The New Economics of The New Economics of Crop Production in Crop Production in

Wisconsin:Wisconsin:Crop Consultants’ Crop Consultants’

PerspectivePerspectivePaul D. MitchellPaul D. MitchellAssistant ProfessorAssistant Professor

Agricultural and Applied EconomicsAgricultural and Applied EconomicsUniversity of Wisconsin-MadisonUniversity of Wisconsin-Madison

2008 WAPAC Spring Seminar2008 WAPAC Spring SeminarArlington, WIArlington, WI

March 6, 2008March 6, 2008

Goal TodayGoal Today

Part I:Part I: Economics of Corn vs. Soybeans vs. Economics of Corn vs. Soybeans vs.

WheatWheat

Part II:Part II: Overview Crop InsuranceOverview Crop Insurance Crop Insurance Hints for 2008Crop Insurance Hints for 2008 Crop Insurance changes comingCrop Insurance changes coming

Crop Prices are HighCrop Prices are High Closing prices on CBOT Wednesday Closing prices on CBOT Wednesday

3/53/5 Dec 08 corn $5.77/buDec 08 corn $5.77/bu Nov 08 soybean $13.91/buNov 08 soybean $13.91/bu Sep 08 wheat $10.59/buSep 08 wheat $10.59/bu Sep 08 oats $4.45/buSep 08 oats $4.45/bu

These prices drive the image that These prices drive the image that farmers are rolling in the moneyfarmers are rolling in the money

The “New” The “New” Economics of Corn Economics of Corn

and Soybeansand Soybeans

Yields are IncreasingYields are Increasing

Annual Annual increase increase (bu/ac) in (bu/ac) in NASS county NASS county average yield average yield from 1977 to from 1977 to 2006 as 2006 as estimated by estimated by regressionregression

Input Costs Have Also Input Costs Have Also IncreasedIncreased

Fertilizer prices are leading the wayFertilizer prices are leading the way Seed is also up about 15%Seed is also up about 15%

FertilizerFertilizer Jan 2008Jan 2008 Jan Jan 20072007

% % increaseincrease

UreaUrea 505505 409409 23%23%

AnhydrousAnhydrous 775775 514514 51%51%

32% N Solution32% N Solution 403403 269269 50%50%

Ammonium Ammonium SulfateSulfate

240240 209209 15%15%

DAPDAP 578578 334334 73%73%

PotashPotash 418418 254254 65%65%

0

50

100

150

200

250

300

350

400

2000 2001 2002 2003 2004 2005 2006 2007 2008

Year

Co

sts

($/a

c)

corn

soybeans

U of IL non-land costs for corn and U of IL non-land costs for corn and soybean production in northern ILsoybean production in northern IL

Corn up $42/ac Corn up $42/ac from 2007from 2007

Soybeans up Soybeans up $18/ac$18/ac

-30

-20

-10

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10

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2000 2001 2002 2003 2004 2005 2006 2007 2008

Year

An

nu

al

Incre

ase (

$/a

c)

corn

soybeans

Annual Increase: U of IL non-land Annual Increase: U of IL non-land costs for corn and soybeans in costs for corn and soybeans in

northern ILnorthern IL

Costs are Costs are Rising faster Rising faster and fasterand faster

$$$$

$$

The “Real” Economics of Corn and The “Real” Economics of Corn and SoybeansSoybeans

Quick Cost of Production Quick Cost of Production EstimatesEstimates

Quick cost of production and net Quick cost of production and net returns estimates for corn, soybeans returns estimates for corn, soybeans and wheat in Wisconsinand wheat in Wisconsin

