The Federal Crop Insurance Corporation is a risk management tool used to mitigate financial losses to U.S. farmers. In 1996, the Risk Management Agency (RMA) was established to administer the Federal Crop Insurance Program. RMA is an agency of the U.S. Department of Agriculture that establishes policy and loss adjustment procedures. Private insurance companies deliver and service individual Federal Crop Insurance policies. Crop insurance can be a great investment to protect downward trends in the market along with low yield performance. Producers often say, “I spent X dollars on crop insurance premiums in the past and I haven’t ‘made’ any money from it.” No insurance policy should ever be viewed as an investment to make an ROI, instead crop insurance needs to be viewed as a business tool for farmers to reduce their financial risk. This planting season, make sure to keep your agent on speed dial and use them as a resource to make good decisions.
Three proactive steps to take during planting:
1. Contact your crop insurance agent.
a. Your Federal Crop Insurance policy should be completed in March.
b. Before planting, review your policy with your agent so that you fully understand replant policies and planting date policies for both soybeans and corn.
2. Review the type of policy that you purchased.
a. Yield Protection:
i. The projected crop value is only based off the Projected Price 2021. Your policy would only qualify for a claim if unit crop production falls below the established guarantee.
b. Revenue Protection:
i. The amount of insurance protection is based on the greater of the projected price or the harvest price. If the harvested plus any appraised production multiplied by the harvest price is less than the amount of insurance protection, the producer is paid an indemnity based on the difference. (https://www.rma.usda.gov)
1. The Projected Price was set at $11.87 / bu based off the average daily Chicago Board of Trade (CBOT) November 2021 futures price during the month of February 2021.
2. The Harvest Price will be set during harvest and based off the average daily CBOT November 2021 futures price during the month of October 2021.
1. The Projected Price was set at $4.58 / bu based off the average daily CBOT December 2021 futures price for the month of February 2021.
2. The Harvest Price will be set during harvest and based off the average daily CBOT December 2021 futures price for the month of October 2021
3. Contact grain broker:
a. Work with a reputable grain broker that can help develop a marketing strategy that allows for capturing market highs while minimizing risk.
b. Share details with the broker about your APH and your type of crop insurance.
c. Ask about buying options to protect low production.
RMA Information Reporting System (will give you a spreadsheet listing every county): https://webapp.rma.usda.gov/apps/RIRS/InsuranceOfferPrices.aspx
Actuarial Information Browser (you can look up information for a specific county/crop): Crop Report Criteria (usda.gov)
Price Discovery Tool (you can look up applicable prices): https://prodwebnlb.rma.usda.gov/apps/PriceDiscovery