Farm Progress

Producers have several changes to consider as they determine best insurance options for 2018.

Shelley E. Huguley, Editor

February 22, 2018

4 Min Read
March 15 crop insurance deadline quickly approaching. Growers need to be aware of changes.

Drought-stricken cotton growers are encouraged to take advantage of new crop insurance provisions and consider insurance add-ons such as the Cottonseed Pilot Endorsement (CPE) to increase coverage levels, as the March 15 crop insurance deadline approaches.

Producers have several changes to consider as they determine best insurance options for 2018, says Shawn Wade, director of policy analysis and research at Plains Cotton Growers, Lubbock, Texas. Wade, spoke to producers at the Seeking Solutions to Economic Risk meeting in Lubbock. 

“If a grower has a yield loss and the insurance price is 74 cents on the lint, the cottonseed endorsement is going to add a little over 11 cents to their coverage to account for the loss associated with cottonseed. So, it’s a good addition when you have experienced a physical loss,” Wade says.

For 2018, the CPE yield loss coverage for cottonseed has been set at 9 cents per pound, the equivalent of $180 per ton. “The way this works, you can add it to a yield policy or a revenue policy but the cottonseed coverage will only kick in with an actual physical loss below that yield guarantee,” explains Wade. “If you have a 1,000-pound Actual Production History (APH) with 70 percent coverage, when that actual yield falls below 700 pounds, those lost pounds would trigger an indemnity under the cottonseed endorsement.”

Since its inception, CPE has paid out over $650 million in extra insurance payments to producers, with Texas growers accounting for the most users. “In 2017, out of about 50,000 cotton policies sold nationwide, we have just under 30,000 that added the cottonseed endorsement, or about a 58 percent use rate nationwide,” says Wade. “It’s a cost-effective way to add a little extra bit of value to your insurance policy.”

For 2018, the statewide seed-to-lint conversion factor in Texas is a little over 1.3, according to Wade. “As these newer varieties have come on these last 10 or 15 years, we’ve seen the seed size go down, and we’re seeing that reflected in the calculated seed-to-lint ratio.”

More Changes

Before growers make their final insurance decisions, Wade says they need to be aware of several changes including:

Replanted Crop

A new definition for a “Replanted Crop” in the common crop insurance policy will consider any failed crop acreage replanted to the same crop prior to the end of an established Late Planting Period, or within the time specified in the Special Provisions (which impacts cotton specifically), to be a replanted crop from which any production will be determined and used to establish any possible indemnity that might be payable.

Enterprise units by practice

RMA also has announced that beginning in 2018 producers who choose to insure their farms with Enterprise units will now be able to, not only, create separate enterprise units by practice, but also elect to mix enterprise unit coverage on one practice with optional unit coverage on a different practice. “The ability for a grower to choose, for instance, to insure non-irrigated cotton under an enterprise unit, but maintain optional unit coverage on their irrigated units will greatly enhance a producer’s ability to fine-tune their insurance coverage to match the financial risks they face on their farm.” notes, Wade.

Yield cups

Another change of which growers need to be aware is with yield cups. In the past, this provision, which prevented a grower’s APH from dropping more than 10 percent from year to year, was automatically a part of the policy. Now, growers must request yield cups be added to their database, Wade cautions. “It’s a one-time election. It doesn’t cost anything. So, just make sure it has been elected for your policy.”

Trend Adjusted Yield

RMA has extended the applicability of yield cups to both Trend Adjusted Yield (TA) and the 2014 farm bill’s Yield Exclusion (YE) adjusted APH databases, which should help prevent large year-to year fluctuations in TA- or YE-adjusted APH database yields.

Cotton quality adjustment

A new provision in the cotton quality adjustment procedures “eliminates the 15 percent deductible and replaces it with a 10 percent trigger. Beginning in 2018, growers who can show a 10 percent quality reduction, can trigger the quality loss provision and calculate a production adjustment factor, they’re going to calculate that loss all the way from 100 percent of the applicable state base quality value, all the way down, to each bale’s actual loan value.”

Conservation compliance dates

The deadline for receiving revised AD-1026 Conservation Compliance forms was shifted from June 1 to the premium billing date, to allow more time for updated forms to be submitted to the USDA Farm Service Agency (FSA) and then to RMA to avoid loss of premium subsidy benefits.

Crop insurance is a complex issue that will require a close examination of multiple options. Producers should check with crop insurance representatives as soon as possible to determine the best policy options for each farm, crop and level of acceptable risk.

About the Author(s)

Shelley E. Huguley

Editor, Southwest Farm Press

Shelley Huguley has been involved in agriculture for the last 25 years. She began her career in agricultural communications at the Texas Forest Service West Texas Nursery in Lubbock, where she developed and produced the Windbreak Quarterly, a newspaper about windbreak trees and their benefit to wildlife, production agriculture and livestock operations. While with the Forest Service she also served as an information officer and team leader on fires during the 1998 fire season and later produced the Firebrands newsletter that was distributed quarterly throughout Texas to Volunteer Fire Departments. Her most personal involvement in agriculture also came in 1998, when she married the love of her life and cotton farmer Preston Huguley of Olton, Texas. As a farmwife, she knows first-hand the ups and downs of farming, the endless decisions made each season based on “if” it rains, “if” the drought continues, “if” the market holds. She is the bookkeeper for their family farming operation and cherishes moments on the farm such as taking harvest meals to the field or starting a sprinkler in the summer with the whole family lending a hand. Shelley has also freelanced for agricultural companies such as Olton CO-OP Gin, producing the newsletter Cotton Connections while also designing marketing materials to promote the gin. She has published articles in agricultural publications such as Southwest Farm Press while also volunteering her marketing and writing skills to non-profit organizations such as Refuge Services, an equine-assisted therapy group in Lubbock. She and her husband reside in Olton with their three children Breely, Brennon and HalleeKate.

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