By KEVIN WALKER
Michigan Correspondent
 
URBANA, Ill. — A report issued out of the University of Illinois recently highlights the most recent changes to crop insurance.
Written by Gary Schnitkey of the university’s Department of Agricultural and Consumer Economics, the report takes an objective view of the different offerings and how the changes might affect what farmers should do about crop insurance this year.

These changes will reduce premiums on CRC and RA coverage this year. They include higher subsidy levels for enterprise units and expansion of the biotech endorsement (BE). Subsidy levels have been lowered for GRIP coverage: 44 percent this year, as compared to 48 percent in 2008. Also new for this year is a simplification of limits of harvest price movements.

Schnitkey writes in his report that “one of the three products will be a good choice for 2009 … Because they are based on farm yields, CRC and RA will provide better risk protection than GRIP. But GRIP will tend to have higher indemnity payments relative to farmer paid premiums than CRC or RA.”

Elliot Alfredson, a crop insurance agent with Spartan Insurance Co., a Michigan-based firm, said GRIP insurance is not the best choice for most producers.

“Farmers tend to buy more insurance than they need with a countywide product like GRIP,” he said. “If there is no loss, farmers have spent a lot in premiums. With a GRIP policy, costs tend to be larger. For some farmers, however, GRIP is necessary.”

GRIP might be a good option for a producer who is unable to prove his yield, which is a requirement for the other types of insurance. For example, someone who uses his crop to feed his livestock might not be able to prove yield and, therefore, might have no other choice but to use GRIP, Alfredson said.

“There are some weaknesses in the countywide product,” Alfredson continued.

“GRIP is fine for guys who don’t want or can’t keep records. GRIP is a good alternative for a gentleman who irrigates. There’s reasons why guys like GRIP.

“I would say that the cost of GRIP has increased dramatically relative to the other coverages. It’s not that I disfavor GRIP, it’s just that I think there’s fewer people who are suited to this type of coverage.”

He went on to give an example of why a producer might not want to use GRIP to insure his crop: If a rogue hailstorm destroys a crop but the storm isn’t countywide, then the farmer with GRIP might not be covered. Alfredson, who grew up on a dairy farm in the Upper Peninsula, said he isn’t just trying to sell one type of policy over another. He sells GRIP policies, too.

He added that the most recent changes in the way crop insurance is structured go even further in making non-countywide policies a better option for most producers.

Although Schnitkey doesn’t go that far, he does say “if CRC and RA-HP are selected, use of enterprise units may be warranted. Use of enterprise units will reduce premium costs. Further use of the BE will further reduce premium costs on corn. The resulting savings could be used in increasing coverage level, thereby providing more risk protection.”

To read the four-page report, visit the UoI website at www.farmdoc.uiuc.edu