AN OVERVIEW OF FEDERAL AN OVERVIEW OF FEDERAL CROP INSURANCE IN CROP INSURANCE IN

WISCONSINWISCONSIN

PAUL D. MITCHELLPAUL D. MITCHELL

AGRICULTURAL AND APPLIED ECONOMICSAGRICULTURAL AND APPLIED ECONOMICSUNIVERSITY OF WISCONSIN-MADISONUNIVERSITY OF WISCONSIN-MADISON

UNIVERSITY OF WISCONSIN-EXTENSIONUNIVERSITY OF WISCONSIN-EXTENSION

Goal TodayGoal Today Overview major crop insurance policies Overview major crop insurance policies

available in Wisconsinavailable in Wisconsin Explain how they workExplain how they work General recommendations for General recommendations for

producersproducers You will leave withYou will leave with

Some new knowledge (hopefully)Some new knowledge (hopefully) Written materialsWritten materials Know where to go for more informationKnow where to go for more information

Crop InsuranceCrop Insurance

USDA’s Risk Management Agency (RMA) USDA’s Risk Management Agency (RMA) operates the Federal Crop Insurance operates the Federal Crop Insurance Corporation (FCIC) to manage the federal Corporation (FCIC) to manage the federal crop insurance programcrop insurance program

RMA “endorses” policies: makes subsidies RMA “endorses” policies: makes subsidies available for companies and farmersavailable for companies and farmers

Without RMA endorsement/subsidy, few Without RMA endorsement/subsidy, few crop insurance polices would be availablecrop insurance polices would be available

Insurable Crop Insurance Plans Apples GYC Barley APH Cabbage GYC

Cigar Binder Tobacco Tobacco (Guaranteed Production) Corn APH, CRC, GRP, GRIP Cranberries APH Dry Beans APH

Forage Production APH, GRP Forage Seeding Dollar Amount of Insurance Grain Sorghum APH, CRC

Green Peas GYC Hybrid Seed Corn GRP, GRIP, Yield-Based Dollar Amount of Insurance

Mint APH Nursery Dollar Amount of Insurance Oats APH Potatoes GYC

Processing Beans GYC Processing Sweet Corn APH, GRP, GRIP

Soybeans APH, CRC, GRP, GRIP Wheat APH, CRC Feeder Cattle LRP Fed Cattle LRP

Swine LRP

Insurable Crop Total Crop Acres % Insured Apples 6,400 17% Barley 45,000 10% Cabbage 2,270 100%

Cigar Binder Tobacco 1,820 65% Corn 3,750,000 56% Cranberries 16,300 95% Dry Beans 6, 600 27% Forage Production 2,400,000 15% Forage Seeding 550,000 10% Grain Sorghum -- 0% Green Peas 37,800 46% Hybrid Seed Corn 9,515 100%

Mint 3,900 56% Nursery 1730 farms 2% Oats 340,000 8% Potatoes 81,000 47%

Processing Beans 75,000 53% Processing Sweet Corn 92,800 43%

Soybeans 1,720,000 63% Wheat 247,000 33%

Why Low Participation in Why Low Participation in WI?WI?

More diversified production, so less More diversified production, so less need for external risk management need for external risk management toolstools More crops per farmMore crops per farm Livestock/Dairy commonLivestock/Dairy common

Rates seem higher: Premiums jump Rates seem higher: Premiums jump when cross state borderwhen cross state border McHenry to Walworth: 40%-75%McHenry to Walworth: 40%-75% Washington to St. Croix: 17%-35%Washington to St. Croix: 17%-35% Allamakee to Crawford: 16%Allamakee to Crawford: 16%

Overview of PoliciesOverview of Policies

Quick description of major policiesQuick description of major policies APH, CRC, GRP, GRIP, Dollar PlanAPH, CRC, GRP, GRIP, Dollar Plan

How each determines Coverage How each determines Coverage (Liability)(Liability)

How each Triggers an IndemnityHow each Triggers an Indemnity

Overview of PoliciesOverview of Policies Actual Production History (APH)Actual Production History (APH)