Use major cost categoriesUse major cost categories Neither scientific nor rigorous, but Neither scientific nor rigorous, but

based on simple assumptionsbased on simple assumptions Farmers should do their own cost and Farmers should do their own cost and

returns projectionsreturns projections

Fertilizer CostsFertilizer CostsPricPricee

CornCorn SoybeansSoybeans WheatWheat

$/lb$/lb AmtAmt CostCost AmtAmt CostCost AmtAmt CostCost

NN 0.600.60 150150 90.090.000

00 00 8080 48.048.000

PP 0.500.50 1010 5.005.00 5050 25.025.000

4040 20.020.000

KK 0.350.35 1010 3.503.50 5050 17.517.500

4040 14.014.000

TotalTotal 98.598.500

42.5042.50 82.0082.00

Seed CostsSeed Costs

CornCorn 34,000/ac @$190/bag = $80.7534,000/ac @$190/bag = $80.75

SoybeansSoybeans 1.2 bag/ac @ $32/bag = $38.401.2 bag/ac @ $32/bag = $38.40

WheatWheat Assume $35/acAssume $35/ac Lots of numbers out thereLots of numbers out there Depends on variety, germination rate, Depends on variety, germination rate,

etc.etc.

Input Cost SummaryInput Cost SummaryItemItem CornCorn SoybeansSoybeans WheatWheat

FertilizersFertilizers 98.5098.50 42.5042.50 82.0082.00

SeedSeed 80.7580.75 38.4038.40 35.0035.00

PesticidesPesticides 30.0030.00 25.0025.00 20.0020.00

Insurance (75% Insurance (75% CRC)CRC)

33.0033.00 27.0027.00 11.5011.50

MiscellaneousMiscellaneous 10.0010.00 10.0010.00 10.0010.00

Interest (8% @8 Interest (8% @8 mo.)mo.)

13.4513.45 7.627.62 8.458.45

TOTALTOTAL 265.70265.70 150.52150.52 166.95166.95

Machinery CostsMachinery Costs

Hard to estimate/measureHard to estimate/measure Very specificVery specific to each farmer to each farmer Use estimates for 2008 machinery Use estimates for 2008 machinery

costs from Iowa State Universitycosts from Iowa State University Adjusted upwards for WI about 25% Adjusted upwards for WI about 25%

for pre-harvest tillage, about 5% for for pre-harvest tillage, about 5% for harvestharvest Smaller fields and farmsSmaller fields and farms Higher custom ratesHigher custom rates

Machinery CostsMachinery Costs

ItemItem CornCorn SoybeanSoybeanss

WheatWheat

Pre-HarvestPre-Harvest 38.5038.50 32.0032.00 28.0028.00

Harvest Harvest (Combine)(Combine)

27.5027.50 27.0027.00 25.0025.00

Haul/HandleHaul/Handle 11.0011.00 3.503.50 6.006.00

DryDry 40.0040.00 0.000.00 3.003.00

TOTALTOTAL 117.00117.00 62.5062.50 62.0062.00

Cost Estimate SummaryCost Estimate Summary

ItemItem CornCorn SoybeansSoybeans WheatWheat

InputsInputs 266266 150150 167167

MachineryMachinery 117117 6363 6262

TOTALTOTAL $383/ac$383/ac $213/ac$213/ac $229/ac$229/ac

Range Range (±25%)(±25%)

$285-$285-$480$480

$160-$160-$265$265

$170-$170-$290$290

Does not include cost for Does not include cost for land, land, management, or investment of capitalmanagement, or investment of capital

Net ReturnsNet ReturnsCornCorn SoybeansSoybeans WheatWheat

YieldYield 180180 5050 7575

PricePrice 5.255.25 13.4013.40 10.0010.00

RevenueRevenue 945945 670670 750750

CostsCosts 383383 213213 229229

Returns to Returns to land and land and operatoroperator

562562 457457 521521

RentRent 200200 200200 200200

Net ReturnNet Return 362362 257257 321321

How do you decide what to How do you decide what to plant?plant?

Can use university budgets or other Can use university budgets or other peoples’ estimates of the yields, peoples’ estimates of the yields, prices, costs, and net returns to prices, costs, and net returns to different cropsdifferent crops

Problem: These are usually averages Problem: These are usually averages or even guessesor even guesses

Reality: Costs and returns vary Reality: Costs and returns vary greatly among farmersgreatly among farmers

You want You want youryour costs and returns costs and returns

1996 Data for 1996 Data for about 250 about 250 Minnesota Minnesota Corn and Corn and Soybean Soybean Farmers Farmers

Source: K. D. Olson and H. D. Source: K. D. Olson and H. D. Lohano “Will the true Lohano “Will the true cost of production please cost of production please stand up?”stand up?”

