March 7, 2008

The March 15 deadline for spring planted crop insurance sign-up is rapidly approaching for Nebraska farmers. Corn, grain sorghum, soybean, sunflower, sugarbeet, dry beans, proso millet, and spring wheat producers will need to sign up for crop insurance by March 17, since March 15 is on a Saturday this year. The increased value of nearly all crops in Nebraska necessitates careful consideration of the crop insurance decision this year.

With corn and soybean gross revenue likely to exceed $1,000 per acre this year, now is not the time to reduce insurance coverage. Although crop insurance premiums are much higher, the increased value of the crop is well worth insuring, possibly at higher levels than in previous years.

Multi peril crop insurance (MPCI) is available on all of the major crops in Nebraska, but may leave you seriously short of coverage if bullish prices continue through harvest. Established prices for both corn ($4.75/bu) and soybean ($11.50/bu) are already well below the market. If these crops are significantly damaged this year, the return from this insurance will be significantly lower than the value of the crop.

There are two types of coverage available for producers interested in protecting against both price and production risk. Historically revenue coverage has been used by farmers interested in cash forward contracting crops. These products allow the value of insurance coverage to increase with price increases and remain at the base level if prices decrease. Crop revenue coverage (CRC) is the oldest of these products and has a limit on the harvest price movement. Revenue assurance with a harvest price option (RA-HPO) is a newer product that gives similar protection with no limits on the harvest price.

For those considering forward contracts, the type of insurance you have may be critical to your decision. For CRC products, the limit that harvest price can deviate from the base price is $1.50 for corn, $2.00 for wheat, and $3.00 for soybeans. The RA-HPO insurance does not have these limits. At the present time, the local winter wheat price for July delivery is $10.43 per bushel, while CRC coverage is limited to $7.88 ($5.88 base price + $2.00 limit). Wheat forward contracted today will have a $2.65 premium over the amount of insurance coverage possible under a CRC contract. If you hold an RA-HPO contract, there is no upside limit on price, and coverage is still in place.

For producers interested in forward contracting corn, grain sorghum, and soybeans, the crop insurance decision is important this year. If you feel that prices may increase by more than the CRC limits on corn and soybeans, then an RA-HPO product may be best for you. The RA-HPO products tend to carry a little higher premium, but they will allow your coverage to remain in place if prices increase. Be sure to discuss these options with your crop insurance professionals prior to the March 15 deadline.

Paul Burgener
Extension Agriculture Economist
Panhandle REC