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Crop insurance unlikely to be harmed in D.C. budget talks
By MICHELE F. MIHALJEVICH
Indiana Correspondent

FORT WAYNE, Ind. — Some farmers are concerned the nation’s crop insurance program could eventually see changes that might negatively impact them, according to an Ohio-based crop insurance specialist.

Regardless of what happens with budget talks in Washington, D.C., crop insurance funding for the 2013 growing year is locked in, said Jason Williamson, of Williamson Insurance Agency in Payne, Ohio. Farmers, though, are uneasy about what could happen to the program in future years, he noted.

“We’re hearing from farmers who are saying, ‘Don’t let them change our program,’” Williamson said. “They don’t want harm to come to the program. They’re wondering if (elected officials) will alter the program, if there will be a cut in subsidies.”

The crop insurance program isn’t affected by the extension of the farm bill to Sept. 30 because that program is not a component of the bill, Williamson said. Rather, crop insurance is authorized by a Standard Reinsurance Agreement between the Federal Crop Insurance Corp. and private insurance companies.

“Would (the delay in getting a new farm bill) affect us? No, we’re still okay,” he said. “But do we want to see something resolved? Absolutely.”

Williamson Insurance Agency keeps in contact with its clients to be sure they understand their policies and how they work, said Greg Owens, an agent with the company. He and Williamson think it’s unlikely crop insurance will disappear.

“I think people (in D.C.) understand the value of the safety tool of crop insurance,” Owens said. “I think we can move forward knowing there will be some kind of safety net.”

Williamson and Owens spoke Jan. 15, during the first day of the Fort Wayne Farm Show. Crop insurance, along with options and futures, are “tools in the toolbox to protect your crop and its value,” Williamson explained.

“Guys will say, ‘I bought crop insurance and that’s my marketing plan.’ No, it’s not. They’ll say ‘I don’t like options.’ But we need to manage value in our policy and our crop.”

A positive aspect of crop insurance is that farmers know their bushels from the start, he said. “There’s nothing more fun than having a meeting with a farmer on June 1 because he can’t get a crop into the ground,” he said. “You’ve got to look at your revenue policy as a marketing tool.”

Having that crop insurance policy allows producers to use all the tools more efficiently, said Michael Liautaud, manager of education and research for Commodity & Ingredient Hedging, based in Chicago. Liautaud also spoke at the Fort Wayne Farm Show.
Purchasing a put option, which gives the producer the right to sell at a certain price, may be the most flexible strategy available for 2013, he explained. At the same time, the farmer doesn’t have an obligation to that price. “The producer would be protected to all lower prices, and also preserves the opportunity to participate in all higher prices,” Liautaud noted.

Forward selling is another option, but producers need to understand the pitfalls of using this option before the crop is planted, Williamson said. For example, a wet spring could cause a farmer to delay planting and possibly miss a planting deadline. Forward selling could be a risky proposition prior to producers knowing their actual planted acreage base, he said.
1/23/2013