1. January 2010 Steven D. Johnson Farm & Ag Business Management Specialist (515) 957-5790 sdjohns@iastate.edu www.extension.iastate.edu/polk/farmmanagement.htm Evaluating Crop Insurance Options

2. 2010 Crop Insurance Considerations  Can my operation withstand a large yield loss or crop price decline?  Should I buy enough crop insurance just to cover my input costs?  Should I elect MPCI or Revenue coverage?  What level of coverage should I elect?  Should I elect Basic, Optional or Enterprise Units?  Should I purchase hail insurance along with the MPCI or Revenue coverage?  Should I request the Biotech Endorsement (BE) for corn?  How can I forward price a portion of my 2010 crop using various crop insurance products? Source: Johnson, ISU Extension, January 2010

3. 2010 Crop Insurance Decisions Source: Johnson, ISU Extension, January 2010

4. Crop Insurance for Iowa Corn Acres Source: USDA Risk Management Agency, October 2009 85% of all 2009 insured acres are covered by Revenue Products Note: Expect CRC & RA to be combined into one “combo product” for 2011

5. Level of Coverage for Iowa Corn Acres - 2009 2.99% 0.21%2.54% 10.55% 20.81% 34.42% 21.59% 7.26% 1.62% Source: USDA Risk Management Agency, October 2009

6. Crop Insurance for Iowa Soybean Acres Source: USDA Risk Management Agency, October 2009 84% of all 2009 insured acres are covered by Revenue Products

7. 2.97% 0.20% 0.48% 9.74% 18.58% 33.66% 23.27% 9.54% 1.55% Level of Coverage for Iowa Soybean Acres - 2009 Source: USDA Risk Management Agency, October 2009

8. Crop Insurance Premium Subsidies Source: USDA Risk Management Agency, October 2009

9. Crop Insurance Units Optional Units: Each farm is separate Basic Units: Combines owned and cash rented acres Enterprise Units: Combine all acres of the same crop across the county Whole Farm: Combine corn and beans

10. Enterprise Unit Overview 654321 789101112 181716151413 192021222324 302928272625 313233343536 If all your farm ground has a similar proximity and productivity, Enterprise Units could be an advantage Example Township with 36 sections However, if you elect Enterprise Units, all corn fields in the county will be combined for Federal Crop Insurance coverage. Source: Johnson, ISU Extension, January 2010 Typical County with 16 Townships

11. Basic vs. Optional Unit Example Share with Jones 2.00 Share with Smith 1.00 Share with Jones 2.00 Farm/Section 6Farm/Section 5 Cash Rent 3.00 Owns 3.00 Farm/Section 7Farm/Section 8 Share with Jones 2.02 Share with Smith 1.00 Share with Jones 2.01 Farm/Section 6Farm/Section 5 Cash Rent 3.01 Owns 3.02 Farm/Section 7Farm/Section 8 Insured has 3 Basic Units: 1 with Smith = Unit 1.00 1 with Jones = Unit 2.00 1 for Cash Rent & Owned = Unit 3.00 Insured has 1 Basic Unit: 1 with Smith = Unit 1.00 Insured has 4 Optional Units: 1 with Jones = Unit 2.01 1 with Jones = Unit 2.02 1 for Cash Rent = Unit 3.01 1 for Owned = Unit 3.02 Source: Johnson, ISU Extension, January 2010

12. Enterprise Unit (EU) Advantages Premium savings in 2009 enabled producers to insure crops at higher levels of coverage (move from 75% to 85% level) Easier to qualify for Prevent Plant and Replant claims than Optional Units (20/20 rule: minimum of 20 acres or 20% of the unit) If already insured, you may improve Actual Production History (APH) yields by combining units and dropping off older yields. Source: Adapted from Crop Insurance Industry, December 2009

13. Enterprise Unit (EU) Disadvantages Variability in farm ground and crop rotation If you have inconsistent crop APHs Farm ground is dispersed throughout a county Localized loss such as hail could occur, so consider additional crop hail coverage Irrigated and non-irrigated crops must be combined Crop disease and quality issues could arise. Source: Adapted from Crop Insurance Industry, December 2009

14. Biotech Endorsement (BE) Qualifications Expanded hybrids and the entire Corn Belt 75% of the acres per unit must be planted to qualifying hybrids Customer must complete certification form and provide seed invoices by acreage reporting date (typically June 30 th or July 15 th ) Producer must keep track of where corn is planted by unit Lack of compliance penalty, loss of premium only Estimated premium discount of 10-15%. Source: USDA Risk Management Agency, December 2009

