Agriculture Focus: Basic Crop Prices Will Rise for 2022 Crop Insurance

The deadline for farmers to purchase crop insurance for the 2022 growing season is March 15. Spring 2022 prices for corn and soybeans will likely be near or above the highest base price levels of the past decade, which will improve the crop insurance coverage available for 2022 compared to recent years. However, due to higher insurance coverages, premium costs are also likely to be higher than a year ago for similar crop insurance products.

Producers have several crop insurance policy options to choose from, including yield protection policies and revenue protection policies, supplemental crop option, enhanced coverage option, and other crop insurance policy options. private insurance.

In recent years, most farmers have opted for revenue protection insurance policy options, which provide a guaranteed minimum of gross revenue dollars per acre (yield x spring price). This minimum guarantee is based on a farm unit’s yield history multiplied by the spring (base) price and average CBOT prices during the month of February for December corn futures and November soybean futures.

From February 7estimated spring crop insurance prices for 2022 in the Upper Midwest for YP, RP and RPE policies have been estimated at $5.73 the bushel for corn and $13.90 per bushel for soybeans. Spring 2021 Crop Insurance rates will be finalized on 1st of March. Current 2022 base price estimates compare to 2021 base prices of $4.58 the bushel for corn and $11.87 per bushel for soybeans.

The final crop income for 2022 will be the actual yield of a farm unit multiplied by the final crop insurance crop price, which is the average CBOT prices in the month of October for corn futures. December and November soybean futures.

Another insurance option that has a lower premium than a typical RP policy with crop price protection is an RPE (crop price exclusion) policy, which works the same way as an RP policy. standard, except that guarantees on RPE policies are set at the base price level and are not affected by crop prices above the base price.

The revenue guarantee for standard RP policies is increased for final insurance calculations, if the average CBOT prices during the month of October are higher than the February CBOT prices, which happened for corn and soybeans in 2020 and 2021. Producers who buy RP and RPE insurance coverage is between 50% and 85%, and losses are paid if the final crop income falls below the guaranteed income.

A historical analysis of the past 14 years (2007-21) shows that the final crop insurance price for corn has been below the spring base price for 10 of the 15 years, including 2013-19. This trend reversed in 2020 when the price of the maize crop was $3.99 the bushel, which was $0.11 above the spring price.

This happened again in 2021 when the spring price was $4.58 per bushel, compared to a harvest price of $5.37 per bushel, an increase of $0.79 per bushel. The only other years that saw a crop price increase were 2010, 2011 and 2012. The range was for a crop price increase of $1.82 per bushel in 2012 to declines of $1.27 the bushel in 2008 and $1.26 per bushel in 2013.

For soybeans, the price at harvest increased in seven years (2007, 2009, 2010, 2012, 2016, 2020 and 2021), decreased in seven years (2008, 2011 and 2014-2019) and remained the same in 2013 The range was an increase of $2.84 per bushel in 2012 to a decline of $3 per bushel in 2008. In 2021, the final price of the harvest was $12.30 per bushel, an increase of $0.43 the bushel of the spring price of $11.87 per bushel.

Many Upper Midwest growers have been able to significantly improve their insurance protection in recent years by using the Trend Adjusted Yield Rider, with slightly higher premium costs. The APH Yield Exclusion option allows specific low producing years to be excluded from the APH Yield Guarantee calculations of Crop Insurance. For more information on YE eligible counties, crops, and years, visit the RMA website.

What to know about additional and enhanced insurance coverage options

Coverage for the Supplemental Coverage Option is only available to growers who select the Price Loss Coverage agricultural program option for the 2022 crop year. The 2022 agricultural program application deadline is March 15which corresponds to the deadline for joining the 2022 crop insurance.

Therefore, farmers will need to consider SCO insurance coverage at the same time they finalize their 2022 farm program selection. The federal government subsidizes 65% of the premium for SCO coverage, so premiums at the the farm are quite reasonable, which can make SCO a viable option for producers who choose the PLC farm program option.

SCO allows producers to purchase additional crop insurance coverage at the county level up to a maximum of 86% coverage. For example, a producer purchasing an 80% RP policy could purchase an additional 6% SCO coverage. SCO is a county revenue-based insurance product that is somewhat similar to some of the local risk protection crop insurance products that are available.

Calculations for SCO work very similarly to PR insurance policies, as they use the same crop insurance base price and crop price. The biggest difference is that SCO uses county-level average yields, rather than the farm-level APH yields that are typically used for most RP and YP policies. Therefore, SCO and RP insurance policies may yield different results.

The Enhanced Coverage Option was a new crop insurance option in 2021 that will be available again for 2022. ECO provides area-based insurance coverage from 86% to 95% coverage, using yields of county similar to SCO coverage.

Growers can choose between 90% and 95% ECO coverage. Unlike SCO coverage, the purchase of ECO coverage is available with the selection of the choice of PLC or ARC-CO agricultural program for 2021. Producers can use both ECO and SCO, in addition to their insurance policy underlying RP, RPE or YP.

It is possible for a producer to collect on an individual RP font, but not to collect on an SCO or ECO font, or vice versa. For example, a grower with an 80% RP policy may have a loss that qualifies for an insurance payout on a farm unit, while the county as a whole may not meet the threshold to qualify. to an SCO or ECO payment. It might also be possible to collect an SCO or ECO payment for revenue loss at the county level, without being eligible for an RP insurance payout at the farm level. Interested growers should check with their crop insurance agent for details of SCO and ECO insurance coverage and premiums for 2022.

Here’s the “outcome” of crop insurance decisions

Given the likely higher spring crop insurance base prices for corn and soybeans, most growers should be able to afford a very desirable level of risk protection for corn and soybean production. of soybeans in 2022. At current spring price levels, many producers will be able to guarantee almost $700 over $900 per acre for corn, and nearly $500 over $700 per acre for soybeans using an 85% PR insurance coverage level in 2022.

Producers can further enhance their revenue guarantees through “buy-out” crop insurance coverage and “wind” and “hail” endorsements offered by private insurance companies, or by purchasing coverage SCO or ECO insurance. Sometimes crop insurance decisions can be more difficult in years like 2022 with higher spring base prices and insurance coverage, but also with higher crop insurance premium costs.

A reputable crop insurance agent is the best source of information for more details on the various crop insurance products offered, for premium quotes, and to help finalize crop insurance decisions from 2022. To receive a free copy of a fact sheet entitled: “Crop Insurance Decisions 2022”, written by Kent ThiesseFarm Management Analyst, please send an email to: [email protected].

Here are some websites with very good information on crop insurance:

* USDA Risk Management Agency (RMA): rma.usda.gov

* University of Illinois FarmDoc : farmdoc.illinois.edu/cropins/index.as

For more information, contact Kent Thiesseagricultural management analyst and senior vice-president, MinnStar Bank, Crystal Lake, Minn.at 507-381-7960 or [email protected].