Corn

Soybeans

Illinois Data for 2006Illinois Data for 2006

Source: Gary Schnitkey “Crop Production Cost and Rotation Source: Gary Schnitkey “Crop Production Cost and Rotation Decisions”Decisions”

Making BudgetsMaking Budgets

Make budgets to estimate Make budgets to estimate youryour net net returns for corn after soybeans, plus returns for corn after soybeans, plus corn after corn, soybeans, and wheatcorn after corn, soybeans, and wheat

Budgets can be as simple or detailed Budgets can be as simple or detailed as you want to make them: as you want to make them: youyou decide decide

Estimate Estimate youryour costs and returns, as it costs and returns, as it is is youryour money, money, youryour responsibility, responsibility, youyou live with the consequences of live with the consequences of youryour decisionsdecisions

Wisconsin Resources Wisconsin Resources AvailableAvailable

My Extension web pageMy Extension web page

www.aae.wisc.edu/mitchell/extension.htm www.aae.wisc.edu/mitchell/extension.htm UW-Team Grains web pageUW-Team Grains web page

www.uwex.edu/ces/ag/teams/grains/www.uwex.edu/ces/ag/teams/grains/ UW Center for Dairy ProfitabilityUW Center for Dairy Profitability

www.cdp.wisc.edu/crop%20enterprise.htmwww.cdp.wisc.edu/crop%20enterprise.htm Detailed Excel spreadsheets with base Detailed Excel spreadsheets with base

cases and then you enter your numberscases and then you enter your numbers

Questions?Questions?

How to help clients be as profitable as How to help clients be as profitable as possible? Recommend judicious input possible? Recommend judicious input

use use Fertilizer is and will be expensiveFertilizer is and will be expensive

Use soil tests, nutrient crediting and Use soil tests, nutrient crediting and recommended rates to control costsrecommended rates to control costs

Properly calibrate application Properly calibrate application equipment or know which applicators equipment or know which applicators do sodo so

Forward price fertilizer, especially PForward price fertilizer, especially P Think about on-farm (or in-field?) Think about on-farm (or in-field?)

storage possibilitiesstorage possibilities

Current and future fertilizer Current and future fertilizer pricesprices

11Landmark Services Coop Landmark Services Coop 22Frontier FS CoopFrontier FS Coop

FertilizerFertilizer Jan Jan 2008200811

Feb Feb 2008200822

Fall 2008Fall 2008

UreaUrea 505505 499499

AnhydrousAnhydrous 775775 712712 750-800750-800

32% N 32% N SolutionSolution

403403 402402

Ammonium Ammonium SulfateSulfate

240240 322322

DAPDAP 578578 622622 950-950-10001000

PotashPotash 418418 516516 600600

Planting Density for CornPlanting Density for Corn

See Joe Lauer’s recent publications on See Joe Lauer’s recent publications on “Guidelines for Managing Corn Seed Costs”“Guidelines for Managing Corn Seed Costs”

Optimal planting densities have increased Optimal planting densities have increased for newer hybrids and for Bt cornfor newer hybrids and for Bt corn

http://corn.agronomy.wisc.edu/AA/2006/A044.htmhttp://corn.agronomy.wisc.edu/AA/2006/A044.htm

Recommended density depends on the Recommended density depends on the corn:seed price ratio and it’s higher than corn:seed price ratio and it’s higher than most farmers are used to plantingmost farmers are used to planting

Maybe try some on farm experiments this Maybe try some on farm experiments this year? year?

