.501.50 - 2.00> 2.00
0.65 – 1.00
Loss Ratio
0.00 – 0.65
1.00 – 1.501.50 - 2.00> 2.00
Loss Ratio
0.00 – 0.65
1.00 – 1.501.50 - 2.00> 2.00
APH+CRC+RA Average County APH+CRC+RA Average County ProgramProgram Loss Ratios for Loss Ratios for SoybeansSoybeans
1995-20071995-2007
0.65 – 1.00
Loss Ratio
0.00 – 0.65
1.00 – 1.501.50 - 2.00> 2.00
0.65 – 1.00
Loss Ratio
0.00 – 0.65
1.00 – 1.501.50 - 2.00> 2.00
Loss Ratio
0.00 – 0.65
1.00 – 1.501.50 - 2.00> 2.00
Main PointMain Point
Farmers, on average over the whole Farmers, on average over the whole state, generally win on crop insurance state, generally win on crop insurance policiespolicies Especially in the northEspecially in the north Especially for soybeansEspecially for soybeans
Payments come when you need themPayments come when you need them Years 1-3: pay $1 premium, no indemnityYears 1-3: pay $1 premium, no indemnity Year 4: pay $1 premium, $8 indemnityYear 4: pay $1 premium, $8 indemnity 4-Year Avg Loss Ratio = 8/4 = 2.04-Year Avg Loss Ratio = 8/4 = 2.0
Questions?Questions?
Paul D. MitchellPaul D. Mitchell
UW-Madison Ag & Applied EconomicsUW-Madison Ag & Applied Economics
Office: (608) 265-6514Office: (608) 265-6514
Cell: (608) 320-1162Cell: (608) 320-1162
Email: [email protected]: [email protected]
Extension Web Page:Extension Web Page:
www.aae.wisc.edu/mitchell/extension.htmwww.aae.wisc.edu/mitchell/extension.htm
