As farm operators begin making their 2011 crop insurance decisions, they will have some new terminology and policies to become familiar with. For several years, the USDA Risk Management Agency (RMA) has been negotiating with the various major crop insurance companies that sell crop insurance products to producers, in order to make to needed revisions in the crop insurance program. It is important that producers be aware of the changes in available crop insurance options, before finalizing their 2011 crop insurance decisions. The 2011 crop insurance enrollment deadline for corn and soybeans in the Upper Midwest is March 15.
The new Common Crop Insurance Policy (COMBO) is in effect for the 2011 crop year. Sign-up started last fall for fall-seeded crops such as winter wheat; however, most producers in Minnesota, Iowa and other Midwestern states will be making their 2011 crop insurance decisions in the next six weeks. The new COMBO insurance policy options are actually a simplification of the many and varied crop insurance choices that existed previously for individual policies.
COMBO Insurance Policies
- Yield Protection (YP) – The new YP policy option will replace and be equivalent to the former Actual Yield Production (APH) policies, or “yield only” insurance protection. The biggest difference in the YP policy option for 2011 from the AYP policies in 2010 will be the price determination for insurance coverage. Previously, the prices used for AYP insurance policies were pre-determined prior to the crop insurance sign-up period by RMA, and were based on USDA commodity price forecasts for the following fall. Under the YP policy option in 2011, the prices used for spring planted crops, such as corn and soybeans, will be the average Chicago Board of Trade (CBOT) prices in the month of February, similar to revenue insurance products.
- Revenue Protection (RP) – The new RP policy option in 2011 will function similarly to the way that Crop Revenue Coverage (CRC) policies and Revenue Assurance with the Harvest Price Option (RA-HPO) policies functioned in 2010 and earlier. Producers who choose RP policy options for 2011 are guaranteed minimum dollars of gross revenue per acre (yield x price) based on yield history and the average CBOT prices in February for spring crops. The revenue guarantee is increased for final insurance calculations, if average CBOT prices in October are higher than the February prices.
- Revenue Protection with Harvest Price Exclusion (RPE) – The new RPE insurance policy option in 2011 is equivalent to the basic Revenue Assurance (RA) policies, without the harvest price option, that existed in 2010 and earlier. The biggest difference between the RPE and RP policy options is that the minimum revenue guarantee (yield and price) is fixed, based on the February CBOT prices for spring crops, and can not be increased based on October CBOT prices with the RPE policy option.
The minimal level of insurance coverage that will still be available for 2011 is the Catastrophic Yield Coverage (CAT) insurance policy. CAT coverage is based on 50% of the APH yield and 55% of the YP price level. CAT coverage only costs $300/crop in each county, but the insurance coverage is very minimal; however, it does keep producers eligible for government disaster programs, if a producer chooses not to secure any other crop insurance coverage.
The COMBO policy crop insurance changes for 2011 are regarding insurance policies for individual producers. There were basically no changes in the group insurance policies, including Group Risk Plan (GRP), Group revenue Insurance Plan (GRIP) and GRIP with a Harvest Price Option (GRIP-HPO) for 2011. These policies insure against widespread yield and revenue losses for all producers on a county basis. The group policies have not been widely used for corn and soybeans in the Upper Midwest in recent years.
The 2011 crop insurance policy options under the new COMBO insurance policies have some new names and acronyms: YP, RP and RPE. However, how the various crop insurance policy options under the COMBO policies will function very similar to comparable insurance policy options in 2010 and previous years. Actually, once producers understand and get used to the YP, RP and RPE terminology, they will probably find it easier to understand than the variety of insurance options that existed previously.
Farm operators should start investigating 2011 crop insurance options well before the March 15 enrollment deadline. A reputable crop insurance agent is a good source of 2011 crop insurance options and premium levels. Following are some very good resources with crop insurance information:
Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at firstname.lastname@example.org.