Crop Insurance for Onion Producers Ag-Analytics.org

Crop insurance Introduction Onion yields are volatile Helps producers manage risk Security for operating loans Helps to recover after a bad planting or harvest Most NY onion acres are now enrolled in crop insurance This presentation considers differences between CAT and BUYUP coverage for onions in New York CAT = $300 admin fee, payouts triggered for catastrophic yield losses only (for example, one option pays 55% of price election on yields loss below 50% of historic average) BUYUP = for premiums, pays for losses below covered levels (50-75%) Just making sure there is an understanding that CAT offers three methods for establishing guarantees according to the current CAT Policy: 50% of a producers approved yield indemnified at the 55% price election for the Common Crop Insurance Policy 65% of the expected county yield indemnified at 45% of the maximum protection per acre for ARPI (Area Risk Protection Insurance), OR Comparable coverage for other policies if CAT is allowed. Onions are insured under the Common Crop Insurance Policy. Consequently, the CAT=$300 admin. fee allows producers to insure 50% of their approved yield at 55% of price election. (ARPI crops allow for 65% of the county yield at 45% of the price.)

Most NY onion production is enrolled in crop insurance Premiums are sometimes more than indemnities, but high indemnities reflect payments being made in response to volatile weather etc. Note: Crop insurance acres could be higher than total acres planted due to prevented planting; Onion acres planted from NASS “Onions, dry, Summer, Storage – Acres Planted”

A large share of enrolled acres use CAT only Premiums are sometimes more than indemnities, but high indemnities reflect payments being made in response to volatile weather etc.

Indemnities and Premiums for BUYUP Premiums are sometimes more than indemnities, but high indemnities reflect payments being made in response to volatile weather etc.

CAT Indemnities much smaller than BUYUP Premiums are sometimes more than indemnities, but high indemnities reflect payments being made in response to volatile weather etc. Note: CAT enrollment only requires a $300 administrative fee (No premium)

CAT is popular in Orleans and Oswego counties Premiums are sometimes more than indemnities, but high indemnities reflect payments being made in response to volatile weather etc.

BUYUP most popular in Orange County Premiums are sometimes more than indemnities, but high indemnities reflect payments being made in response to volatile weather etc.

CAT payouts are relatively rare and small Premiums are sometimes more than indemnities, but high indemnities reflect payments being made in response to volatile weather etc.

BUYUP indemnities larger than CAT Premiums are sometimes more than indemnities, but high indemnities reflect payments being made in response to volatile weather etc.

CAT vs. BUYUP example: catastrophic yield decline (70% loss) Approved (historic) yield of 285 CWT per acre, projected price of $12.20 using basic units under rare/catastrophic yield loss event CAT 65% coverage - BUYUP 75% coverage - BUYUP Premium* per acre - $237 per acre $349 per acre Premium* for 100 acres $300 $23,700 $34,900 Yield guarantee 143 CWT/acre 185 CWT/acre 214 CWT/acre Actual yield 86 CWT/acre Indemnity calculation (143-86)*.55* $12.20*100 acres (185-86)* $12.20*100 acres (214-86)* $12.20*100 acres Total indemnity $38,247 $121,695 $156,465 Note: $12.20 is the price for Yellow Type Onions. CAT: $12.20 X 0.55 = $6.71 $6.71 X 57 = 382.47 X 100 acres = $38,247.00 65% Buyup 285 X 0.65 = 185 185-86=99 cwt loss 99 X $12.20= $1208 1208 X 100 = 120,800 75% Buyup 285 X 0.75= 214 214-86= 128 128 X $12.20 = $1562 $1562 X 100 = $156,200 Estimated premium for Yellows (190), non-irrigated with cover crop, for Orange County, from ag-analytics.org/cropsinsurance, for educational purposes only. All numbers are rounded to nearest dollar, while indemnities are based on exact values.

