Expect lower premiums for 2018 crop insurance
Most Iowa farmers will benefit from lower 2018 crop insurance premiums. The USDA Risk Management Agency (RMA) has started posting December ’18 corn and November ’18 soybean futures price averages used to calculate the projected prices for crop insurance. So far, these 2018 averages appear to be slightly lower than the 2017 projected prices of $3.96 per bushel for corn and $10.19 per bushel for soybeans, respectively.
However, another factor used to determine final premiums are price volatility for December corn and November soybean futures options. However, it’s this volatility factor the last five trading days of February that is used to determine final premiums. In early February, volatility for corn was four points lower as compared to 2017 and three points lower for soybeans. Currently, these volatility factors for corn and soybeans are at some of the lowest levels in the past 20 years.
According to projections compiled by Dr. Art Barnaby, Kansas State University extension ag economist, these lower volatility factors will impact final 2018 premiums. Barnaby anticipates the corn rates will be discounted by three percent in high-risk counties in the Corn Belt and over 20 percent in low-risk counties.
Since it’s the last five trading days of February that determine these volatility levels, rates and thus final premiums will not be known until the first couple days of March. Farmers should communicate with their crop insurance agent prior to the March 15 final sales closing date for spring crops. Some may consider buying crop insurance at high levels in 2018 since premiums will reflect these lower volatility factors.
Other crop insurance changes
Some additional 2018 changes in crop insurance coverage include:
If you are adding ground in a new county, you must notify your crop insurance agent prior to the March 15 deadline.
The period deemed "practical to replant" was shortened from 25 to 10 days after the final planting dates. In Iowa, the new late planting periods will run from May 31 thru June 10 for corn and June 15 thru June 25 for soybeans.
Damage to crop from actions caused by a third party. The insured can protect their Actual Production History (APH) for the affected farm. Insureds will still need to provide timely Notice of Loss (NOL) and this will only affect production and acres damaged.
Example: A neighbor negligently applies chemical and the resulting spray drift damages the insured’s crop. While the loss is not covered by crop insurance, the insured can still benefit by eliminating the production and acres impacted from the loss and used to determine their APH database.
Use of Revenue Protection
Iowa farmers annually select Revenue Protection Crop Insurance on over 95 percent of all insured row crop acres in Iowa. Insureds are guaranteed revenue per acre using their APH yields times a price guarantee. This price guarantee is determined annually as the higher of the projected price (February simple average) or harvest price (October simple average) for December corn futures and November futures prices. Insureds then choose annually a coverage level by crop and county between 50 percent and 85 percent of that revenue guarantee.
Farmers may want to review with their crop insurance agent existing unit structure, level of coverage and related crop insurance changes well in advance of the March 15 deadline. Consider making an appointment with your crop insurance agent for the week of March 5 when final crop insurance premiums will also be known.
Steven D. Johnson, retired extension farm management field specialist