Less volatility in corn and soybean prices recently means most farmers are paying slightly lower crop insurance premiums for 2018.
Iowa farmers will benefit from these lower premiums. In February, USDA’s Risk Management Agency began tracking December 2018 corn and November 2018 soybean futures price averages for the month. Those are the figures used to calculate projected prices for crop insurance. The final prices became official after March 1 and are $3.96 per bushel for corn and $10.16 per bushel for soybeans. That’s the same as the 2017 projected price for corn and slightly lower than the $10.19 for soybeans.
However, another factor used to determine final premiums is price volatility for December corn and November soybean futures options. It’s this volatility factor during the last five trading days of February that is used to determine final premiums. In early February, volatility for corn was 4 points lower compared to 2017 and 3 points lower for soybeans. The volatility factors for corn were at some of the lowest levels in the past 20 years.
March 15 deadline to change coverage
How much did the lower volatility factors impact the final 2018 crop insurance premiums? The corn rates will be discounted by nearly 3% in high-risk counties in the Corn Belt and roughly 15% in low-risk counties.
Now that the final premiums for 2018 are known, farmers should communicate with their crop insurance agent before the March 15 final sales closing date for spring-planted crops. Some growers may consider buying crop insurance at higher levels in 2018 since they are saving money with lower premiums. You can take some of the money you budgeted previously for crop insurance and increase your coverage. If you have any questions or concerns about 2018 coverage, call your agent today for an appointment.
Other crop insurance considerations
Some additional 2018 changes in crop insurance coverage include:
• If you are adding ground in a new county, you must notify your crop insurance agent before the March 15 deadline.
• The period deemed "practical to replant" was shortened from 25 to 10 days after the final planting dates. In Iowa, the new practical-to-plant periods will run from May 31 through June 10 for corn and June 15 through June 25 for soybeans.
• The rules regarding damage to a crop from actions caused by a third party such as dicamba drift have changed. The insured farmer can protect his or her actual production history for the affected farm. Insured farmers will still need to provide timely notice of loss, and this will only affect production and acres damaged.
Example: A neighbor negligently applies a chemical and the resulting spray drift damages the insured farmer’s crop. While the loss is not covered by crop insurance, the insured farmer can still benefit by eliminating the production and acres impacted from the loss and used to determine the farmer’s APH database.
Use of Revenue Protection
Iowa farmers annually select Revenue Protection Crop Insurance on over 95% of all insured row crop acres in Iowa. Insured farmers are guaranteed revenue per acre using their APH yields times a price guarantee. This price guarantee is determined annually as the higher of the projected price (February simple average) or harvest price (October simple average) for December corn futures and November soybean futures prices. Farmers can choose annually a coverage level by crop and county between 50% and 85% of that revenue guarantee.
Farmers may want to review with their crop insurance agent the existing unit structure, level of coverage and related crop insurance changes well in advance of the March 15 deadline. Consider making an appointment now with your crop insurance agent.
Johnson is the Iowa State University Extension farm management specialist for central Iowa. Contact him at [email protected].