Crop insurance: Factors every farmer should consider

By Dan Martens
University of Minnesota Extension

Several crop insurance providers are conducting workshops to provide a review and update about the crop insurance programs for 2013. I have to admit I haven’t attended a good crop insurance review for 2013 yet this year. In the mix of doing private pesticide applicator workshops, and a few other tasks, I’m certainly looking for an opportunity to attend a good crop insurance discussion session.

The first thing I encourage farmers to do is to look back at their own experience with producing crops and with crop insurance and think about the primary risk they are trying to protect against. I talk with some people who farm land in the part of the county where their biggest concern is prevented planting coverage.

For some farmers the dairy cows are part of risk management in making use of crops that don’t turn out very well. They are thinking largely about meeting feed needs.

Another farmer is thinking more about how crop insurance fits with their grain marketing strategies.

A skilled crop insurance representative is looking at your farm situation with you and thinking with you about your needs, and the kind of crop insurance product that might fit your situation the best.

Those who study weather patterns report that we are still in a pattern of significant weather variability and intensity. It’s likely to be too dry this year somewhere, and it’s likely to be too wet somewhere. We just don’t know where.

Farmers continue to look at crop insurance options that are based primarily on Yield Protection (YP) based on Actual Production Yield (APH) History and Revenue Protection policies (RP) that are based on yields and market variables.

More people are considering RP products to account for risk in the markets as well as risk in the field.

Over the last couple of years, the crop insurance program has developed something called a Trend-Adjusted Actual Production History (TA-APH) for corn and soybeans. Wheat will be added to this in some areas in 2013. In some situations, TA-APH allows farmers to raise their APH yield based on yield trends.

Farmers continue to make choices about how their crop insurance is structured as “units.” This might apply to land in different sections, in different counties, or based on whether a parcel of land is contiguous with other parcels of land. The “unit” structure might affect whether fields are all averaged together to determine a loss, or evaluated separately. This will also affect premium rates.

Farmers should make sure they understand how different choices will play out for them in terms of how premiums are calculated, how a loss is evaluated, how a payment related to a loss is determined.  Take time to ask questions and to understand how your choices relate to your needs and goals, and how things work around your farm.

Farmers might consider whether crop insurance coverage affects eligibility in the event of a USDA crop disaster declaration. Creditors might have requirements for specific crop insurance features.