More, cheaper insurance options available in '13

Growers have more, cheaper insurance options in 2018.

Published on: Jan 12, 2013

     Given the prospect of reduced insurance rates, an expanded opportunity to rewrite farm “history,” and a new option to separate low- and high-risk acres, crop insurance may appear even more appealing for Illinois farmers. 

     Growers recovering from last year’s drought have available what Illinois Farm Bureau risk management specialist Doug Yoder deemed a significant new tool: the High Risk-Alternative Coverage Endorsement (HR-ACE).

     Under the endorsement, producers can opt for separate reduced-yield coverage on high-risk acres within a county or, in the event general acres are covered under a revenue policy, either revenue protection at a lower coverage level or simply an equal or reduced level of yield coverage. Yoder called the new endorsement “a biggie, especially as you move south.”

     “In Illinois, revenue coverage easily is the most popular (crop insurance) option,” he noted. “Last year, an 85 percent coverage level was the most widely used protection.

     “But 85 percent revenue protection on high-risk ground is unaffordable -- it’s astronomical. Your only other choices were to exclude those acres completely from coverage or take bare-minimum catastrophic coverage at a 50 percent price and 50 percent coverage. HR-ACE allows you to have additional coverage options on that high-risk ground.”

     IFB long has lobbied for HR-ACE-style options. The Illinois Corn Growers Association, meanwhile, was instrumental in USDA Risk Management Agency’s three-tiered adjustment of county insurance rates, which continues this year with further corn and soybean rate reductions in most of the northern two-thirds of the state (see accompanying map).

     Further, an expanded Trend-Adjusted-Actual Production History (TA-APH) option offers “huge benefits” for Illinois farmers, Yoder said. Eligible producers may adjust APH to better reflect more recent county yield trends (higher APH generally translates into a higher guarantee).

     TA-APH, which was available for all Illinois soybean acres and corn acres in selected counties in 2012, is extended to all Illinois counties this season. In addition, the option was opened to wheat growers this fall.

     TA-APH consistently results in reduced premium per dollar of coverage. For example, a Macon County farmer who paid $23 per acre in 2012 premiums to protect 151 bushels at an 85 percent coverage level without adjustment might have enjoyed an equal level of protection at a $15 premium with 80 percent coverage, University of Illinois crop insurance specialist Bruce Sherrick said.

     “Especially in the Midwest, for corn and soybeans, trend yields have such a major effect on the (crop) guarantee,” U of I ag economist Nick Paulson told FarmWeek. “For wheat, the trend yield increases over time haven’t been as strong, but in general, you’re basically adjusting coverage to more accurately reflect your production potential.

     “I think trend adjustment is a great addition to the program, in terms of producers being able to cover what their true expected production and projected revenue are in any given crop year.”