Choosing Crop Insurance for 2010

William Edwards, ISU Extension Economist

Impact of the 2008 Farm Bill• Both ACRE and SURE provide

additional revenue risk protection.• Prices, yields, timing differ from

crop insurance.• Probably should not influence the

crop insurance decision.

Impact of SURE• SURE provides 15% added coverage above

the crop insurance guarantee (up to 90%).• All crops must be insured except crops that

are less than 5% of total crop value.• Can use CAT level coverage for minor crops• Can use NAP coverage for noninsurable

crops.• All crops and all acres per producer are

added together to calculate coverage and losses.

• Payment is 60% of loss not paid by insurance.

Impact of ACRE• ACRE protects gross revenue• ACRE is by FSA farm unit.• Guarantee based on 2-year average

price and 5-year average yield.• Both farm level and state level

triggers must be met.• Payment is based on state level loss.• Payment limit is 25% of state trigger.

ACRE vs. Crop Insurance• ACRE is similar to crop insurance.• State and farm yield may not

track.• Market price is same for farm and

state.• Provides added coverage at a low

price (lose 20% of USDA direct payment).

• Does not replace farm level insurance.

Acres Insured in 2008 Corn and Soybeans--Iowa

GRP2%

GRIP2%

RA67%

CRC15%

APH12%

Acres Insured in 2009 Corn and Soybeans--Iowa

CRC74%

GRP1%

GRIP2%

RA12%

Other1%

APH10%

Why the big shift to CRC?

Price!

Compare before you buy.

February and Harvest Prices 2009

$4.04

$8.80

$3.72

$9.66

$3.90

$9.66

$0.00$1.00$2.00$3.00$4.00$5.00$6.00$7.00$8.00$9.00

$10.00

February Fall-CRC Fall-RA

CornSoybeans

Indemnity Prices: Corn(revenue insurance)

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Feb. priceRA Nov. priceCRC Oct. price

Indemnity Prices: Soybeans(revenue insurance)

$0.00$2.00$4.00$6.00$8.00

$10.00$12.00$14.00$16.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Feb. priceRA Nov. priceCRC Oct. price

Lower Indemnity Prices in 2010?

Corn APH (Yield) Revenue

2009 $4.00 $4.042010 $3.90 ?Soybeans2009 $9.90 $8.802010 $9.15 ?

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 co.• Whole Farm: Combine corn and

beans

$

Subsidy rates have increased for enterprise units and

whole farm units.

Coverage level

Basic Unit subsidy

rate

New rate for

Enterprise Units

New rate for Whole

Farm Units

60% 64% 80% not avail.65% 59% 80% 80%70% 59% 80% 80%75% 55% 77% 80%80% 48% 68% 71%85% 38% 53% 56%

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.

Example: Hardin Co., Iowa CRC policy, Corn, 2009

rates/acre

Rates will vary with the number of acres & number of sections covered. 2010 rates will be different.

Coverage Level

Optional Basic Enterprise

65% $ 8.75 $ 7.87 $ 3.3870% $11.94 $10.75 $4.4975% $17.65 $15.88 $6.7980% $27.13 $24.42 $12.2985% $42.85 $38.56 $23.41

Example: Hardin Co., Iowa CRC policy, Soybeans, 2009

rates/acre

Rates will vary with the number of acres & number of sections covered. 2010 rates will be different.

Coverage Level

Optional Basic Enterprise

(2 sect.)65% $ 4.95 $ 4.46 $ 1.7070% $ 6.95 $ 6.26 $ 2.3275% $10.59 $ 9.54 $ 3.6180% $16.81 $15.13 $ 6.7585% $27.34 $24.60 $13.24

Enterprise Unit DiscountsCRC discount is based on number of planted acres for the crop.

RA discount is based on number of sections, or FSA unit numbers, up to 10.

Percent of discount varies by state/county/crop.

If you change to enterprise units:

1. Keep coverage level the same, reduce the premium.

or2. Pay the same premium, increase the

coverage level.

Many people increased their coverage in 2009.

0%5%

10%15%20%25%30%35%

50 65 70 75 80 85 90% Guarantee

Level of Guarantee Purchased--Iowa

20082009

Biotech Endorsement (BE)• Available in the entire Corn Belt.• Must be at least 75% of the acres

in the insurance unit. • Still need 20% as refuge acres

(EPA).• Less documentation this year.• Lack of compliance penalty is loss

of premium discount only.

Eligible Hybrids• Monsanto YieldGard® Plus with

Roundup Ready® Corn 2, YieldGard® VT Triple, and YieldGard® VT Triple PRO hybrids

• Pioneer and Dow AgroSciences Herculex® Xtra and Herculex® Xtra RR2® hybrids

• Syngenta Agrisure® CB and RW stacked and Agrisure® 3000GT

Biotech Endorsement• Discount available on yield (APH) or

revenue (RA, CRC) but not on group policies

• Estimated at 10-15% discount, overall• Consider added cost of seed versus yield

effects and insect or weed pressure.• Do you need it?

Biotech Endorsement DiscountsHardin County, 2009

Coverage APH RA RA-HP CRC

65% 33% 24% 19% 20%70% 29% 17% 14% 18%75% 26% 13% 10% 16%80% 22% 10% 8% 14%85% 19% 8% 7% 12%

Specialty Soybean Crops• Can now be insured separately.• Low yields will not drag down the

APH yield for conventional beans.• Must be covered with an APH (yield)

policy, not a revenue policy.• Can use past records to create an

APH yield for each type of soybeans.• Indemnity price is higher of contract

price or conventional APH soybean indemnity.

• Large seeded food grade – Soybeans commonly used for tofu, soymilk,and miso

• Small seeded food grade – Soybeans commonly used for sprouts, or for natto soybeans

• Low linolenic acid – Soybeans used to produce soybean oil with a linolenic acid level of 3% or less

• Low saturated fat – Soybeans containing 50% less saturated fat than conventional soybeans

• High protein – Soybeans containing protein levels of 43% or greater

Key Points for 2010

1. SURE and ACRE do not reduce the need for crop insurance.

2. Indemnity prices will be a little lower.3. Compare RA and CRC premiums.4. Higher enterprise unit subsidy allows

higher coverage levels.5. Biotech endorsement expanded.6. Specialty soybeans can be insured

separately.