You won’t find a laundry list of new products or major changes as you make your 2019 crop insurance selections. But with continued financial strain and increases in yields, now is a good time to re-evaluate your coverage plan, seek expert advice and analyze the options available.
As you try to whittle down your cost of production, you might be tempted to reduce your crop insurance coverage. Before you make the cut, weigh the pros and cons.
“Farmers need to talk to their bankers to find out their banker’s biggest concern with them for 2019,” says Jamie Wasemiller, analyst and crop insurance agent with the Gulke Group. “You may decide you want to reduce insurance to cut costs, but they might prefer you protect more of your crop and revenue with insurance.”
Farmers have harvested record or near-record yields the past several years. Since your actual production history (APH) yield is used to set the guarantees under the Federal Crop Insurance Corporation, analyze how your current coverage levels stack up.
“With the high yields we have seen the last few years that are above farmers’ APH, regular multi-peril crop insurance is leaving a lot of bushels unprotected,” Wasemiller says. “My concern is producers will end up not protecting the price of those unprotected bushels.”
If you fall into this category, think about adding a private crop insurance product to provide additional protection. Private products tend to be more customizable than standard products, Wasemiller says.
Depending on the spring prices for multi-peril, farmers could opt for only protecting yields in 2019 (as opposed to yields and revenue).
“But I think this year it’s better to stick with revenue coverage because so much outside of production can affect that value of our crops, such as tariffs, the U.S. dollar, exports and political unrest,” Wasemiller says.
Private crop insurance products address risk exposure that is not adequately protected through the traditional crop insurance products, says Mike Scherer, president of Ag Risk Solutions.
“The most common private coverage we see used is hail and wind coverage,” he says. “Especially with so many of our clients moving to enterprise units, private hail and wind coverage can be a great and cost-effective way to address the most common cause of spot losses.”
Consider private products such as increased coverage election (ICE) and revenue accelerator max protection (RAMP) to supplement your multi-peril policy, Wasemiller says. Both provide coverage for when production or revenue losses are over or under the multi-peril guarantee. With these programs, you can protect up to 95% of your revenue guarantee.
“These programs had pretty good success on corn and worked great on soybeans in 2018 and should be considered in 2019,” Wasemiller says. “You could lower your level of multi-peril by 5% to 10% to help pay for a higher level of coverage, which reduces that cumbersome deductible we all deal with every year.”
Analyze the costs and benefits of these extra programs. “There may be situations where it makes sense to increase coverage to protect cash flow requirements, but there’s a limit to where that is still cost-effective,” Scherer says. “When it comes to lowering coverage to reduce costs, Farmers need to be careful to not take that too far and expose themselves to a worst-case scenario.”
As always, review your options this winter so you are ready to make the best selection for your farm. “Get your intended acres to your agent so they can put together an accurate and comprehensive quote showing your options,” Scherer encourages. “Remember that each county, crop and practice are separate coverage decisions.”
Register Now for Top Producer Seminar
You can learn more about crop insurance from Jamie Wasemiller at the 2019 Top Producer Seminar, which takes place Jan. 15-17 in Chicago. Learn more and register at tpsummit.com.