Current Corn:Seed Price Current Corn:Seed Price RatioRatio

Seed PriceSeed Price Corn Price ($/bu)Corn Price ($/bu)

$/80,000$/80,000 $/1,000$/1,000 $3.00 $3.00 $3.50 $3.50 $4.00 $4.00 $4.50 $4.50 $5.00 $5.00 $5.50 $5.50

$40 $40 $0.50 $0.50 0.170.17 0.140.14 0.130.13 0.110.11 0.100.10 0.090.09

$60 $60 $0.75 $0.75 0.250.25 0.210.21 0.190.19 0.170.17 0.150.15 0.140.14

$80 $80 $1.00 $1.00 0.330.33 0.290.29 0.250.25 0.220.22 0.200.20 0.180.18

$100 $100 $1.25 $1.25 0.420.42 0.360.36 0.310.31 0.280.28 0.250.25 0.230.23

$120 $120 $1.50 $1.50 0.500.50 0.430.43 0.380.38 0.330.33 0.300.30 0.270.27

$140 $140 $1.75 $1.75 0.580.58 0.500.50 0.440.44 0.390.39 0.350.35 0.320.32

$160 $160 $2.00 $2.00 0.670.67 0.570.57 0.500.50 0.440.44 0.400.40 0.360.36

$180 $180 $2.25 $2.25 0.750.75 0.640.64 0.560.56 0.500.50 0.450.45 0.410.41

$200 $200 $2.50 $2.50 0.830.83 0.710.71 0.630.63 0.560.56 0.500.50 0.450.45

$220 $220 $2.75 $2.75 0.920.92 0.790.79 0.690.69 0.610.61 0.550.55 0.500.50

Optimal Harvest Plant Optimal Harvest Plant DensitiesDensities

Guidelines for Managing Corn Seed Costs, J. Lauer and T. Stanger. Agronomy Advice, Dec. 2006

Judicious Pesticide UseJudicious Pesticide Use

Scout for pests (soybean aphids) and diseases Scout for pests (soybean aphids) and diseases to catch them before losses occurto catch them before losses occur

Scout weeds, use right herbicides for the weeds Scout weeds, use right herbicides for the weeds they have and control when they are small they have and control when they are small

Stay in touch with multiple suppliers on Stay in touch with multiple suppliers on chemical prices and availabilitychemical prices and availability Know which chemicals are expensive or in short Know which chemicals are expensive or in short

supplysupply What are the alternatives to help reduce input costs?What are the alternatives to help reduce input costs? Who has which chemicals at what cost?Who has which chemicals at what cost?

Pesticide Prices and Pesticide Prices and AvailabilityAvailability

Companies ready to sell as much as they Companies ready to sell as much as they can, to take advantage of higher demandcan, to take advantage of higher demand

Supplies and prices could be an issue if we Supplies and prices could be an issue if we get unexpectedly large demandget unexpectedly large demand Fungicides if soybean rust hits hardFungicides if soybean rust hits hard Insecticides if have soybean aphid explosionInsecticides if have soybean aphid explosion

Specific chemicals have higher prices Specific chemicals have higher prices (roundup, atrazine) or tighter supply due (roundup, atrazine) or tighter supply due to plant closingsto plant closings

Applicator/equipment availability maybe Applicator/equipment availability maybe more of an issuemore of an issue

Questions?Questions?

2008 Crop Insurance 2008 Crop Insurance OverviewOverview

Overview current crop insurance Overview current crop insurance programs for corn, soybeans and programs for corn, soybeans and wheat wheat

Crop Insurance Hints for 2008Crop Insurance Hints for 2008 Crop Insurance changes comingCrop Insurance changes coming

Types of PoliciesTypes of Policies APH: Actual Production HistoryAPH: Actual Production History

Individual Yield InsuranceIndividual Yield Insurance CRC: Crop Revenue CoverageCRC: Crop Revenue Coverage

Individual Revenue InsuranceIndividual Revenue Insurance GRP: Group Risk PlanGRP: Group Risk Plan

Area-wide (County) Yield InsuranceArea-wide (County) Yield Insurance GRIP: Group Risk Income ProtectionGRIP: Group Risk Income Protection

Area-wide (County) Revenue InsuranceArea-wide (County) Revenue Insurance

APH: Actual Production APH: Actual Production HistoryHistory

If your harvested yield is less than your yield If your harvested yield is less than your yield guarantee, receive an indemnityguarantee, receive an indemnity