CAT vs. BUYUP example: 40% yield decline Approved (historic) yield of 285 CWT, projected price of $12.20 using basic units under 40% yield decline CAT 65% coverage - BUYUP 75% coverage - BUYUP Premium* per acre - $237 per acre $349 per acre Premium* for 100 acres $300 $23,700 $34,900 Yield guarantee 143 CWT/acre 185 CWT/acre 214 CWT/acre Actual yield 171 CWT/acre Indemnity calculation (185-171)* $12.20*100 acres (214-171)* $12.20*100 acres Total indemnity $17,385 $52,155 40% Yield Decline from 285 cwt to 171 cwt: CAT 285 cwt X 0.50=142.5 No Loss with 171 cwt/A 65% Buyup 285 X 0.65 = 185.25 185-171 = 14 cwt/A 14 cwt X $12.20 = $183/A $171 X 100 = $17,100 75% Buyup 285 X 0.75 = 214 214-171 = 43 cwt/A 43 cwt X $12.20 = $524.60/A 524.60 X 100 = $52,460 Estimated premium for Yellows (190), non-irrigated with cover crop, for Orange County, from ag-analytics.org/cropsinsurance, for educational purposes only. All numbers are rounded to nearest dollar, while indemnities are based on exact values.

CAT vs. BUYUP example: 30% yield decline Approved (historic) yield of 285 CWT, projected price of $12.20 using basic units under 30% yield decline CAT 65% coverage - BUYUP 75% coverage - BUYUP Premium* per acre - $237 per acre $349 per acre Premium* for 100 acres $300 $23,700 $34,900 Yield guarantee 143 CWT/acre 185 CWT/acre 214 CWT/acre Actual yield 200 CWT/acre Indemnity calculation (214-200)* $12.20*100 acres Total indemnity $17,385 30% Yield Decline from 285 cwt to 200 cwt: CAT 285 cwt X 0.50=142.5 No Loss with 200 cwt/A 65% Buyup 285 X 0.65 = 185.25 185-200 = 0 75% Buyup 285 X 0.75 = 214 214-200 = 14 cwt/A 14 cwt X $12.20 = $170.80/A 170.80 X 100 = $17,080 Estimated premium for Yellows (190), non-irrigated with cover crop, for Orange County, from ag-analytics.org/cropsinsurance, for educational purposes only. All numbers are rounded to nearest dollar, while indemnities are based on exact values.

Premium Calculator How much does it cost? Estimate your annual premium costs using the Crop Insurance Premium Calculator tool at Ag-Analytics.org/CropInsurance

How much does it cost? Fill out your location and yield information using your Schedule F

How much does it cost? Then the tool will show you premium estimates for different levels of coverage… As a graph

How much does it cost? Then the tool will show you premium estimates for different levels of coverage… And a chart

CAT vs BUYUP CAT BUYUP Advantage: Low cost ($300 for entire farm) Advantage: Modest payouts in years with severe yield declines (decline > 50%) Disadvantage: Does not pay out as often Disadvantage: Indemnities may not cover production costs BUYUP Advantage: Will pay out more often and at higher amounts Advantage: Level of coverage can be selected to meet your farms’s (i.e. repay loans, next year’s planting costs) Disadvantage: More coverage = more premiums

Supplemental Coverage Option (SCO) SCO is an option now available to onion growers that provides additional coverage for a portion of your underlying crop insurance deductible. It must be purchased as an “endorsement” to yield or revenue policies The Federal Government pays 65 percent of the premium cost for SCO. SCO increases the level of coverage to 86% of Producer’s APH Yield Payments begin if “area yield” is less than 86% of historic levels, so farm yield relative to county yields should be taken into account in purchase decision SCO results in additional premium and an additional administrative fee SCO increases the level of coverage to 86% of the Producer’s APH yield. The additional premium is subsidized at 65%. The amount of protection and cost is based upon the underlying policy coverage. The lower the underlying coverage, the greater the SCO coverage. The higher the underlying coverage, SCO coverage is lower. There is no overlap between individual and SCO coverage. All planted acres of the crop is covered.

For more information Talk to an agent Find a crop insurance agent at www.rma.usda.gov/tools/agent.html Crop insurance information, testimonials and decision tools www.ag-analytics.org/cropinsurance

Cornell University delivers crop insurance education in New York State in partnership with the USDA Risk Management Agency. Diversity and Inclusion are a part of Cornell University's heritage. We are an employer and educator recognized for valuing AA/EEO, Protected Veterans, and Individuals with Disabilities.

Jennifer Ifft jifft@cornell.edu