Producers should initially sign up for new insurance option

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A Texas A&M AgriLife Extension Service economist said the only decision farmers need to make soon concerning the U.S. Department of Agriculture Risk Management Agency announcement Tuesday of counties covered under the new Supplemental Coverage Option insurance program is “go ahead and sign up.”

Dr. Joe Outlaw, co-director of the Agricultural and Food Policy Center at Texas A&M University and AgriLife Extension economist in College Station, spoke at the Cattle Trails Wheat and Stocker Conference at Wichita Falls shortly after the announcement was made.

With the crop insurance deadline looming in September and many of the final details unknown on the farm bill, the best thing for producers to do now is go ahead and sign up for the Supplemental Coverage Option, or SCO as it will be known, when they purchase the individual coverage they normally buy, he said.

They have several months to drop SCO if they decide they do not want it or if they select the Agricultural Risk Coverage, or ARC as it will be known, on their wheat through the USDA Farm Service Agency, he said. Choosing the Agricultural Risk Coverage will automatically make them ineligible to buy or keep SCO.

Outlaw said the final decision doesn’t have to be made until December, so producers should go ahead and sign up for SCO now and then drop it before the deadline if they decide it is not for them.

“If you choose ARC, you are not going to be able to buy the supplemental coverage,” Outlaw said. “Also, if your county isn’t available for SCO on wheat, then you don’t have to worry about it.”

He said all the major wheat growing regions of Texas were included in the coverage map.

Outlaw explained that SCO provides extra protection over and above the normal coverage for a premium and can be thought of as covering part of the deductible associated with the producers’ individual coverage.

“Coverage starts at 86 percent and ends at the individual protection level,” he said. “So if a producer normally purchases 65 percent coverage, the SCO policy would cover from 86 percent down to 65 percent for an additional premium.”

“All it is doing is letting you cover more of that deductible area,” Outlaw said. “Most producers know year in and year out they won’t have enough loss to get past their deductible. This provides the opportunity to get more coverage at a pretty cheap rate. You are going to have to make a choice if you are in a covered county.”

According to the new rule, producers applying for SCO for the 2015 winter wheat crop may withdraw coverage on any farm where they have elected, or where they intend to elect, ARC for winter wheat by their earlier acreage reporting date or Dec. 15, without penalty.

“This allows producers additional time to make an informed decision related to whether to elect to participate in either the ARC or Price Loss Coverage, programs for their winter wheat,” Outlaw said. “Unless you tell them you want in, you are not going to get in. But you can always get out of it if you determine it is not what you need.”

The rule also stated: In order to withdraw coverage without penalty, producers must notify their agents of their intended election for ARC by their winter wheat acreage reporting deadline.

“On the choice between ARC and PLC for wheat, a few months ago I might have thought PLC was the better choice, but under more recent price forecasts, I might lean more for ARC,” he said. “In the end, the question is where do you think prices will be; where do you want your protection to be.”

Outlaw said producers can begin to see how their farm will fit under different scenarios by going to the Agricultural and Food Policy Center website at https://www.afpc.tamu.edu/ and clicking on the Economic Models link to gain access to the tool he and his co-workers have been developing for more than 1.5 years.

The tool is at the bottom of the page, he said, adding there are a number of podcasts he has done to help explain the program, but of most importance for producers wanting to know what data is needed and how to plug it into the tool are podcasts No. 11 and No. 12.

“Also, if you set up an account today and they make a substantial change to the rules in the coming months, we will send you an email notice to say it might change your decisions and that you might want to re-run your analysis,” Outlaw said. “You can save your data, but you don’t have to. I just want y’all to know how to use it.”

He said this tool “is the ultimate ‘what if’ machine. You can plug in one set of numbers and then run it and come back and change those numbers according to various ‘what if’ situations to give you a better idea of how things might change. And it only takes a very short time to see all the scenarios.”


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