Crop Insurance Options for 2011 North Central Iowa Crop & Land Stewardship Clinic Iowa Falls, Iowa Feb. 11, 2011 Chad Hart Assistant Professor/Grain Markets Specialist chart@iastate.edu 515-294-9911 1 1

Common Crop Insurance Policy Known as COMBO In effect for 2011 crops Combines major policy plans Simplifies guarantees and payments Clarifies enterprise and whole farm units Clarifies replant and prevented planting

COMBO is available for: Corn Soybeans Grain sorghum Wheat (spring & fall) Barley (feed & malting) Cotton Rice Canola/rapeseed Sunflowers

OLD NEW Actual Production History (APH) Yield Protection (YP) Crop Revenue Coverage (CRC) Revenue Assurance with harvest price option (RA-HPO) Revenue Protection (RP) Revenue Protection with harvest price exclusion (RP-HPE) Revenue Assurance (RA) Income Protection (IP)

Acres Insured in 2010 Corn and Soybeans--Iowa

Yield Protection (YP) Same as old APH (or MPCI) policy No change to APH yield determination Projected price is the average closing futures price during February (same as for revenue insurance) Corn: December contract Soybeans: November contract

Yield Protection (YP) Price Election = 55-100% of the projected price Insured Yield = 50-85% of APH yield Indemnity Payment = (Insured Yield – Actual Yield) x Price Election

Yield Protection (YP) Catastrophic coverage is 55% of the projected price and 50% of your APH yield $300 per crop per county administrative fee

Revenue Protection (RP) Same as old CRC and RA-HPO No change to APH yield determination Projected price is the average closing futures price during February Corn: December contract Soybeans: November contract

Revenue Protection (RP) No price election - must take 100% Coverage levels (revenue guarantees) are between 65-85% Harvest price is average of October futures price Old RA corn coverage used November

Revenue Protection (RP) Final guarantee is based on the higher of the February or October price Catastrophic level is not available Indemnity Payment = (Coverage Level x APH Yield x Max(Proj. Price, Harvest Price)) – Actual Yield x Harvest Price

Revenue Protection with Harvest Price Exclusion (RP-HPE) Same as old RA or IP policy Projected price is the average closing futures price during February Corn: December contract Soybeans: November contract Final guarantee is based on the projected price

Revenue Protection with Harvest Price Exclusion (RP-HPE) No increasing guarantee if harvest price exceeds projected price No catastrophic coverage Indemnity Payment = Coverage Level x APH Yield x Proj. Price – Actual Yield x Harvest Price

Corn Insurance Prices Harvest prices have been higher 3 out of last 11 years

Soy Insurance Prices Harvest prices have been higher 6 out of last 11 years

Group Policies Group Risk Plan: GRP Group Risk Income Protection: GRIP Group Risk Income Protection with harvest price option: GRIP-HPO

Group Policies No changes made GRP uses the RMA projected price GRIP uses the Feb. and Oct. futures prices Expected yields based on historic trends Actual yield is based on county averages (per planted acre)

Premiums Only one rating system for revenue policies Similar to RA system RP > RP-HPE > YP May be higher or lower than before

What Units to Choose? Optional Units: Each farm is separate Basic Units: Combine owned and cash rented acres in same county Enterprise Units: Combine all acres of the same crop in same county Whole Farm: Combine all crops in county

Current Subsidy Rates 60% 64% 80% 65% 59% 70% 75% 55% 77% 48% 68% 71% Coverage level Basic Units Optional Units Enterprise Units Whole Farm Units 60% 64% 80% not avail. 65% 59% 70% 75% 55% 77% 48% 68% 71% 85% 38% 53% 56%

Enterprise Units Available for YP, RP and RP-HPE Must include at least 2 sections CRC used acres instead of sections At least 2 sections must have acres equal to or greater than the lesser of 20 acres or 20% of the total

Enterprise Units Generally, the more acres you combine into one unit, the lower the cost per acre Probability of collecting a payment is lower, too But grain and dollars are commingled

Whole Farm Units Combine all insurable crops in county Available for Revenue Protection only Must include at least 2 crops that are each 10% or more of the total planted acres

Prevented Planting/Replant Payments Based on Feb. futures price, not October Replant payments are no longer based on actual costs Replant Payments: Corn: 8 bu. x Feb. price, per acre Soybeans: 3 bu. x Feb. price, per acre

Looking Forward Corn: Dec. 2011 futures $ 6.02 Soy: Nov. 2011 futures $13.75 as of Feb. 10, 2011 (Feb. average)

Corn Insurance Prices Harvest prices have been higher 3 out of last 11 years

Soy Insurance Prices Harvest prices have been higher 6 out of last 11 years

Good Performance Refund Recent proposal by RMA that could be in place for the 2011 crop year Would provide a refund to producers for good crop insurance performance Less than 2 years of losses over ten years (2000-09) Have paid in more than they have received Preliminary rules are under discussion now Total refunds in the $75 million range Estimated average refund for qualifiers ~ $1000 Refunds will be between $25 and $25,000 per producer

Upcoming ISU Extension Events The New COMBO Crop Insurance Policy: Insuring a Profit in 2011 Date Time City Location Feb. 15 10am – 2pm Cherokee Cherokee Co. Ext. Office Feb. 21 Atlantic Cass Co. Community Center Feb. 22 Noon – 4pm Fairfield Jefferson Co. Ext. Office Feb. 24 Iowa Falls ECC Ag & Renewable Energy Center Mar. 1 1pm – 4pm Washington Washington Co. Ext. Office Featured Speaker: William Edwards, Ext. Farm Management Specialist Computers will be provided to explore crop insurance tools $20 Registration Fee (except Washington, $25; Lunch provided) Iowa Farm Bureau Crop Insurance Webinar, Feb. 17, 1pm Featured Speakers: William Edwards and Ed Kordick Live weblink from www.iowafarmbureau.com (membership not required)

Thank you for your time. Any questions. My web site: http://www. econ Thank you for your time! Any questions? My web site: http://www.econ.iastate.edu/~chart/ Iowa Farm Outlook: http://www.econ.iastate.edu/ifo/ Ag Decision Maker: http://www.extension.iastate.edu/agdm/