Crop Insurance Strategies for

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1 Crop Insurance Strategies for 2018

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3 Why is Crop Insurance Important for Risk Management? Creates a Foundation to build upon Makes a big impact on marketing throughout the year Changes your Risk/Profitability outlook Helps determine marketing tools to use

4 Changes in Federal Crop Insurance for 2018 Prevented Planting Buy Up lowered to 5% Can now pick different unit structure by practice Redefined Practical to Replant to up to 10 days after the final plant date

5 Changes in Federal Crop Insurance for 2018 Approved yield cannot decrease more than 10% from the prior years APH. Must be elected! (YC) Indemnities can offset premiums even before premiums are billed. Replant, Hail

6 Traditional Insurance Products Crop Insurance

7 Pre-Decision Information Needed! Acres to each crop and how many acres are flexible? Cost of Production for each crop. Estimate High! Cash sales made and average price. P/L on marketing already done for the crop year. Current Fall Basis and historical basis at harvest. Is it possible to grow a third crop?

8 Determine Risk Yield Risk: Yield Policy/Yield Private Products/ICE Harvest Max Price Risk: RP/RPowerD/RAMP/ICE Cash Price Risk: Whole Farm/PCI

9 Traditional Insurance Products Corn

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13 Thoughts on Corn (High APH) You should be able to cover costs at the 75% TA or the 80% deductible. Hail Insurance for top dollar loss. Take advantage of the low premiums to try and reduce risk or lock in more profits. Private Products, Hedging. Consider Basic or Optional Units Buy Up Replant Option in fringe states Downside Price Risk - Whole Farm

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17 Thoughts on Corn (Low APH) Consider the 80% or 85% policy. 75% TA if others are too high Hail Insurance for top dollar loss. Look at private products either with 10% bands of coverage Alternative Spring Price opportunity over the summer months. (cheap call) Buy Up Replant in fringe states. Downside Price Risk Whole Farm

18 Traditional Insurance Products Soybeans

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22 Thoughts on Soybeans (High APH) MPCI cannot cover input costs. Stick with the 85% TA which provide limited risk Manage with future or options If you go 80% or want to cover all your input costs consider a higher band of coverage Maybe capture some of this recent rally in soybean prices to get a higher Spring Price. Downside Price Risk Whole Farm

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26 Thoughts on Soybeans (Low APH) MPCI alone has a big cap trying to cover input costs The risk profile is high for a producer that does not get big yields. Significant downside Price Risk Consider going with 80% or 85%. Usually the 80% TA have better coverage than the 85% and it is cheaper By Up Replant in fringe states Consider a higher band of coverage. Consider Harvest Max Maybe capture some of this recent rally in soybean prices to get a higher Spring Price. Downside Price Risk/Bushel Risk Whole Farm

27 Traditional Insurance Products Wheat

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30 Thoughts on Wheat Cannot cover input costs Best ROI is likely 80% TA Tons of risk that needs to be addressed Consider 85% Yield Protection. Decent Spring Price Look at Price Flex, Yield or Revenue RAMP/ICE

31 W hole Far m Revenue

32 Whole Farm Revenue Protection against loss of Gross revenue that a producer expects to earn.

33 Whole Farm Revenue Worried about significantly lower cash sales opportunities throughout the year (NAFTA) Have crops generally subjected to dockage. Tend to store unpriced bushels into the following calendar year to attempt to catch a carry in the market.

34 Whole Farm Revenue Utilize to protect cash prices which we have not been able to insure before. Protects against loss or revenue expected to earn, including animals and animal product. Has one of the longest insurance periods of any insurance product. Enable producers to grow new crops or crops with low APH yields.

35 Whole Farm Revenue Affordable option in areas where 80% and 85% MPCI is to expensive. Can be a way to reduce your insurance bill and still satisfy your lender. Can be considered a hedge against bad cash marketing.

36 Whole Farm Revenue Whole Farm Subsidy Rates Coverage Level 50% 55% 60% 65% 70% 75% 80% 85% Commodity Count: 1 Commodity Count: 2 Commodity Count: 3+ 67% 64% 64% 59% 59% 55% N/A N/A 80% 80% 80% 80% 80% 80% N/A N/A 80% 80% 80% 80% 80% 80% 71% 56%

37 Whole Farm Revenue Whole Farm Coverage Example Grain Farmer # of All Commodities 3 Acres 5,900 Qualifying Threshold $371,000 WFRP Historic Avg. $3,800,000 Total Expected $3,351,000 MPCI Liability Total $2,200,000 Cov Level Liability Tot. Premium Subsidy % Pro. Premium Rate/[$] Prem/Acre 85% $2,848,418 $122,482 56% $53, % $ % $2,680,864 $103,213 71% $29, % $ % $2,513,310 $86,709 80% $17, % $ % $2,345,756 $70,373 80% $14, % $2.39 WFRP Example Quote

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40 Whole Farm Revenue Protection Quote Agent: Phone: Notes: # of All Commodities Qualifying Threshhold Eligible Commodities Grouped Commodities Commodities to Count Cov Level Liability 2 $150, Tot. Premium Simple Average Index Average Expand Op Avg WFRP Historic Avg $1,000,000 $1,000,000 $0 $1,000,000 Total Expected Approved Amount $906,675 $906,675 MPCI Liability Total Subsidy % Pro.Premium $725, Rate /[$] Prem/Acre 85% 80% 75% $680,006 $28,560 80% $5, % $ % $634,672 $22,214 80% $4, % $ % $589,339 $17,091 80% $3, % $ % $544,005 $13,056 80% $2, % $ % $498,671 $9,475 80% $1, % $1.21

