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2012 Crop Insurance Updates

By Tyler Slinden

Crop Solutions agents recently attended the Minnesota Crop Insurance Conference in Mankato, MN.  This conference is held annually to keep Minnesota’s Crop Insurance Agents up to date on changes in the industry.  Many topics were presented; however I will summarize a couple of key points that may affect Multi-Peril Crop Insurance coverage for the 2012 season.

TREND ADJUSTED YEILD.  Many producers have expressed concern that their 10 year Average Production History (APH) is no longer reflective of their current production potential because of rapid improvements in yield over only the last few years.  Trend Adjusted Yield is a concept that has been approved for 2012. Actual details have not yet been released  but according to William J Murphy of Risk Management Agency an adjustment of 2 bushels per year has been proposed.  This would increase a producer’s 2010 proven yields by 2 bushels, 2009 proven yields by 4 bushels, etc.  The adjustment would vary by crop and by county. 

BIOTECHOLOGY ENDORSEMENT.  The Biotechnology Endorsement (BE discount) will not be a part of the 2012 Common Crop Insurance Policy.  The Risk Management Agency (RMA) is taking the stance that the majority of producers are now using biotechnology (triple stack, quad stack, smart stack, etc.) and therefore additional documentation is not unnecessary. 

RATE REDUCTION.  Because the BE discount is not going to be offered in 2012, and because these technologies do reduce the risk of a claim due to insect pressure, the RMA is going to reduce the rate by which premiums are calculated.  Basically, they are giving the BE discount to everyone who buys Multi-Peril Crop Insurance, and eliminating unnecessary documentation.  Now what this means is the total (farmer paid and subsidized) premium in 2012 PER $100.00 OF COVERAGE PER ACRE will be less than it was in 2011.  It DOES NOT  mean that total premium PER ACRE in 2012 will be less than it was in 2011.  That is dependant upon what the spring price will be in 2012.  Remember, the higher the spring price, the more dollars are covered per acre.  Here are a couple of examples:

$6.01 spring price, 175 bushel APH, 75% coverage.  Total coverage per acre under this scenario would be 175 x 75% x $6.01 = $788.81

$8.01 spring price, 175 bushel APH, 75% coverage.  Total coverage per acre under this scenario would be 175 x 75% x 8.01 = $1051.31

As you can see, scenario two provides $262.50 more coverage per acre than scenario one.

LEVEL OF SUBSIDY.  With the current economic tone in WashingtonD.C. all federal spending is under scrutiny.  At this time, everything is up in the air and unfortunately there is no clear cut answer as to where this will end up.

This has been a brief summary of some of the changes in Multi-Peril Crop Insurance for the 2012 season.

Source

Federal Crop Insurance: A Program Update.  William J. Murphy, Administrator, Risk Management Agency.  September 12, 2011.