Yield guarantee: average of your actual Yield guarantee: average of your actual harvested yields for last 4-10 yearsharvested yields for last 4-10 years

Coverage Level: Determines yield triggerCoverage Level: Determines yield trigger Choose percentage of your average yield as your Choose percentage of your average yield as your

guarantee, from 50% to 85% by 5% intervalsguarantee, from 50% to 85% by 5% intervals Price Election: Determine price for lossesPrice Election: Determine price for losses

Choose price paid for each bushel below your Choose price paid for each bushel below your guarantee, from 100% to 55% of established guarantee, from 100% to 55% of established priceprice

If you observe farmer has a If you observe farmer has a lossloss

If you think you farmer has a loss, If you think you farmer has a loss, farmer farmer shouldshould contact his crop insurance agentcontact his crop insurance agent Documentation of losses and practices is keyDocumentation of losses and practices is key Likely leave crop standing for loss adjustmentLikely leave crop standing for loss adjustment Stalk rot/lodged corn, Aflatoxin a lossStalk rot/lodged corn, Aflatoxin a loss Wildlife damage a loss: deer, wild hogs, geeseWildlife damage a loss: deer, wild hogs, geese Alternative uses: Be careful before you grazeAlternative uses: Be careful before you graze Poor management is not insurable cause of lossPoor management is not insurable cause of loss

Lots of rules, don’t forfeit indemnities by Lots of rules, don’t forfeit indemnities by making a mistakemaking a mistake

CRC Crop Revenue CRC Crop Revenue CoverageCoverage

Combines APH with price protection based on Combines APH with price protection based on CBOT futures pricesCBOT futures prices

Farmers APH yield history and CBOT prices Farmers APH yield history and CBOT prices sets preliminary revenue guaranteesets preliminary revenue guarantee

Same coverage level options, same unit Same coverage level options, same unit structures structures

Revenue at harvest is yield x CBOT prices Revenue at harvest is yield x CBOT prices (Nov average of Dec corn)(Nov average of Dec corn)

If harvest revenue is below guarantee, If harvest revenue is below guarantee, triggers an indemnity paymenttriggers an indemnity payment

CRC protects againstCRC protects againstprice increases and decreasesprice increases and decreases

If price falls or have low yield, know will have If price falls or have low yield, know will have grain or money to buy grain to fulfill contractsgrain or money to buy grain to fulfill contracts

If price increases by harvest, revenue guarantee If price increases by harvest, revenue guarantee increases too, so again know will have grain or increases too, so again know will have grain or money to buy grain to fulfill contractsmoney to buy grain to fulfill contracts

Can market more aggressively since will have Can market more aggressively since will have grain or indemnities to buy grain at the existing grain or indemnities to buy grain at the existing market prices if have a yield lossmarket prices if have a yield loss

Careful: are limits to price swings CRC coversCareful: are limits to price swings CRC covers

CRC Price LimitsCRC Price Limits

CRC limits the harvest price swings it CRC limits the harvest price swings it covers to no more than $1.50 for corn and covers to no more than $1.50 for corn and $3.00 for soybeans$3.00 for soybeans

Much more likely in 2008 with current high Much more likely in 2008 with current high prices and associated volatilitiesprices and associated volatilities

Gary Schnitkey, U of IL FarmDOCGary Schnitkey, U of IL FarmDOC““Impacts of CRC Price Limits on the Value Impacts of CRC Price Limits on the Value of CRC Relative to RA” of CRC Relative to RA” http://www.farmdoc.uiuc.edu/manage/http://www.farmdoc.uiuc.edu/manage/newsletters/fefo08_04/fefo08_04.htmlnewsletters/fefo08_04/fefo08_04.html

Corn $5.30/bu Corn $5.30/bu basebase

Soybeans $13/bu Soybeans $13/bu basebase

If harvest prices move outside the $1.50 If harvest prices move outside the $1.50 or $3.00 range, farmer revenue or $3.00 range, farmer revenue guarantees will not update enough to guarantees will not update enough to buy grain at the prevalent harvest pricebuy grain at the prevalent harvest price

