When Steve Johnson looks ahead at the decisions farmers may face regarding crop insurance in 2018, he can’t help but compare it to the excitement college basketball fans often have as the NCAA tournament nears.
“This is as close to March Madness as we may get this year,” says the Iowa State Extension farm management specialist.
While Johnson’s assessment may say as much about the chances Iowa’s college teams have of making the tournament this year as anything else, he says that several items point toward lower crop insurance premiums in 2018 and that should be good news for many farmers.
The USDA Risk Management Agency (RMA) has started posting December 2018 corn and November 2018 soybean futures price averages. Those are the figures used to calculate projected prices for crop insurance.
And while those figures won’t be official until after March 1, so far they indicate that the projected prices for corn and soybeans are slightly lower than last year’s $3.96 figure for corn and the $10.19 for soybeans.
What’s more, RMA also looks at price volatility for December corn and November soybean futures options. Kansas State Extension agricultural economist Art Barnaby says the estimates right now indicate that volatility is down so far this year, dropping 4 percentage points from last year on corn and 3 points for soybeans.
The volatility figures are some of the lowest recorded in the past 20 years, Barnaby says.
The last five trading days of February determine those volatility levels, so rates and premiums won’t be known until the first few days of March.
With those two items in mind, Johnson says farmers should go into March with the expectation that crop insurance rates are likely to be lower in 2018.
Johnson says some farmers may have been considering the idea of saving money by lowering crop insurance coverage in 2018, but the numbers indicate they may want to hold firm or even increase coverage levels. At the very least, they could be paying less for the same level of coverage as last year.
Barnaby goes further.
“Let’s just say we stay at 15 (percent volatility). Take some of what you budgeted for this and up your coverage,” he says.
There are several other things to keep in mind this year, Johnson says.
First of all, if you are adding ground in a new county, you must notify your crop insurance agent prior to the March 15 deadline.
Secondly, the period deemed “practical to replant” has been shortened from 25 days to 10 days after the final planting dates. In Iowa, the new late planting periods will run from May 31 through June 10 for corn and from June 15 through June 25 for soybeans.
Third, rules regarding damage to crops from actions caused by a third party (such as dicamba drift) have changed. The insured farmer can protect his or her Actual Protection History (APH) for the affected farm.
Insured farmers will still need to provide timely Notice of Loss (NOL), and that would only affect production and acres that are damaged.
The loss from a situation such as dicamba drift is not covered by crop insurance, but the affected farmer can benefit from eliminating the lower production numbers from those acres when their APH average yield is determined.
In Iowa, over 95 percent of all insured row crop acres are in the Revenue Protection plan where farmers are guaranteed revenue per acre using their APH yield times a price guarantee.
This price guarantee is determined annually as the higher of the projected price (February’s simple average) or the harvest price (October’s average) for December corn futures and November soybean futures. Farmers can choose coverage levels ranging from 50 percent to 85 percent.
The bottom line is that it looks likely that rates will be lower in 2018 and farmers should talk with their crop insurance agents during the week of March 5 about what that means regarding their coverage, Johnson says.