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Comparing 2011 Crop Insurance Premiums to Projected 2012

Comparing 2011 Crop Insurance Premiums to Projected 2012

RMA re-rating of risk should lower crop insurance premiums for farmers.

USDA's Risk Management Agency has updated the way premiums are calculated for crop insurance. There are two possible changes producers will see when signing contracts in March. USDA, through an actuarial analysis, has re-rated risk. It generally should result in lower premiums for farmers in primary Corn Belt states.

The agency, in a pilot program available most everywhere corn is grown, has also recalculated Actual Production History yields. Illinois Extension Farm Management Specialist Gary Schnitkey dropped the new premium schedule into last year's program to see how things would change.

"For optional units we find that the reduction in premiums are about 5% to 6%," Schnitkey said. "For basic and enterprise units the premiums will go down more, but that is part of the re-rating effort and also RMA changed the way enterprise units were calculated. In enterprise unit case we could be looking at premium reductions that will average about 14% although it does vary based on where you are at as far as the premium reduction."

The University of Illinois ag economist says not only does the premium vary by location but that it also varies by unit size.

"On average larger unit sizes do have more of a premium reduction," Schnitkey said. "Just to give you a feel for this - this is averages for Illinois - an enterprise unit with 350 acres will have an 11% reduction, and that same unit with 450 acres will have 16% so it is pretty sizable."

Those are the numbers for corn. The soybean premium reductions where even greater averaging anywhere from 5% to 12%.

Schnitkey's premium comparison pitted last year's risk ratings against the update for this year, but ignored the pilot program Adjusted Trend Yield.

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