About Crop Insurance

Posted: Fri Aug 02, 2013 09:45 pm Post Subject: price protection

If corn fall prices are$4.75/bu and my insurance is @5.65 bu and I have no loss of production, do I receive income via thr price drop

Posted: Fri Aug 02, 2013 10:53 pm Post Subject:

To the best of my knowledge, crop insurance is protection against loss due to natural disaster (fire, windstorm, hail, drought, etc.) or other crop failures (contamination, disease, etc.), including the inability to plant due to the effects of bad weather.

The Risk Management Agency of the USDA has this to say:
Q: Does crop insurance cover crops in the event of natural disasters?
A: Producers who purchased crop insurance are covered for all natural causes of loss listed in their policies. For those without insurance, the Noninsured Crop Disaster Assistance Program (NAP), managed by USDA's Farm Service Agency, provides financial assistance to producers of non-insurable crops when low yields, loss of inventory, or prevented planting occurs due to natural disasters.

As far as I know, like other insurance, it is not intended to be protection merely against a drop in the price of corn -- that's one of the major risks inherent in the business of farming . . . too many acres planted and the price drops . . . too many fallow acres and the price spikes. Not to mention government interventions such as mandatory crop/acreage reductions to artificially maintain prices, and the effect of turning food into fuel instead of putting it into someone's mouth (including the mouths of the cattle).

If, instead of dropping, the price spiked to $8.00/bu, you wouldn't expect to pay a higher premium would you? The $5.65/bu is simply the insured value of your 2013 crop.

If your entire crop was lost, and the expected harvest would have amounted to 101,120 bu (640 acres at 158 bu/acre -- the 2013/14 estimated yield), you are insured for $571,326 (less any applicable deductible). If the harvest comes in as expected, better than expected, or at a higher price than expected, you had the peace of mind knowing that in the alternative, your loss would have been mitigated by the insurance, Either way, you pay a premium and that is a deductible expense in the course of your business as a farmer.

Someone from a farm state who actually sells crop insurance through FCIC might have a better answer, but I believe this is accurate.

BTW, my corn harvest has been pretty good this year! First crop yielded 42 ears in 16 square feet. Second crop is two weeks old, and should yield about 50 ears in 16 square feet. Growing super sweets, and they are like candy!