15. Specialty Soybean Coverage Can be insured separately in 2010 Must be covered by a yield product, not revenue Past yield records can be used to create APH yield for each type of soybeans Low yields will not drag down the APH yield for conventional/GMO beans Indemnity price is the higher of contract price or conventional APH soybean indemnity price Source: USDA Risk Management Agency, December 2009

16. 2010 Crop Insurance Reminders Recordkeeping has become more important with 2008 Farm Program changes Keep APH production records for up to 3 years plus current year APH yields are used for both SURE and ACRE programs Crop insurance policy entity type and Tax ID and/or SSN number needs to match FSA documentation Inconsistent information can reduce or eliminate crop insurance loss payments. Source: USDA RMA & FSA, January 2010

17. 2010 Crop Insurance Indemnity Prices CornAPH (Yield)Revenue 2009$4.00$4.04 2010$3.90 Dec. Corn futures in the month of February Soybeans 2009$9.90$8.80 2010$9.15 Nov. Soybean futures in the month of February Source: USDA Risk Management Agency, December 2009

18. New Crop ‘10 Corn Chart Source: www.jimwyckoff.com, January 25, 2010

19. New Crop Corn Seasonal Trend 79% Odds: Spring Price Exceeds Harvest Price Source: www.cmegroup.com U of MN, CFFM, 2009 80% Odds that Spring Price is higher than Fall

20. Corn Historical Crop Insurance Prices 1995 1993 2002 2006 1997 Source: USDA Risk Management Agency, October 2009 75% of the Time the Spring Price is higher than Fall

21. New Crop ‘10 Soybean Chart Source: www.jimwyckoff.com, January 25, 2010

22. New Crop Soybean Seasonal Trend 79% Odds: Spring Price Exceeds Harvest Price Source: www.cmegroup.com U of MN, CFFM, 2009 67% Odds that Spring Price is higher than Fall

23. Soybean Historical Crop Insurance Prices 1995 1993 2002 2005 2003 1990 2007 2009 Source: USDA Risk Management Agency, October 2009 60% of the Time the Spring Price is higher than Fall

24. 23% 31% 29% 17% Roll 7Roll 8 or 10 $3.12/bu. $3.91/bu. $4.80/bu. $6.28/bu. Assumes a Neutral ENSO on June 1st, 2010 National Avg. Yield, Dec. 2010 Corn Futures Price at Harvest Source: Taylor, ISU Extension Climatologist, December 2009 2010 Long-Term Corn Yield Probability

25. CRC or RA Coverage 170 bu/A APH 75% Level $4.00 bu/A Spring and Fall Price Crop Revenue Insurance Coverage (with SURE) SURE Coverage 115% of Revenue Coverage Source: Johnson, ISU Extension, January 2010

26. Comparing ACRE Payments to CCP 2010 ACRE Cash Price Triggers: Corn = $3.35 /bu Soybeans = $8.55 /bu Counter-Cyclical Payment (CCP) Nat’l Cash Price below: $2.35 /bu Corn $5.56 /bu Soybeans CCP ACRE Source: Johnson, ISU Extension, January 2010

27. Source: Johnson, ISUE Farm Mgt., Sept. 2008. Consider 2010 ACRE Enrollment by June 1st Prove your APH annually for Optional Units Consider Multiple Pre-Harvest Marketing Strategies Use Crop Insurance Revenue Products (Consider Additional Hail Coverage) 5 Strategies for Managing Revenue Risk Wrap up Crop Sales with Spring Seasonal Price Trends Source: Johnson, ISU Extension, January 2010

28. 5 Crop Insurance Web Sites Crop Risk Management - ISU Polk County (Crop Marketing Newsletter & Crop Insurance Updates, Webcasts) www.extension.iastate.edu/polk/farmmanagement USDA Risk Management Agency (RMA) www.rma.usda.gov Ag Manager – K-State Extension www.agmanager.info Farm Doc – U. of Illinois Extension www.farmdoc.illinois.edu Ag Decision Maker – ISU Extension (Decision Tools, Newsletters, Publications and Voiced Media) www.extension.iastate.edu/agdm Source: Johnson, ISU Extension, January 2010