Implication: be more careful with overly Implication: be more careful with overly aggressive marketing based on CRC aggressive marketing based on CRC revenue guaranteesrevenue guarantees

31% 31% chancechance

39% 39% chancechance

GRP Group Risk PlanGRP Group Risk PlanGRIP Group Risk Income GRIP Group Risk Income

ProtectionProtection GRP = APH, except uses NASS county GRP = APH, except uses NASS county

average yieldaverage yield GRIP with GRIP with Harvest Revenue OptionHarvest Revenue Option is is

RA, but with NASS county average yieldRA, but with NASS county average yield Does not have price swing limits (like RA)Does not have price swing limits (like RA)

GRP/GRIP Not available for Wheat in WIGRP/GRIP Not available for Wheat in WI GRP/GRIP payments not made until GRP/GRIP payments not made until

Mar/Apr when NASS yields come outMar/Apr when NASS yields come out

Lots of Crop Insurance RulesLots of Crop Insurance Rules

Rules on: Planting dates, Late/prevented Rules on: Planting dates, Late/prevented planting, planting, Double croppingDouble cropping, Alternative crop , Alternative crop uses, uses, Corn maturityCorn maturity, Yield guarantees, , Yield guarantees, Breaking new groundBreaking new ground (CRP vs pasture) (CRP vs pasture)

Be sure you are not recommending practices Be sure you are not recommending practices that violate crop insurance rulesthat violate crop insurance rules

Insurance agents do not always know all Insurance agents do not always know all rulesrules

Call RMA St. Paul regional office 651-290-Call RMA St. Paul regional office 651-290-3304 3304

Questions?Questions?

Hints for Using Crop Insurance in Hints for Using Crop Insurance in 20082008

CRC will be popular again this yearCRC will be popular again this year Yield Risk: same as it has always beenYield Risk: same as it has always been Price Risk: increased with higher volatilityPrice Risk: increased with higher volatility Investment Risk: high input costs mean larger Investment Risk: high input costs mean larger

investment in planted fields: want more investment in planted fields: want more protection against crop failure/lossprotection against crop failure/loss

Premiums high in 2008 with high crop pricesPremiums high in 2008 with high crop prices Dairy/Livestock can use CRC indemnities to Dairy/Livestock can use CRC indemnities to

buy grain at current prices if have a lossbuy grain at current prices if have a loss

GRIP/GRPGRIP/GRP

GRIP popular with large, low risk producersGRIP popular with large, low risk producers You may have yield histories to help producer You may have yield histories to help producer

see if APH/CRC will be likely to pay for themsee if APH/CRC will be likely to pay for them If unlikely, GRIP may be a good idea for them, If unlikely, GRIP may be a good idea for them,

to get price protection, some yield protectionto get price protection, some yield protection Download NASS county yield to look at how Download NASS county yield to look at how

likely GRP/GRIP to paylikely GRP/GRIP to pay See “Is GRP a Good Deal for my corn in 2008?”See “Is GRP a Good Deal for my corn in 2008?”

Potentially useful for irrigated farmersPotentially useful for irrigated farmers Offset irrigation costs in dry yearsOffset irrigation costs in dry years

GRP/GRIP for Corn in GRP/GRIP for Corn in WisconsinWisconsin

Important issue for Corn: Which county Important issue for Corn: Which county yield do you choose to insure, yield per yield do you choose to insure, yield per planted acre or yield per harvested acre?planted acre or yield per harvested acre?

Only in Wisconsin is there a choiceOnly in Wisconsin is there a choice Because of dairy, in years with marginal Because of dairy, in years with marginal

corn yields, poorer corn chopped for silagecorn yields, poorer corn chopped for silage Yield per harvested acre can remain high, even Yield per harvested acre can remain high, even

though it’s a bad yearthough it’s a bad year Which is better? Depends on the county! Which is better? Depends on the county!

Is GRP a good deal for my Corn Is GRP a good deal for my Corn and Soybeans?and Soybeans?