The fundamental crop insurance policyThe fundamental crop insurance policy Yield guarantee based on actual yield Yield guarantee based on actual yield

historyhistory If harvested yield is less than yield If harvested yield is less than yield

guarantee, farmer receives an indemnityguarantee, farmer receives an indemnity Multiple Peril Crop Insurance (MPCI)Multiple Peril Crop Insurance (MPCI) Grower Yield Certification (GYC)Grower Yield Certification (GYC) Catastrophic Coverage (CAT) is the Catastrophic Coverage (CAT) is the

minimum APH coverage anyone can buyminimum APH coverage anyone can buy

Overview of PoliciesOverview of Policies

Crop Revenue Coverage (CRC)Crop Revenue Coverage (CRC) Revenue guarantee based on actual yield Revenue guarantee based on actual yield

history and futures markets prices at history and futures markets prices at plantplant

If harvest revenue is less than revenue If harvest revenue is less than revenue guarantee, farmer receives an indemnityguarantee, farmer receives an indemnity

Essentially combines APH yield coverage Essentially combines APH yield coverage with price coveragewith price coverage

More popular than APHMore popular than APH

Overview of PoliciesOverview of Policies

Group Risk Protection (GRP)Group Risk Protection (GRP) If USDA-NASS county average yield less If USDA-NASS county average yield less

than chosen guarantee, farmer receives than chosen guarantee, farmer receives indemnityindemnity

Like APH, but for county yieldLike APH, but for county yield Group Risk Income Protection (GRIP)Group Risk Income Protection (GRIP)

If county average revenue less than chosen If county average revenue less than chosen guarantee, farmer receives indemnityguarantee, farmer receives indemnity

Adds low price coverage to GRPAdds low price coverage to GRP Like CRC, but for county average yieldLike CRC, but for county average yield

Overview of PoliciesOverview of Policies

Dollar Amount of Insurance (Dollar Dollar Amount of Insurance (Dollar Plans)Plans) RMA determines available dollar amounts of RMA determines available dollar amounts of

coverage and producer chooses amountcoverage and producer chooses amount If stand kill/yield loss occurs, then grower If stand kill/yield loss occurs, then grower

receives indemnityreceives indemnity Like APH, but RMA, not grower yield history, Like APH, but RMA, not grower yield history,

determines available coverage. determines available coverage. Forage Seeding, Hybrid Seed CornForage Seeding, Hybrid Seed Corn

Policies Policies NOTNOT available in WI available in WI Revenue Assurance (RA)Revenue Assurance (RA)

Like CRC, but lower premium for same Like CRC, but lower premium for same coveragecoverage

More popular than CRC when both availableMore popular than CRC when both available Available for corn and soybeans in 19 states Available for corn and soybeans in 19 states

(ND to CO to OK to LA-TN-NC to MI)(ND to CO to OK to LA-TN-NC to MI) Adjusted Gross Revenue (AGR) and AGR-LiteAdjusted Gross Revenue (AGR) and AGR-Lite

Whole farm income insurance for diversified Whole farm income insurance for diversified producers of under-served commodities in producers of under-served commodities in under-served statesunder-served states

Income Protection (IP): farm level income Income Protection (IP): farm level income insurance for few crops in few statesinsurance for few crops in few states

How APH WorksHow APH Works

Unit StructureUnit Structure APH yield calculationAPH yield calculation Coverage Level and Price ElectionCoverage Level and Price Election PremiumsPremiums Late and Prevented PlantingLate and Prevented Planting Farmer ResponsibilitiesFarmer Responsibilities

Insurance UnitInsurance Unit

If yield for the whole unit is less than the If yield for the whole unit is less than the unit’s yield guarantee, triggers indemnityunit’s yield guarantee, triggers indemnity A 300 acre unit with a 100 bu/ac guarantee A 300 acre unit with a 100 bu/ac guarantee

would have to yield less than 100 x 300 = would have to yield less than 100 x 300 = 30,000 bu to trigger an indemnity30,000 bu to trigger an indemnity

100 ac with 0 yield + 200 ac with 150 bu/ac = 100 ac with 0 yield + 200 ac with 150 bu/ac = 30,000 bu, triggers no indemnity30,000 bu, triggers no indemnity

Each unit is possibly/likely several fieldsEach unit is possibly/likely several fields Farmers do better with more/smaller unitsFarmers do better with more/smaller units

Unit StructureUnit Structure

RMA has rules for unit structureRMA has rules for unit structure Each unitEach unit

