Crop Insurance. Background

Transcription

1 Crop Insurance Background RMA (Risk Management Agency) a division of USDA sets the: Rules Prices Oversees the industry Government subsidizes the premiums 1

2 Background All insurance companies have the exact same price and products Difference is the service supplied by providers Insurance providers FCMA represents: NAU Country Insurance Climate Crop Insurance ADM Crop Risk Services Why producers may need Crop Insurance? To protect your families livelihood and net worth To protect the high input costs To support grain marketing plans To maximize income per acre 2

3 What are the common causes of crop losses in the U.S.? 45% drought/heat 27% excess moisture 9% cold/frost 9% hail 4% other 3% disease 3% wind What is covered? All natural perils: Hail, Wind, Flood, Drought, Disease, Prevented Planting and Wildlife Damage Key peril is Fluctuating Grain Markets Not included: theft, domestic livestock, and combine fires 3

4 How are guarantees figured? Actual Production History Producer can have up t0 10 years of history per crop Producer can insure 50%-85% of that average Example-150 bushel average insured at 80% carries a 120 bushel guarantee Choosing your plan Bushel coverage Yield Protection Revenue coverage Revenue Protection What coverage level (percent)? What options? BU-One farm EU-Enterprise OU-Optional 4

5 Optional or Enterprise? Optional Units Pros- Each farm insured individually Great option when farming drastically different ground in the same county Cons- Higher premium Premium is normally almost twice as much per acre as Enterprise Optional or Enterprise? Enterprise Units Pros-Heavily subsidized Discounted premium Cons-The bushel loss is averaged over the entire county Higher bushels on one farm may compensate for the loss on another farm resulting in no claim 5

6 Enterprise 20/20 rule To qualify for enterprise producer must have at least two farm numbers per crop with the smaller of the two consisting of 20 acres or 20% of the total crop. Two or more smaller farms may be combined to qualify Yield Protection Individual bushel guarantee Indemnity is based on producers Actual Production History (APH) Producers select amount of coverage from 50%-85% Includes replant and prevent planting CBOT projected spring price (premium and indemnity based on) 6

7 Yield Protection continued Includes replant and prevent planting CBOT projected spring price (premium and indemnity based on) Revenue Protection Producers selects amount of coverage from 50%-85% of APH Guarantees a dollar coverage per acre Uses the higher of the Spring Price or Harvest Price Includes replant and prevent plant 7

8 Revenue Protection Price set in Spring and Fall by CBOT Crop guarantee is the higher of the two prices Protects the crop s value when the market is increasing or decreasing. Protects a yield loss. Helps to plan the marketing of the crop and give you peace of mind. Spring Price A projected price for corn is set by CBOT in March based on February averages of December futures (corn) A projected price for soybeans is set by CBOT in March based on February averages of November futures (soybeans) 8

9 Harvest or Fall Price Corn average for October for December futures Soybean average for October for November futures. Producer gets the higher of the spring or fall price for his guarantee RP 2014 Claim Example Low Fall Price Guaranteed =$465 acre Harvest Price set at $3.50 Harvested 100 bushels 100 bushels x $3.50= $350 per acre Guarantee of $465-$350=$115 per acre indemnity Doesn t matter what you actually sell grain for-harvest price is used 9

10 RP 2012 Common Claim Example-High Fall Price Guaranteed =$568 acre Harvest Price $7.50 bushel $7.50x 100B=$750 acre (New Guarantee) Harvested 50 bushels 50 bushels x $7.50= $375 per acre(used to figure claim) $750 Guarantee- $375=$375 indemnity TA (Trend Adjusted ) Yield New in 2013 Increases APH history Trend factor for each county per crop May increase corn up to 10 bushels 10

11 Climate.com Web-based climate tracking software Shows weather history and forecast including rainfall, temp, etc. hourly Field level-farm by farm Enter plant dates and maturity and it will estimate bushels Grain moisture tracker-field by field FREE! Basic is free, all we need is a 578 Summary What plan? Yield Protection What coverage level? 50%-85% Enterprise or Optional We will help you with decision-making based on your individual needs. 11

12 What product is the best? It all depends on the individual and the situation. A producer can safely rely on FC Crop Insurance Specialist to help match his/her individual needs based on all the factors involved. FCMA Crop Insurance Questions? 12

13 FCMA Crop Insurance Thank You! Agent: Chris Coffey Cell: