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Planning for Crop Insurance

Krista Blair
Educational Opportunities: 
Grain, Young, Beginning Farmers, AgriBusiness
Home > Education & Events > December 2017 > Planning for Crop Insurance

How profitable will your next production season be? It depends on how you plan for it.

I encourage clients to educate themselves and seek out a crop insurance partner with experience and expertise. Understanding, evaluating and managing risk is a vital part of any successful operation. I recommend looking at risk management as a whole and evaluate what all of your risks are, as opposed to making decisions based on what happened in the last six months. The goal is for growers to discover new ideas and solutions, while also becoming educated on crop insurance risk management tools.         

Be sure to get your production records in order so you can report your bushels to your crop insurance agent before the next deadline. With lower ending harvest prices, look at both production and revenue guarantees to check for a possible indemnity payment. If you think you have a possible loss, contact your agent immediately to help with that determination, and ask them to contact an adjuster for you if necessary. 

What are your crop insurance needs for the upcoming year? Commodity price risk and weather are two of the most unpredictable aspects of managing an operation. Your agent should encourage you, the producer, to continue to utilize multi-peril crop insurance as a safety net. Multi-peril crop insurance gives you a revenue floor per acre as well as utilizing a subsidy from the government. Is hail your greatest peril? There are several cost effective hail products you can review with your agent to fit in with your cost of production.

Strategic marketing on those commodity prices involves several layers of decision making. Each decision you make, including your crop insurance coverage, should be made according to how it will influence overall average price. You should always aim for the best possible average price for all sales and purchases, while trying to maintain a reasonable cost for managing both opportunity and risk.

Your agent can help you compare several insurance products that will allow you to compliment your existing multi-peril policy with some additional price protection built into them. If you want to look at multiple crop insurance products, you need to set an end point - the revenue per acre you need to break even. From there, you need to work backwards in order to sort out your per acre costs and make marketing decisions that put you in control of your price floor. 

When looking at costs per acre, be sure to consider the following: seed, fertilizer, chemicals, crop insurance, crop drying, and fuel. In addition to repairs, operating interest, land rent, overhead costs and machinery depreciation. The more you know, the better the risk management plan will be laid out. Compeer Financial's Grain Margin Manager tool is a simple, but powerful tool to help calculate the costs of operation and determine how those costs impact your per bushel price objectives.

Products like RevNet and PriceFlex allow you to lock in a spring price at an earlier date or choose alternative price discovery periods. When coupled with your multi-peril bushel guarantee, it allows you to analyze expenses (cash rent, seed, fertilizer, etc.) and guarantee revenue to assure a profitable position. HarvestMax will help you protect against shallow yield losses and allows you to insure up to 95% of your approved yield.

Margin Protection is a new crop insurance coverage option that helps you provide coverage against an unexpected decrease in your operating margins. 

If livestock is part of your coverage needs, Livestock Risk Protection provides protection against declining livestock prices. Livestock Gross Margin, protects an expected gross margin.

Whole Farm Revenue Protection helps you cover both crops and livestock up to a certain level. You must have at least three commodities of significance to get the 80% to 85% coverage levels. This insures against a whole farm loss, not a shallow or spot loss on your crop or commodities.

Crop insurance used as a risk management tool can take some of the emotion and guess work out of grain marketing. Remember to be consistent! Stick with price opportunity and risk management strategies in good times and bad. Great marketing is measured over the long haul. Be sure to pre-plan your marketing strategies.  Know your intentions if the market goes up or down and make those decisions based on long term goals.

Compeer Financial is ready to help you fix an end point for revenue planning and build a crop insurance package that puts you in control. We see the value in offering industry insights and updates to our clients whenever possible. Our wide array of industry experts are continually staying up to date on industry trends, products and changes that may affect our clients. 

Interested in upcoming events or timely information on important focus areas for you? Opt-in for our enewsletters. Plus, keep up to date on important deadlines and notifications from our Crop Insurance team to ensure that you stay on track by also opting-in for our text messages.
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