FarmWeekNow.com logo
 
Share This
 

‘Combo’ coverages make risk management simpler

Wheat test ground for consolidated policies
Martin Ross 
Published: Sep 3, 2010
A new crop insurance combo menu should serve up streamlined risk management options with fewer details and decisions for producers to digest.

USDA’s Risk Management Agency (RMA) has introduced new Common Crop Insurance Policies -- popularly known as “combo” coverages -- this month for wheat producers, rolling existing yield and revenue policies into three basic new products. Combined coverages will be available to Illinois corn, soybean, grain sorghum, and barley growers next spring.

Under policy restructuring, crop revenue coverage (CRC) and revenue assurance (RA) with a fall harvest price option have been melded into a new revenue protection policy. A second revenue protection policy with a harvest price exclusion absorbs existing RA coverage without the fall harvest price option and income protection (IP).


At the same time, actual production history coverage -- also known as multi-peril crop insurance (MPCI) -- and basic catastrophic crop insurance have been converted into a single yield protection product. County-based group risk plan (GRP) and group risk income protection policies (GRIP) policies also will remain available.

Country Financial crop marketing consultant John Fahl sees new offerings making risk management “a lot simpler.” IP sales have been low in Illinois, but beyond consolidating policies, the new program uses the same crop base price for both yield and revenue protections (the APH guarantee price previously was released prior to revenue base price) and expands unit coverage options under yield policies.

“You’re always somewhat skeptical when you hear big changes are coming, but I think they did make this simpler,” Fahl told FarmWeek. “It’s simpler for everybody to understand, especially producers. There are fewer options; it does limit choices. But I think (RMA) did a good thing here.”

Country financial representatives and crop specialists have been fully trained in new policies, which are available for 2011 wheat growers. Prospective wheat producers must purchase coverage by Sept. 30, and announcement of the wheat base price, the basis for revenue guarantees and 2011 crop year premiums, is expected by Sept. 14.

The impact of policy consolidation on premiums is not yet clear, but Fahl noted indications policy pricing under new revenue protection likely will track more closely with RA and thus may run slightly higher than had CRC premiums in most counties. Federal premium subsidies will remain the same.

Where previously, producers who sought the choice of a revenue price guarantee based on base or harvest price were required to take a RA harvest price election, those who do not now must actively select the harvest price exclusion. Policy harvest price is capped at 200 percent of base price.

The new revenue policy will use a single revenue harvest price for spring-planted crops. CRC used an October harvest price, RA a November price -- “I’ve never seen any analysis in March able to tell you which price is better,” Illinois Farm Bureau risk specialist Doug Yoder said.

Yoder recommends revenue coverage for farmers “who are trying to do a better job of marketing their grain.” Growers who favor more basic yield protection will see one key change under policy conversion: A new option to cover “enterprise” units, or all acres of an individual crop within a county.

Fahl sees enterprise coverage as an increasingly “attractive” option vs. basic unit coverage, which includes all tracts an individual owns and/or cash rent within a county. The new insurance plan also makes it easier for revenue policyholders to qualify for enterprise unit coverage, he said.


Permalink: Click here
Comments
Read comments from others and share your own thoughts.
Please provide the answer to the following question:

 = 
  
Search this site:   
Read More Stories
IRS makes changes to Schedule F
U of I tax specialist Gary Hoff says some major changes have been made to Schedule F, which most farmers use to report income.
Read this story
Shrinking cow herd could pressure beef prices
A smaller inventory of cattle in the U.S. is expected to provide upward pressure on beef prices throughout this year and possibly into 2013. We have audio from Purdue's Chris Hurt.
Read this story
33 Illinois counties eligible for air quality initiative
Farmers in 33 Illinois counties are eligible for a new air quality initiative through the Natural Resources Conservation Service (NRCS).
Read this story
  
Illinois Farm Bureau honored for support of National Guard & Reserve
IRS makes changes to Schedule F
33 Illinois counties eligible for air quality initiative
Shrinking cow herd could pressure beef prices
Analyst: This could be a big year for corn production
U of I: Corn-Corn-Bean rotation more profitable
Corn basis revisited
Top 50 Tags