Bulletins posted on my webpage (soybeans Bulletins posted on my webpage (soybeans soon)soon)

Analyze county yield data and estimate the Analyze county yield data and estimate the expected return to GRP in expected return to GRP in bu/acbu/ac for each for each Wisconsin county that has GRPWisconsin county that has GRP

Expected return = long run average Expected return = long run average netnet return return to GRP if everything constant over many yearsto GRP if everything constant over many years

If GRP is valuable for a county, GRIP will be If GRP is valuable for a county, GRIP will be valuable too, as it adds price protectionvaluable too, as it adds price protection

If GRP is not valuable for a county, GRIP can If GRP is not valuable for a county, GRIP can still make sense, to get the price protectionstill make sense, to get the price protection

> 1

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< -2

No Data

> 1

0 to 1

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< -2

No Data

Planted Acres Harvested Acres

Side-by side comparison (regression Side-by side comparison (regression yields)yields)

> 1

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No Data

> 1

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-2 to -1

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No Data

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< -2

No Data

> 1

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Planted Acres Harvested Acres

Side-by side comparison (RMA yields)Side-by side comparison (RMA yields)

0

20

40

60

80

100

120

140

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180

1980 1985 1990 1995 2000 2005

Harvstd Yld

Regression

RMA

Regression vs. RMA: What’s the Regression vs. RMA: What’s the difference?difference?

CalumeCalumet t CountyCounty

This little This little gap drives gap drives the the differencedifference

> 1

½ to 1

0 to ½

-½ to -1

< -1

No Data

> 1

½ to 1

0 to ½

-½ to -1

< -1

No Data

Regression

RMA

Soybeans: Regression vs. Soybeans: Regression vs. RMARMA

Crop Insurance HintsCrop Insurance Hints CRC 65%-75% coverage, 100% price CRC 65%-75% coverage, 100% price

election, with many optional unitselection, with many optional units Larger/low risk farms: think GRIP 90% Larger/low risk farms: think GRIP 90%

coverage with HRO, using maps to pick coverage with HRO, using maps to pick acreage optionacreage option

Breaking new ground (e.g. pasture), can Breaking new ground (e.g. pasture), can be given low or no coveragebe given low or no coverage Ask your agent for a Ask your agent for a New Breaking New Breaking

Written AgreementWritten Agreement and request a higher and request a higher yieldyield

You could supply data to support requestYou could supply data to support request

Crop Insurance Changes Crop Insurance Changes ComingComing

Biotech Yield EndorsementBiotech Yield Endorsement Approved Sept 12, 2007Approved Sept 12, 2007 Available if plant triple stack (Bt CB, Bt RW, Available if plant triple stack (Bt CB, Bt RW,

RR) on at least 75% of cornRR) on at least 75% of corn Premium reduction for APH/CRC/RA around Premium reduction for APH/CRC/RA around

20% at the 70%-75% coverage levels20% at the 70%-75% coverage levels Piloted in IA, MN, IL, and IN starting in 2008Piloted in IA, MN, IL, and IN starting in 2008 Expect expansion to WI if proves popular Expect expansion to WI if proves popular

and actuarially soundand actuarially sound

Crop Insurance Changes Crop Insurance Changes ComingComing

Combo Policy: Released in 2009Combo Policy: Released in 2009 One basic policy with multiple optionsOne basic policy with multiple options Combines APH, CRC/RA, GRP, GRIPCombines APH, CRC/RA, GRP, GRIP No longer sell APH, CRC, RA, GRP, GRIP, IPNo longer sell APH, CRC, RA, GRP, GRIP, IP Will mean RA-like policy for WI Will mean RA-like policy for WI

(finally)(finally) AGR-Lite and AGR combined into AGRIAGR-Lite and AGR combined into AGRI

Whole farm revenue insurance that can Whole farm revenue insurance that can combine with crop-specific policiescombine with crop-specific policies

Released in 2010Released in 2010

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: pdmitchell@wisc.eduEmail: pdmitchell@wisc.edu

Extension Web Page:Extension Web Page:

www.aae.wisc.edu/mitchell/extension.htmwww.aae.wisc.edu/mitchell/extension.htm