University Extension/Department of Economics
COMBO: Crop Insurance for 2011
Crop Advantage SeriesJan. 2010
Farm Management Extension Staff
University Extension/Department of Economics
Common Crop Insurance Policy
• Known as COMBO
• In effect for 2011 crops
• Combines major policy plans
• Simplifies guarantees and payments
• Clarifies enterprise and whole farm units
• Clarifies replant and prevented planting
University Extension/Department of Economics
COMBO is available for:• Corn
• Soybeans
• Grain sorghum
• Wheat (spring & fall)
• Barley (feed & malting)
• Cotton
• Rice
• Canola/rapeseed
• Sunflowers
University Extension/Department of Economics
Crop Revenue Coverage (CRC)Revenue Assurance with
harvest price option (RA-HPO)Revenue Protection (RP)
Revenue Assurance (RA)Income Protection (IP)
Revenue Protection with harvest price exclusion
(RP-HPE)
Actual Production History (APH) Yield Protection (YP)
OLD NEW
University Extension/Department of Economics
Acres Insured in 2010 Corn and Soybeans--Iowa
APH8%
CRC79%
RA10%
IP0%GRP
1%GRIP2%
University Extension/Department of Economics
Yield Protection (YP)
• Same as old APH (or MPCI) policy• No change to APH yield determination• Projected price is the average closing
futures price during February (same as for revenue insurance)– Corn: December contract– Soybeans: November contract
University Extension/Department of Economics
Yield Protection (YP)
• Price Election = 55-100% of the projected price
• Insured Yield = 50-85% of APH yield
• Indemnity Payment =
(Insured Yield – Actual Yield)
x Price Election
University Extension/Department of Economics
Yield Protection (YP)
• Catastrophic coverage is 55% of the projected price and 50% of your APH yield– $300 per crop per county administrative
fee
University Extension/Department of Economics
Revenue Protection (RP)
• Same as old CRC and RA-HPO
• No change to APH yield determination
• Projected price is the average closing futures price during February – Corn: December contract
– Soybeans: November contract
University Extension/Department of Economics
Revenue Protection (RP)
• No price election - must take 100%
• Coverage levels (revenue guarantees) are between 65-85%
• Harvest price is average of October futures price – Old RA corn coverage used November
University Extension/Department of Economics
Revenue Protection (RP)
• Final guarantee is based on the higher of the February or October price
• Catastrophic level is not available
• Indemnity Payment =
(Coverage Level x APH Yield
x Max(Proj. Price, Harvest Price))
– Actual Yield x Harvest Price
University Extension/Department of Economics
Revenue Protection with Harvest Price Exclusion (RP-HPE)
• Same as old RA or IP policy
• Projected price is the average closing futures price during February – Corn: December contract– Soybeans: November contract
• Final guarantee is based on the projected price
University Extension/Department of Economics
Revenue Protection with Harvest Price Exclusion (RP-HPE)
• No increasing guarantee if harvest price exceeds projected price
• No catastrophic coverage
• Indemnity Payment =
Coverage Level x APH Yield x Proj. Price
– Actual Yield x Harvest Price
University Extension/Department of Economics
0
1
2
3
4
5
6
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
$ p
er
bu
she
l
Projected Price Harvest Price
Corn Insurance Prices
Harvest prices have been higher 3 out of last 11 years
University Extension/Department of Economics
Soy Insurance Prices
0
2
4
6
8
10
12
14
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
$ p
er
bu
she
l
Projected Price Harvest Price
Harvest prices have been higher 6 out of last 11 years
University Extension/Department of Economics
Group Policies
• Group Risk Plan: GRP
• Group Risk Income Protection: GRIP
• Group Risk Income Protection with harvest price option: GRIP-HPO
University Extension/Department of Economics
Group Policies
• No changes made• GRP uses the RMA projected price• GRIP uses the Feb. and Oct. futures prices • Expected yields based on historic trends• Actual yield is based on county averages
(per planted acre)
University Extension/Department of Economics
Premiums
• Only one rating system for revenue policies
• Similar to RA system
• RP > RP-HPE > YP
• May be higher or lower than before
University Extension/Department of Economics
What Units to Choose?
• Optional Units: Each farm is separate
• Basic Units: Combine owned and cash rented acres in same county
• Enterprise Units: Combine all acres of the same crop in same county
• Whole Farm: Combine all crops in county
University Extension/Department of Economics
Current Subsidy RatesCoverage
levelBasic Units
Optional Units
Enterprise Units
Whole Farm Units
60% 64% 80% not avail.
65% 59% 80% 80%
70% 59% 80% 80%
75% 55% 77% 80%
80% 48% 68% 80%
85% 38% 53% 80%
University Extension/Department of Economics
0%5%
10%15%20%25%30%35%
50 65 70 75 80 85 90
% Guarantee
Level of Guarantee Purchased--Iowa
200820092010
University Extension/Department of Economics
Enterprise Units
• Available for YP, RP and RP-HPE
• Must include at least 2 sections
• CRC used acres instead of sections
• At least 2 sections must have acres equal to or greater than the lesser of 20 acres or 20% of the total
University Extension/Department of Economics
Example
• 300 total acres of corn in 2 sections
• Must have at least 20 acres in each
section
• 20% rule applies if total acres is less than
100 acres
University Extension/Department of Economics
You Can Aggregate Acres Across Sections
• Example: 300 total acres– 278 acres in Section 1 – 12 acres in Section 2 – 10 acres in Section 3
• Can combine acres in Sections 2 and 3
University Extension/Department of Economics
Enterprise Units
• Generally, the more acres you combine into one unit, the lower the cost per acre
• Probability of collecting a payment is lower, too
• But grain and dollars are commingled
University Extension/Department of Economics
Whole Farm Units
• Combine all insurable crops in county
• Available for Revenue Protection only
• Must include at least 2 crops that are each 10% or more of the total planted acres
University Extension/Department of Economics
Prevented Planting/Replant Payments
• Based on Feb. futures price, not October
• Replant payments are no longer based on actual costs
• Replant Payments:– Corn: 8 bu. x Feb. price, per acre– Soybeans: 3 bu. x Feb. price, per acre
University Extension/Department of Economics
Looking Forward to 2011
Corn: Dec. 2011 futures $ 5.53
Soy: Nov. 2011 futures $12.94
as of Jan. 3, 2010
University Extension/Department of Economics
0
1
2
3
4
5
6
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
$ p
er
bu
she
l
Projected Price Harvest Price
Corn Insurance Prices
University Extension/Department of Economics
Soy Insurance Prices
0
2
4
6
8
10
12
14
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
$ p
er
bu
she
l
Projected Price Harvest Price