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Crop insurance choices: Low premium or high coverage


In three more weeks, the calculations will begin to determine the spring guarantees for crop insurance. Unfortunately, this year it will not even be close to the $5.65 for corn that it was last year, which many farmers thought was too low. When it was $6.01 in 2011, those were “the good old days.”

This year, the crop insurance guarantees may be closer to $4.60, which is the value of December futures contract prices. Regardless of the guarantee, your first decision will be to determine a coverage level for your crop. Will you stay at 85%, or will you cut back on coverage to reduce your outlay for premiums in a year when margins are going to be tight?

Because commodity prices are low, premiums will also be lower than they have been the past several years. However, when you are trying to break even on your input costs and your marketing plan, it is tempting to forego the 85% coverage that costs $16.17 per acre with a 190 APH, and opt for the 75% coverage at $3.83. But University of Illinois farm management specialist Gary Schnitkey says that is the opposite of what you probably want to do.

Farmers who are currently calculating a rather thin margin this year—or farmers who have a high debt-to-asset ratio—or farmers who have high amounts of cash rent will probably be smarter to obtain the highest amount of crop insurance they can, regardless of the premium cost.

Read more about your choices for crop insurance in 2014.


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