By ANN HINCH
Assistant Editor

JEFFERSONVILLE, Ind. — The first point Sara Davis makes about crop insurance is that all agencies work under the same rules and pricing structure, since these are absolutes set forth by the USDA’s Risk Management Agency (RMA). She also explained the federal government pays a large share of farmers’ policy premiums.

Davis is a specialist with Farm Credit Services of Mid-America, and while she used a slice of her time at last week’s 10th Purdue University Women in Agriculture conference to promote her employer, ultimately, she pointed out, “There’s no difference if you work with one company or agent (or another) because we all work under the same rules.”

Growers need crop insurance for various reasons; perhaps foremost, it’s a requirement to be eligible for most crop-related government programs. Obviously, it also reimburses farmers if they suffer significant loss to drought, excess moisture, disease, storms, high wind, hail – any natural occurrence, Davis explained.

But it also covers other kinds of losses. Last year, one of her clients died, and his widow didn’t get a crop planted; despite this, she still owed cash rent for land. Because the farmer had coverage in his crop insurance, FCS was able to deliver his wife a $40,000 check so she wouldn’t have to pay the rent out-of-pocket.

Not all insurance plans are created equal, according to Davis. For instance, she does not recommend GRP (Group Risk Plan) or GRIP (Group Risk Income Protection) because they are tied to what happens to an entire county’s worth of crops, rather than an individual’s field.

She called it a “lottery” in which farmers pay a high premium on the chance their entire county will be eligible for assistance if losses occur. The advantage for the individual farmer is there are no records to keep, almost no paperwork and no adjustor to contact.

Davis much prefers individual plans, such as YP (Yield Protection, which used to be known as APH) and RP (Revenue Protection), that can cover individual losses down to a field. YP covers loss of bushels and is based on historical production for the affected land.

The example she gave for YP is if a field has normally produced 150 bushels per acre corn and the insurance policy guarantees 75 percent of that (112.5 bushels), then if the yield falls below 112.5, the policy will pay out the difference based on a “spring price” calculated by averaging daily Chicago Board of Trade (CBOT) December futures prices (November, for soybeans) from that February.

RP, on the other hand, guarantees a certain income in the event of loss, in the form of a certain dollar coverage per acre of crop. This helps growers in a volatile market like the one right now, Davis said, pointing out it used to be a big deal if a commodity moved 20 cents on CBOT in one season; now, the daily fluctuation can be more than that.

For RP, FCS calculates a “fall price” as well as a spring price from CBOT, just later in the year. If the fall price drops for corn or soybeans and they’ve been insured at the spring price, farmers will receive a payout of the revenue difference. If the fall price is higher, a grower would have to experience a loss of yield to qualify for a payout.

A payout, Davis said, is not affected by for how much a grower actually sells the grain they were able to harvest. The idea, she said, is to insure for one’s livelihood, with the question in mind: “Can you live on (this payout) if you have a total loss?”

Growers may insure their crop in three different types of units – basic, optional and enterprise. An optional unit carries the most expensive premium because it allows the most “cherry-picking” in insuring individual plots, which is helpful if one knows a certain piece of their land almost always washes out or has poorer soil than another. It also allows a grower to insure only his or her crop, if they share a field with another grower.

The enterprise unit is the least expensive of the three types of units to the farmer, and also one which qualifies for some federal subsidies. An enterprise unit must consist of at least two sections or plots (as defined by the insurer) to qualify as such. The entire grouping’s fortunes are tied together, unlike the optional unit – crop loss on one part of the land can be canceled out if yields make up for it on another part.

The basic unit premium falls somewhere between optional and enterprise. It allows a grower to individually insure sections of land, but with limits, including on fields they might share with another grower.

Throughout the year there are dates for when insurance policies must be purchased – March 15 is the most immediate one right now; it’s when farmers must have their coverage in place for corn, soybeans and oats – when premiums are due and other insurance deadlines, varying by crop and state. For example, the “last planting date” for corn is likely different in Tennessee than in Iowa because of climate.

These are strict dates set forth by the RMA, Davis said, and agents cannot get around them – if a farmer calls on March 16 wanting to insure this year’s corn, they’re out of luck.

She also offered a few basic pieces of advice that covers all crop insurance, including:

•An existing policy automatically renews the following year unless you inform your agent to change or cancel it

•If you are moving to another agent, do not cancel your existing policy or you won’t be eligible for another year (the agents should handle this transfer)

•Always inform your agent of a loss right away and do not replant until an adjustor – not the agent – gives permission to do so

If a policy requires one to keep records, Davis advised keeping those for at least four years. “If you’re audited, you have to prove (your loss) is accurate,” she pointed out, adding every loss has to be validated by a third party, whether it’s sales records/settlement sheets or an adjustor’s measurements.
She also advised growers to contact their Congressional representative if they don’t want their insurance premium payment due date to move from October to August – which it’s set to do in 2012.