Planted to same crop during insurance Planted to same crop during insurance periodperiod

Cannot cut across a county lineCannot cut across a county line Separate production records for each unit Separate production records for each unit

Three unit typesThree unit types Basic Unit, Optional Unit, Enterprise UnitBasic Unit, Optional Unit, Enterprise Unit

Basic UnitBasic Unit

OneOne basic unit for all acres planted to the basic unit for all acres planted to the insured crop on land producer owns/cash insured crop on land producer owns/cash rentsrents

OneOne additional basic unit designation for all additional basic unit designation for all acres planted to the insured crop on land the acres planted to the insured crop on land the producer share rents with a producer share rents with a differentdifferent landlordlandlord

Producers insuring all acreage of a crop as Producers insuring all acreage of a crop as basic units receive a 10% premium discount. basic units receive a 10% premium discount.

Optional UnitOptional Unit OneOne optional unit for all acres in different optional unit for all acres in different

township sections planted to the insured crop township sections planted to the insured crop on land that the producer owns/cash rentson land that the producer owns/cash rents

Possibly separate optional units for different Possibly separate optional units for different practices or crop typespractices or crop types Dryland and irrigated acreage of the same cropDryland and irrigated acreage of the same crop Corn for grain and corn for silageCorn for grain and corn for silage Alfalfa, alfalfa-grass mix, and red cloverAlfalfa, alfalfa-grass mix, and red clover

Producers usually want as many optional Producers usually want as many optional units as possibleunits as possible

Enterprise UnitEnterprise Unit

Combines all of a producer’s acreage Combines all of a producer’s acreage for the insured crop in the county for the insured crop in the county into a single unit, whether it is into a single unit, whether it is owned, cash, or share rentedowned, cash, or share rented

Producers using an enterprise unit Producers using an enterprise unit pay lower premiums pay lower premiums

Farms A-G: Same operator planting the same crop Basic Units

1) A, C, D, and F

2) B and E

3) G

Optional Units

1) A and C

2) B

3) D

4) E

5) F

6) G

Enterprise Unit

1) A thru GAdapted from W. Edwards, “Insurance Units for Crop Insurance.” Iowa State University Extension A1-56, February 2003.

www.extension.iastate.edu/agdm/crops/pdf/a1-56.pdf

Farm B 50-50 crop share lease from Smith

Farm D cash rent

lease from Jones

Farm A Owned

Township Section 1

Farm C cash rent

lease from Smith

Farm E 50-50 crop share lease from Smith

Township Section 2

Farm F Owned

Farm G 60-40 crop share lease from Black

Township Section 12

Township Section 11

APH Yield CalculationAPH Yield Calculation

Use actual yield history for unit to Use actual yield history for unit to determine unit’s average yield and determine unit’s average yield and calculate unit’s yield guaranteecalculate unit’s yield guarantee

Up to 10 years of continuous recordsUp to 10 years of continuous records No missing years (can file for exception)No missing years (can file for exception) If less than 4 years, use Transition YieldsIf less than 4 years, use Transition Yields Use a Yield Cup, Cap, and FloorUse a Yield Cup, Cap, and Floor

Transition (T) YieldsTransition (T) Yields Need 4 years of yield historyNeed 4 years of yield history If only have 3 yearsIf only have 3 years

Add one 1 year of 100% county T-yieldAdd one 1 year of 100% county T-yield If only have 2 yearsIf only have 2 years

Add one 2 years of 90% county T-yieldAdd one 2 years of 90% county T-yield If only have 1 yearIf only have 1 year

Add one 3 years of 80% county T-yieldAdd one 3 years of 80% county T-yield If have no yield historyIf have no yield history

Have 65% of county T-yieldHave 65% of county T-yield

Year 4 Years 3 Years 2 Years 1 Year None

2004 143 143 143 143112 x 0.65

= 73

2003 128 128 128112 x 0.80

= 90112 x 0.65

= 73

2002 101 101112 x 0.90

= 101112 x 0.80

= 90112 x 0.65

= 73

2001 122112 x 1.00

= 112112 x 0.90

= 101112 x 0.80

= 90112 x 0.65

= 73

APH Yield 124 121 118 103 73

Yield Cup, Cap, and FloorYield Cup, Cap, and Floor Yield Cup: APH yield cannot decrease more Yield Cup: APH yield cannot decrease more

than 10% in any 1 yearthan 10% in any 1 year Yield Cap: APH yield cannot increase more Yield Cap: APH yield cannot increase more

than 20% in any 1 yearthan 20% in any 1 year Note: Good/bad years eventually work their Note: Good/bad years eventually work their

way into APH yield, cup/cap prevent rapid way into APH yield, cup/cap prevent rapid changeschanges

