1. Choosing Crop Insurance for 2012 William Edwards, ISU Extension Economist

2. COMBO Insurance Coverage (Iowa, 2011) Revenue Protection = 88.5% of Insured Acres Source: USDA Risk Management Agency, September 2011

4. Causes of Crop Insurance Losses 2001-2010 (Iowa)

5. Corn Indemnity Prices

6. Soybeans Indemnity Prices

7. Revenue Payments in 2011 CornSoybeans 2011 projected price (Feb. futures)$6.01$13.39 2011 harvest price (Oct. futures)$6.32$12.14 Price decline0%9% Yield loss to trigger payment@ 80%20%12% Yield loss to trigger payment@ 75%25%17%

8. What’s New for 2012 APH (proven) yields can be adjusted for yield trends. Premiums will be lower. Biotech Endorsement discount has been discontinued. Reporting, billing dates changed.

9. APH Yield Trend Adjustment Actual Production History (APH) yields have been a simple average of yields for the past 4 to 10 years Did not reflect upward yield trends Farms with longer yield histories were at a disadvantage Beginning in 2012 a yield trend adjustment is available

10. Iowa Average Yields

11. Trend Adjusted APH Yields Approved for most of Corn Belt Trend factor estimated for each county, based on historical county yields Separate factors for corn and soybeans Annual factor is added to producers’ yield history

12. Example Farm has 10 years of yield history for corn County trend adjustment factor is 2.0 bu/yr

13. Trend-Adjusted Actual Production History Yield Example YearReported YieldYield AdjustmentAdjusted Yield 200213320153 200314518163 200416716183 200512214136 200615712169 200716510175 20081718179 20091936199 20101764180 20111972199 Average1632012 APH= 174

14. APH Yield Trend Adjustment

16. Trend factor is reduced 25% for each year that fewer than 4 actual yields are available. Example: –3 years, adjustment factor = 1.5 bu/year –2 years, adjustment factor = 1.0 bu/year –1 year, adjustment factor = 0.5 bu/year

17. APH Yield Trend Adjustment Maximum adjusted yield is the highest actual yield plus the adjustment factor. Example: 197 bu/acre is highest yield submitted in the last 10 years Maximum adjusted yield = 197 bu. + 2 bu. = 199 bu./ac (higher than 174, no effect) Applies only when yield history has been very consistent over time

18. Trend-Adjusted Actual Production History Yield Example YearReported YieldYield AdjustmentAdjusted Yield 200213320153 200314518163 200416716183 200512214136 200615712169 200716510175 20081718179 20091936199 20101764180 20111972199 Average163 174 =2012 APH

19. Implication: more dollars guaranteed Before: –APH = 163 bu/acre –80% guarantee, $5.70 projected price –Coverage = $743.28 After: –APH = 174 bu/acre –80% guarantee, $5.70 projected price –Coverage = $793.44 Or: 75% x 174 bu/ac x $5.70 = $743.85

20. Premium Rates to be Lowered Loss ratios in Midwest have rarely exceeded 100% in recent years Technology, weather Average Iowa rates will be reduced: –13% for corn – 9% for soybeans Will vary by county

21. Loss payments in Iowa rarely exceed 100%

22. Biotech Endorsement (BE) Premium discount for planting selected hybrids with risk reducing traits. Pilot project for 2008 through 2011. Discontinued as of 2012. Eligible hybrids are in wide use.

23. Lower Indemnity Prices in 2012? CornSoybeans 2009$4.04$8.80 2010$3.99$9.23 2011$6.01$13.49 2012?$5.70??$12.30??

24. Premiums in 2012? Higher APH yields Lower premium rates Change in projected price?

25. Dates Changed Acreage reporting date: –From June 30 to July 15 Premium billing date –From October 1 to August 15

26. Key Points for 2012 1.Indemnity prices may be a little lower. 2.Yield trend adjustment is available. 3.Premium rates will be lower. 4.Biotech endorsement is discontinued 5.Reporting and billing dates are changed.