No easy answers to crop insurance questions

SPOKANE – Farmers don’t have a quick and easy answer to determining what type of crop insurance is best for them, say industry executives.

But there are good questions they can ask themselves and their crop insurance agent to find the answers.

The Tri-State Grain Producers’ Convention offered a roundtable on crop insurance December 2 in Spokane.

This year’s drought resulted in an “unexpected swerve” for many farmers, who found themselves underinsured or discovered that their crop insurance program was not working as they expected, said Andy Juris, a Bickleton, Washington., wheat farmer and vice-president of the Washington Wheat Producers Association.

Juris suggested that producers look back 10 years on their gains and losses, analyzing their risks.

“We pay a lot of money for these insurance policies,” he said. “Most of us probably wouldn’t buy a high-priced piece of equipment and then opt out and not care.”

Randy Fortenbery, small grains economist at Washington State University, received phone calls this year from farmers concerned that they might not receive the same insurance-covered price as their neighbor, or that grain elevators were offering a lower price than the price on the Portland Marlet.

“You do not have the guarantee of the market price, you have the guarantee of Portland price of your insurance product, ”he said.

Fortenbery explained how the USDA Risk Management Agency determines soft white wheat prices for crop insurance programs.

The agency reviews the daily futures prices for soft red winter wheat on the Chicago Stock Exchange from Aug.15 to Sept.15 for the contract which expires in September of the following year. The agency uses the average as the guaranteed price for next summer’s harvest. The risk of a price change between this period and the harvest is determined by the implied volatility of the last five days of the discovery period.

To calculate the price of soft white wheat in the Pacific Northwest, RMA takes the soft red winter wheat futures contract and adjusts for a soft white premium, using the five-year average between August 1 and August 31.

Farmers have the option of purchasing a crop insurance income product with inclusion of the price of the crop, Fortenbery said. If the harvest price is higher than the guaranteed price for the previous September, it is this price that makes it possible to calculate the expected income and to determine the payment of compensation.

For a higher premium, farmers could buy the crop price exclusion, meaning they wouldn’t benefit from a price increase between when they bought their insurance policy and when they bought their insurance policy. they collected it. It’s not a popular option, but some growers are using it, Fortenbery said.

“It’s really important to think carefully about what you’re trying to insure, how much risk you’re willing to take, and how much risk you have to give up when choosing between these products,” he said.

Panel moderator Nicole berg, a Paterson, Washington., wheat farmer and vice-president of the National Association of Wheat Producers, weighs the cost per acre of insurance.

For example, if the cost is $ 1.90 per acre to cover 65% of his farm or $ 1.95 per acre at the next level of cover, she assesses whether the extra bushels of cover for her farm are worth the higher price.

Juris recommended that farmers be practical and ensure that their crop insurance agents provide adequate service and correct documentation. He noted that this is the knowledge he has acquired over the years through “error and trial”.

“If you have an agent who sends you a stack of paper in an envelope with a sticky note that says ‘Sign’ and no explanation, I would probably look for another crop insurance agent,” he said. “I like to know what I’m signing, especially when we pay large amounts. It’s not just something I want to sign without understanding exactly what I’m certifying and verifying. “

Crop insurance officers should explain the difference between insurance plans and keep farmers up to date with new developments, usually mentioned through producer associations or events, said Ben thiel, director of the RMA regional office in Spokane.

“A good agent is going to explain new things that you might be particularly interested in,” Thiel said. “(If) you bring it up and they don’t know what it is, your agent might not be the most up to date with new things that are going on.”