Yield FloorYield Floor 0 years of Yield History: 65% of the county T-yield0 years of Yield History: 65% of the county T-yield 1 year of Yield History: 70% of the county T-yield1 year of Yield History: 70% of the county T-yield 2-4 years of Yield History: 75% of the county T-2-4 years of Yield History: 75% of the county T-

yieldyield 5 or more years of Yield History: 80% of the 5 or more years of Yield History: 80% of the

county T-yieldcounty T-yield

Coverage LevelCoverage Level

Pick percent of APH yield to guarantee: Pick percent of APH yield to guarantee: 50%, 55%, 60%, 65%, 70%, and 75%50%, 55%, 60%, 65%, 70%, and 75% 80% and 85% for some counties/crops80% and 85% for some counties/crops

Unit yield below this yield guarantee Unit yield below this yield guarantee triggers an indemnitytriggers an indemnity

100% – Coverage Level ~= Deductible100% – Coverage Level ~= Deductible Higher coverage level has higher Higher coverage level has higher

premiumpremium

Price ElectionPrice Election Crop price used to pay indemnitiesCrop price used to pay indemnities

Each bushel the unit’s yield is less than the Each bushel the unit’s yield is less than the yield guarantee is compensated at this priceyield guarantee is compensated at this price

RMA announces price elections at sign-RMA announces price elections at sign-up, usually based on futures pricesup, usually based on futures prices

Available options: 55% to 100% by 1% Available options: 55% to 100% by 1% increments of announced price electionincrements of announced price election

Usually best to take max price election Usually best to take max price election and adjust coverage leveland adjust coverage level

APH ExampleAPH Example 100 ac corn unit, APH yield = 120 bu/ac100 ac corn unit, APH yield = 120 bu/ac Chooses 65% coverage levelChooses 65% coverage level Yield guaranteeYield guarantee

120 x 0.65 = 78 bu/ac120 x 0.65 = 78 bu/ac 78 bu/ac x 100 ac = 7,800 bu for the 78 bu/ac x 100 ac = 7,800 bu for the

unitunit Price Election $2.15/bu, chooses 100%Price Election $2.15/bu, chooses 100% Harvest for unit = 6,500 buHarvest for unit = 6,500 bu Indemnity: 7,800 – 6,500 = 1,300 buIndemnity: 7,800 – 6,500 = 1,300 bu 1,300 bu x $2.15/bu = $2,7951,300 bu x $2.15/bu = $2,795

Premium SubsidiesPremium Subsidies Company receives A&O subsidy, so it Company receives A&O subsidy, so it

cannot add a load to premiumcannot add a load to premium Producer Premium SubsidyProducer Premium Subsidy

Main Point: producers Main Point: producers on averageon average should make money with crop should make money with crop insuranceinsurance

Coverage Level (%) 50 55 60 65 70 75 80 85 Premium Subsidy (%) 67 64 64 59 59 55 48 38 Producer Share (%) 33 36 36 41 41 45 52 62

Catastrophic Coverage Catastrophic Coverage SubsidySubsidy

CAT: 50% coverage, 55% price CAT: 50% coverage, 55% price electionelection

CAT premium completely subsidizedCAT premium completely subsidized Producer pays $100 administrative Producer pays $100 administrative

fee per crop in each countyfee per crop in each county CAT cost can be waived for limited-CAT cost can be waived for limited-

resource farmersresource farmers

Premium CalculationPremium Calculation Consult with crop insurance agentConsult with crop insurance agent RMA Premium CalculatorRMA Premium Calculator

www3.rma.usda.gov/apps/premcalc/indexwww3.rma.usda.gov/apps/premcalc/index.cfm.cfm Requires login ID and passwordRequires login ID and password Saves calculations for later useSaves calculations for later use Provides useful print outProvides useful print out

