Crop Insurance Market Updates
Thoughtful Examination of Choices
Harvest is usually a time of year we look forward to. Of course, some look forward to it more than others, depending on variables such as yield. But there really is something about the sound of the equipment running, watching as your crop moves into the header, and the satisfaction of seeing a field just finished.
Many of us in the grain business gain a similar satisfaction from harvest by arriving early in the morning to the grain elevator when steam is rolling out of the top of the dryer, the grain chatters as it discharges through spouts during a transfer, and the warm corn emits a pleasant, familiar smell. There have been many times when I’ve stood outside with coffee to start my day just to take in the sights and smells.
While we may romanticize harvest, let’s face it – it can be grueling and there are many business considerations that must be made on the fly. There are also other things that must be observed now so informed decisions can be made later. A few of these items include grain quality and its storability, possible insurance claims and indemnities, and understanding yields by field to have a thoughtful conversation with your insurance agent to ensure protection from perils and carrying the right unit structure for the farm.
Grain quality and storability
There have been several reports of lower test weight corn due to high stress during grain fill in parts of the east, and anticipated lower test weight in parts of the northwest. While crop insurance does have certain triggers for low test weight, storability may be a bigger threat for lost value. Crop insurance does not cover damage that occurs in the bin, and one of the fastest ways to lose value in your crop is through lost quality in storage.
Low test weight corn sometimes dries on the surface faster than the interior. This shows a lower moisture content initially, but as the moisture evens out in the bin it causes a higher moisture test. Think of it like a sponge. It also absorbs moisture more easily which invites mold and other damage. When the integrity of the kernel is compromised, it often leads to more broken corn or fines after handling. We encourage people in these situations to plan to core their bins early and closely monitor grain quality.
Insurance claims and indemnities
It looks likely that our harvest price discovery for crop insurance will be over the projected prices. This means with a typical Revenue Policy, the only trigger will be a yield below your guaranteed bushels but have a higher guarantee. Know what those are and be prepared to discuss this early with your agent if you feel you may have a loss to ensure you are paid if you are owed. Filing a timely notice of loss is a requirement of your crop insurance policy.
Yield by field
There are a few different unit structures in crop insurance, meaning how the policy is “built” for the purpose of guarantees. You are probably familiar with the enterprise structure, where you insure all the production in a county by the crop planted. But are you aware of optional units that insure by crop, by field? In some cases, such as when a county has wide ground variability, it may make sense to insure by field. Optional units insure by crop, by field. There are some cases where a county has wide ground variability, so it may make sense to insure by field. This does tend to cost more than grouping all the fields together; however, it may be something that better reflects the risk you are looking to manage. For example, you may have three fields that do really well in a given year but one that underperformed. The average yield of the four fields may keep you from triggering a covered loss, but the one field still struggled. If you have this type of variability, discuss it with your Crop Risk Services agent to determine whether a different unit structure is a better solution.
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