41 Whole Farm Revenue Protection Quote Agent: Phone: Notes: # of All Commodities Qualifying Threshhold Eligible Commodities Grouped Commodities Commodities to Count Cov Level Liability 2 $150, Tot. Premium Simple Average Index Average Expand Op Avg WFRP Historic Avg $1,000,000 $1,000,000 $0 $1,000,000 Total Expected Approved Amount $906,675 $906,675 MPCI Liability Total Subsidy % $725, Pro.Premium Rate /[$] Prem/Acre 85% 80% 75% $680,006 $14,280 80% $2, % $ % $634,672 $11,107 80% $2, % $ % $589,339 $8,545 80% $1, % $ % $544,005 $6,528 80% $1, % $ % $498,671 $4,737 80% $ % $0.60

42 Whole Farm Revenue + Crop Insurance Buying MPCI gives an additional subsidy to WFRP. Allows for Individual crop coverage if that is a major concern. Utilize MPCI to capitalize on a much higher harvest price. MPCI pays in the fall. WFRP pays the following April.

43 Huge Change for 2018 Whole Farm Revenue In 2017 any indemnity you made Hail and Private Product counted toward the Whole Farm Revenue Guarantee. In 2018 only the portion of the indemnity that is over the deductible is counted towards the Whole Farm Revenue Guarantee.

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45 Huge Change for 2018 Whole Farm Revenue Brings High Insurance Cost States into Play i.e. Nebraska tends to buy a lot of hail insurance Whole Farm + MPCI + Hail + Buy Up Replant

46 Non-Traditional Insurance Products Crop Insurance

47 Non-Traditional Insurance Products Addresses many different perils. Usually will end of being top dollar loss opportunities. Highly customizable. Underwriters make them very attractive in order to get your book of business. No subsidy. Compare Prices Not available for every crop in every state Bands of Coverage and Spring Price Adjustment

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50 PriceFlex & Price Flex Prime (Hudson, ProAg, G.A) To Generate higher revenue protection Uses daily monthly or bi-monthly averages Consider if Spring Prices cannot cover BE March-August must be done by MPCI SCD Soybeans, Wheat, Corn, Cotton Crop Insurance PriceFlex

51 PriceFlex Comparing 85% RP 85% RP + PF 85% RP + PF Half Month

52 Net Profit Net Profit + PriceFlex Side by side - Farmer with, and without PF Matrix (only the matrix box).

53 RPowerD (Hudson, ProAg, Great American, RCIS) Coverage up to 95% and/or: Buy additional discovery month Buy Yesterdays Close Maybe? Additional Price Coverage Up to.25 for Corn and.50 for soybeans. Buy early! Crop Insurance RPowerD

54 RPowerD (Hudson, ProAg, Great American, RCIS) If you select zero for APC, no Market price and no alternative month s you can buy up to 95% using the Spring Price. Unit Structure different than MPCI Coverage by Practice Sales Closing Date is April 1

55 Base Price Modifier (NAU) Increases the Spring Price based on a factor. Mirrors level of MPCI coverage Unit Structure can be different than MPCI RP, RPHPE, YP Corn, Soybeans Crop Insurance BPM

56 Max Price (Ag Armour) Increase your Spring Price guaranteed EU, OU, BU Corn $.25 or $.35 Soybeans $.50 Crop Insurance Max Price

57 Added Price Option (RCIS) Higher bushel price protection (TA Yield) Unit structure different than MPCI Yield loss payment even if HP is higher than the Spring Price Yield or Revenue Policy Price elected by Producer Corn, Soybeans Crop Insurance APO

58 RAMP (Farmers Mutual Hail) Covers up to 95% TA Yield RAMP Revenue or RAMP Yield Optional or Enterprise Units Can build or strengthen coverage 10% Bands of Coverage Corn, Soybeans, Winter/Spring Wheat, Popcorn, Barley, Grain Sorghum Crop Insurance RAMP

59 Increased Coverage Election (ProAg) Covers up to 95% Revenue or Yield Optional or Enterprise Units 10% Band of Coverage Corn, Soybeans, Winter/Spring Wheat, Sugar Beets Crop Insurance RAMP

60 HarvestMAX (AgArmour) Protects Shallow Bushel Loss Very Customizable Protects up to 95% of your APH HarvestMAX No MPCI Needed! Corn, Soybeans, Sugar Beets, Fall Potatoes

61 PAR (ProAg, Great American, Hudson) Provides Area Revenue Coverage RP + PAR generally less than ARP Use County or Crop Reporting District Coverage up to 95% Crop Insurance PAR

62 FCIP (NAU) Take advantage of market conditions as they happen. Encourages profitable sales Protects your forward contracts Has Prevented Planting protection Receive price protection at time of sale Yield or Revenue policies Corn, Soybeans Crop Insurance FCIP

63 Lodging Loss of Production (RCIS) Top Dollar Loss Covers direct peril of wind (lodging) Corn Only Crop Insurance LLOP

64 Weather Insurance ( Temperature Heat or Cold Precipitation Too much rain Too little rain

65 Risk Management Risks Tools Minimize Risk, Maximize Profit

66 Risk Management Risk Management Tools We Consider Federal Crop Insurance Hail Insurance Basis Contract Forward Sales Hedge To Arrive (HTA) Private Crop Insurance Futures & Options Weather Contracts Over The Counter (OTC) Commodity Programs

67 Risk Management Where Visibility Meets Clarity

68 HOW WE DO IT Software Summary of projected profitability

69 HOW WE DO IT Software Profit Matrix Total Risk Management Insurance + CBOT + Grain Sales +

70 MONITOR, EVALUATE, EXECUTE

71 HOW WE DO IT Software When producers see their risks, they make better decisions.

72 THANK YOU