Farmdoc Premium EstimatorFarmdoc Premium Estimatorhttp://http://www.farmdoc.uiuc.edu/cropins/index.htmlwww.farmdoc.uiuc.edu/cropins/index.html

Both are useful for planning and Both are useful for planning and comparing insurance optionscomparing insurance options

Special Issues in APHSpecial Issues in APH

Late and Prevented PlantingLate and Prevented Planting Replant ProvisionsReplant Provisions Farmer ResponsibilitiesFarmer Responsibilities Fraud and Program AbuseFraud and Program Abuse

Late and Prevented PlantingLate and Prevented Planting Many crops/policies have Late and Prevented Many crops/policies have Late and Prevented

Planting provisionsPlanting provisions If weather prevents planting by required date If weather prevents planting by required date

Tell the crop insurance agentTell the crop insurance agent Plant anyway, but with reduced coveragePlant anyway, but with reduced coverage Plant a different crop, possibly with reduced Plant a different crop, possibly with reduced

coveragecoverage Leave fallow and receive prevented planting Leave fallow and receive prevented planting

indemnityindemnity Several rules/restrictions, ask crop insurance Several rules/restrictions, ask crop insurance

agent to explain options and their impactagent to explain options and their impact Can exclude from policy to reduce premiumCan exclude from policy to reduce premium

Replant ProvisionsReplant Provisions

Crop severely damaged early in season so Crop severely damaged early in season so projected yield < 90% of yield guaranteeprojected yield < 90% of yield guarantee

Indemnity for actual replant costsIndemnity for actual replant costs Maximum = chosen price election x 20% Maximum = chosen price election x 20%

yield guarantee; up to 8 bu for corn, 3 bu yield guarantee; up to 8 bu for corn, 3 bu for soybeans, and 1 ton for corn silage for soybeans, and 1 ton for corn silage

Replanted yield guarantee as for original Replanted yield guarantee as for original plant date (no reduction for late planting)plant date (no reduction for late planting)

Farmer ResponsibilitiesFarmer Responsibilities Know all dates and required activitiesKnow all dates and required activities

Sales closing/cancellationSales closing/cancellation Acreage reportsAcreage reports File Notice of Crop DamageFile Notice of Crop Damage Submit ClaimSubmit Claim

Variety/Hybrid and Practice Variety/Hybrid and Practice RestrictionsRestrictions Hybrid maturity restrictionsHybrid maturity restrictions No early cutting alfalfa and planting No early cutting alfalfa and planting

corncorn

Farmer ResponsibilitiesFarmer Responsibilities Use “good farming practices … generally Use “good farming practices … generally

recognized by agricultural experts for the recognized by agricultural experts for the area”area” Extension often definesExtension often defines No coverage for losses due to negligence, No coverage for losses due to negligence,

mismanagement, etc. (long list) mismanagement, etc. (long list) Soybean Rust: would have to treat if experts say soSoybean Rust: would have to treat if experts say so

Alternative Crop UsesAlternative Crop Uses Get permission from agent firstGet permission from agent first Can chop for silage corn insured as grainCan chop for silage corn insured as grain Mow “weeds” in flooded out cropMow “weeds” in flooded out crop Graze remainder of hailed cropGraze remainder of hailed crop

Farmer ResponsibilitiesFarmer Responsibilities

When a loss occursWhen a loss occurs File notice of damage within 72 hours of File notice of damage within 72 hours of

discovery (not occurrence), but no later than discovery (not occurrence), but no later than 15 days after the end of the insurance period15 days after the end of the insurance period

Continue to protect crop from further Continue to protect crop from further damagedamage

Follow Agent’s guidance, leave unharvested Follow Agent’s guidance, leave unharvested strips as requested, provide documents, strips as requested, provide documents, cooperate with loss adjustorscooperate with loss adjustors

Fraud and Program AbuseFraud and Program Abuse

RMA very serious about fraud, federal RMA very serious about fraud, federal prosecution if they detect fraudprosecution if they detect fraud

Latest statistical and monitoring technologyLatest statistical and monitoring technology Random audits, audit suspicious claimsRandom audits, audit suspicious claims Everyone asked to report fraud or program Everyone asked to report fraud or program

abuse (USDA-FSA, Extension faculty)abuse (USDA-FSA, Extension faculty) If suspect, contact USDA's Office of Inspector If suspect, contact USDA's Office of Inspector

