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Crop Insurance Options for Your Small Grains

After taking a several month hiatus from our shared learning calls, in September we jumped back into the swing of things with a call on crop insurance options for small grains. Mark Gutierrez and Criag Christianson from the regional Risk Management Agency (RMA) office in Minneapolis joined us to review the available policies for these crops. We compared and contrasted single crop policies and whole farm revenue policies so farmers could make informed decisions about what crop insurance option would work best for their small grains.

Individual Crop Plans:

Individual crop plans insure a farmer’s yield or revenue on one product, such as oats. If that farmer produces corn, soybeans and oats and chose to insure through single crop policies, they would have three policies – one for corn, one for soybeans and one for oats. Within individual policies there are three different types of insurance that you can purchase, which I’ll list so it’s easier to read:

  1. Yield Protection Plan – Policy is based on 3-10 most recent years of actual production history on your farm of the crop in question. Then loss claims are based off of production levels or yields. Loss payments are your production shortfall multiplied by your projected price for the crop.
  2. Revenue protection plan – Policy is also based on 3-10 years of production history, but compensates for price drops rather than yield drops. The price secured by the policy for the product is determined using spring projections and actual harvest prices.
  3. Area risk protection plan – For this plan, the RMA assesses yields over a whole area and when they drop below a certain threshold everyone in the area with this policy receives a payment – whether or not the farmer personally has suffered substantial yield losses.

But because all of the small grains are not widely grown throughout the upper Midwest, not all small grains are covered with ready-made single crop policies. The following small grains policies are available by state:

State Yield Protection Individual Crop Plans Revenue Protection Individual Crop Plans
Iowa Barley, Sorghum, Oats, Wheat Barley, Sorghum, Wheat
Minnesota Barley, Buckwheat, Flax, Oats, Wheat Barley, Wheat
Wisconsin Barley, Sorghum, Oats, and Wheat Barley, Sorghum, Wheat

Now, even though there are some counties in Iowa that offer ready-made barley policies, not every county carries that as a standard option. Even if the policy you’re seeking is not offered a la carte, so to speak, in your county, your insurance agent has the ability to write you a custom agreement for yield protection or revenue protection policies (there are no written policies for area risk protection policies, since presumably there isn’t enough production in your area to determine area losses). This means they will consult policies from other counties or even other states in the region and write you a special policy for that crop. If your crop insurance agent is unfamiliar with this process, they should work with their Approved Insurance Provider for help on completing a written agreement request. RMA can work with the agent and the company underwriter if they still have questions about the process.

Whole Farm Revenue Protection Policy:

Whole Farm, for short, was first offered in 2015 and is distinct from individual policies because it insures your revenue from all of your farming enterprises combined. The policy determines your historic average revenue from the last five years of your schedule F tax forms. Unlike a single crop policy, you don’t need a minimum of three years of verifiable production records to get a policy. Your insurance agent can instead use projections from similar crops or area levels to set an expected price for the crop, which will be adjusted as you accumulate years of yield and price data, so you can insure crops that you are growing for the first time as long as you have been farming for at least five years.

Whole farm is formulated to reward diversity. Your agent will use your commodity count to determine coverage levels. In order for a commodity to count in this official tally it has to meet a minimum level of revenue in order to be included. So, for example, if you have two crops and one generates 95% of your revenue that would only result in a commodity count of one. As your commodity count rises you increase the coverage options available to you. If you have one or two commodities you would only qualify for 50%-75% insurance of your annual revenue – but with three or more commodities you can access 80-85% coverage levels, though these policies have less federal subsidies than the lower coverage options. Additionally, for each crop in your commodity count up to seven you get a discount on your premium base.

Winter wheat grain in bag

This hard red winter wheat, grown in Iowa, could be insured under either a yield or a revenue protection policy. But this is not true for all small grains, like oats, where only yield policies are offered.

Another reason you might consider a whole farm policy is that it offers revenue protection on any crop while individual crop policies for small grains don’t always have a revenue protection option. If you refer back to the table listing single crop policies, you will see that oats, flax, buckwheat, and rye (italic type in the table above) only have yield protection options. We hear from farmers that low prices and lack of viable markets is the biggest barrier to growing small grains regularly and at scale. If you too are most concerned about securing a good price, it is worth considering a revenue protecting policy either at the individual or whole farm level.

But there are reasons why you might prefer an individual crop policy. Cash flow is one reason. You have to file your taxes for the year and present your schedule F in order to secure a whole farm payment. So if you are concerned about waiting several months after a crop or market failure to receive your payment, whole farm might not be the option for you. The other reason you might opt for an individual policy over whole farm is that you cannot purchase both a catastrophic plan and a whole farm plan for your farm. And if you have individual policies on crops and whole farm then loss payments from your individual plans will count as revenue for your whole farm policy. If you like to really cover your bases on insurance policies then whole farm may not be a good one to add because its benefits are sharply limited by doubling up with other policies.

If you are interested in joining us for our monthly small grains shared learning calls to hear more information like this, contact me at [email protected]. We are now accepting requests for our $40/acre cost share on small grains harvested in 2018. To request acres fill out this survey: https://www.surveymonkey.com/r/DXGGRHG. Read more about the cost-share program requirements in this flyer.

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