General: (800) 424-9121General: (800) 424-9121

Other Crop PoliciesOther Crop Policies

Quick overview of other policies and Quick overview of other policies and how they differ from APHhow they differ from APH

CRCCRC GRPGRP GRIPGRIP Dollar PlansDollar Plans

Crop Revenue Coverage Crop Revenue Coverage (CRC)(CRC)

Revenue insurance, not yield insuranceRevenue insurance, not yield insurance Most policy provisions same as APHMost policy provisions same as APH Price Election: 100% or 95% of Base Price Election: 100% or 95% of Base

PricePrice Base Price: Average of daily closing Base Price: Average of daily closing

price of harvest time futures contract price of harvest time futures contract for the month before normal plantingfor the month before normal planting

Corn CRC Base Price: February average Corn CRC Base Price: February average closing price of CBOT December corn closing price of CBOT December corn futures contract futures contract

CRC Revenue GuaranteeCRC Revenue Guarantee Preliminary revenue guaranteePreliminary revenue guarantee

100% or 95% of Base Price x APH Yield100% or 95% of Base Price x APH Yield Harvest Price: Average new crop closing Harvest Price: Average new crop closing

futures price for month before expiration futures price for month before expiration of harvest future contractof harvest future contract

Corn Harvest Price: November average Corn Harvest Price: November average closing price for CBOT December futuresclosing price for CBOT December futures

Final guarantee: calculated with Final guarantee: calculated with whichever price is higher—base price or whichever price is higher—base price or harvest priceharvest price

CRC ExampleCRC Example 300 acre corn unit, APH yield is 140 bu/ac300 acre corn unit, APH yield is 140 bu/ac Announced CRC Base Price is $2.32/buAnnounced CRC Base Price is $2.32/bu 70% coverage level and a 100% price election70% coverage level and a 100% price election APH yield guarantee: 140 x 0.70 = 98 bu/ac, APH yield guarantee: 140 x 0.70 = 98 bu/ac,

then 98 x 300 = 29,400 bu for the unit then 98 x 300 = 29,400 bu for the unit Preliminary revenue guarantee 29,400 bu x Preliminary revenue guarantee 29,400 bu x

$2.32/bu = $68,208 for the unit$2.32/bu = $68,208 for the unit Harvest = 29,800 bu, Harvest price = $2.05/buHarvest = 29,800 bu, Harvest price = $2.05/bu Harvest Revenue for unit = 29,800 bu x Harvest Revenue for unit = 29,800 bu x

$2.05/bu = $61,090, which triggers indemnity $2.05/bu = $61,090, which triggers indemnity of $68,208 – $61,090 = $7,118of $68,208 – $61,090 = $7,118

APH in this case, no indemnityAPH in this case, no indemnity

Group Risk Plan (GRP)Group Risk Plan (GRP)

Indemnity received if NASS county Indemnity received if NASS county average yield is below chosen trigger average yield is below chosen trigger yieldyield

Coverage level: % county average yieldCoverage level: % county average yield 65%, 70%, 75%, 80%, 85%, and 90%65%, 70%, 75%, 80%, 85%, and 90% Price Election: wide range available, Price Election: wide range available,

choose 100% to 60% (1% increments), choose 100% to 60% (1% increments), or 45% as CATor 45% as CAT

GRP ExampleGRP Example Assume 500 corn acres in Adams CountyAssume 500 corn acres in Adams County 2005 expected county average yield: 117.5 2005 expected county average yield: 117.5

bu/acbu/ac 100% level of protection: $414.19 ($3.53/bu)100% level of protection: $414.19 ($3.53/bu) Choose 90% coverage yield, implying a Choose 90% coverage yield, implying a

trigger yield of 117.5 x 0.90 = 105.8 bu/actrigger yield of 117.5 x 0.90 = 105.8 bu/ac Assume 2005 Adams County NASS yield = Assume 2005 Adams County NASS yield =

100.0 bu/ac, which triggers an indemnity100.0 bu/ac, which triggers an indemnity Indemnity Calculation: Yield loss 105.8 – Indemnity Calculation: Yield loss 105.8 –

100.0 = 5.8 bu/ac, or 5.8/105.8 = 5.5% loss 100.0 = 5.8 bu/ac, or 5.8/105.8 = 5.5% loss Indemnity ($/ac) 0.055 x $414.19/ac = Indemnity ($/ac) 0.055 x $414.19/ac =

$22.78/ac$22.78/ac Total Indemnity: 500 ac x $22.78/ac = Total Indemnity: 500 ac x $22.78/ac =

$11,390 $11,390

GRPGRP

County yields not finalized until April, County yields not finalized until April, so indemnities come much laterso indemnities come much later

Must file acreage report, no yield Must file acreage report, no yield history needed, use good farming history needed, use good farming practices, etc.practices, etc.

GRP good if no or poor yield history, GRP good if no or poor yield history, yield closely track county averageyield closely track county average

Often combine with Hail/Fire policy for Often combine with Hail/Fire policy for localized losseslocalized losses

Group Risk Income Protection Group Risk Income Protection (GRIP)(GRIP)

Trigger indemnity of county revenue Trigger indemnity of county revenue less than county revenue guaranteeless than county revenue guarantee

Yield: NASS county yield (just as GRP)Yield: NASS county yield (just as GRP) Expected County Price: average Expected County Price: average

futures contract closing price for 5 futures contract closing price for 5 days before the sales closingdays before the sales closing

Actual County Price: average futures Actual County Price: average futures contract closing price for month contract closing price for month before harvest (just as CRC harvest before harvest (just as CRC harvest price)price)

Dollar Plans: Forage Seeding Dollar Plans: Forage Seeding and Hybrid Seed Cornand Hybrid Seed Corn

List available dollar amounts of coverageList available dollar amounts of coverage Indemnity if annual crop value less than Indemnity if annual crop value less than

chosen amount of insurancechosen amount of insurance Key: How is annual crop value calculatedKey: How is annual crop value calculated Forage Seeding: plant stand >75% Forage Seeding: plant stand >75%

normal, crop value = dollar amount of normal, crop value = dollar amount of coveragecoverage

Hybrid Seed Corn: yield at contract pricesHybrid Seed Corn: yield at contract prices

10 Recommendations10 Recommendations

1.1. Use as many optional units as possibleUse as many optional units as possible

2.2. Avoid 80% and 85% coverage levels for Avoid 80% and 85% coverage levels for CRC and APH: generally over pricedCRC and APH: generally over priced

3.3. Consider getting at least CATConsider getting at least CAT

4.4. Choose max price election and vary Choose max price election and vary coverage level to get desired premiumcoverage level to get desired premium

5.5. If no yield history or poor yield history, If no yield history or poor yield history, consider GRP/GRIP with hail coverageconsider GRP/GRIP with hail coverage

10 Recommendations10 Recommendations

6.6. Know hybrid and practice restrictionsKnow hybrid and practice restrictions

7.7. Know late and prevented planting and Know late and prevented planting and replant provisions and restrictionsreplant provisions and restrictions

8.8. Talk to crop insurance agent before Talk to crop insurance agent before implement alternative crop usesimplement alternative crop uses

9.9. Keep good yield & management Keep good yield & management recordsrecords

10.10. Don’t Cheat! Very likely caught and Don’t Cheat! Very likely caught and federally prosecutedfederally prosecuted

Additional ResourcesAdditional Resources USDA-RMA: USDA-RMA: www.rma.usda.govwww.rma.usda.gov

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www.agrisk.umn.eduwww.agrisk.umn.edu Clearinghouse for Extension risk management Clearinghouse for Extension risk management

materials from all states: largematerials from all states: large Farmdoc: Farmdoc: www.farmdoc.uiuc.eduwww.farmdoc.uiuc.edu

Publications, Spreadsheet Tools, Income Publications, Spreadsheet Tools, Income SimulatorsSimulators

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Contact MeContact Me Paul D. MitchellPaul D. Mitchell

Agricultural and Applied EconomicsAgricultural and Applied EconomicsUniversity of Wisconsin-MadisonUniversity of Wisconsin-Madison

Office: (608) 265-6514Office: (608) 265-6514 Cell: (608) 320-1162Cell: (608) 320-1162 Email: Email: pdmitchell@wisc.edupdmitchell@wisc.edu Extension Web Page: Extension Web Page:

www.aae.wisc.edu/mitchell/extensionwww.aae.wisc.edu/mitchell/extension.htm.htm