Insuring Sunflower in 2003
Monday, February 3, 2003
filed under: Marketing/Risk Management
Multi-peril crop insurance price elections this year are $11.35 for oil, and $14.60 for confection. This is a significant increase from the 2002 rates of $9.30 for oil and $13.60 for confection, and reflects the higher projected cash prices next year.
Because of the higher price elections, MPCI will likely be more attractive to producers than revenue assurance (RA), which currently is offered on sunflower only in North Dakota. The National Sunflower Association is working on getting RA coverage expanded to other sunflower-producing states.
RA provides dollar-denominated coverage by the producer selecting a dollar amount of target revenue from a range defined by 65-85% of expected revenue. Unlike multi-peril coverage based on actual production history, RA coverage offers additional protection for price fluctuations during the crop year. The price guarantee is based on the average October futures soybean oil price traded at the Chicago Board of Trade during the month of February.
There are several planting date changes for sunflower in South Dakota and Colorado (see map of crop insurance final planting deadlines). “We were successful in urging the USDA Risk Management Agency to extend the final planting date in much of central and southern South Dakota from June 10 to June 15. Also, for six counties in northeast Colorado, the final planting date has been extended from June 15 to June 20,” says John Sandbakken of the NSA.
Quality coverage for Sclerotinia is again available for confection sunflower. Confection sunflower with Sclerotinia levels at 1.1% or higher will be eligible for quality adjustment. Better Sclerotinia coverage was granted by the RMA beginning with the 2001 crop, at the urging of the NSA. Beginning with the 2001 crop, the RMA also enhanced the policy’s quality coverage in other areas, including low test weight, kernel damage and odors, all of which now provide better coverage for both confection and oil-type sunflower.
What if it’s too dry to plant? Then prevented plant (PP) coverage may come into play. According to the RMA’s Regional Service Office in Billings, PP from drought is defined as “insufficient soil moisture for germination of seed and progress toward crop maturity.”
Affected producers will need to demonstrate valid reasons for prevented plant, and every company will have its own rules on which it makes final PP determinations, based in part by verifiable weather data.
MPCI and RA includes 60% of the purchased guarantee as standard PP coverage. Growers can “buy up” and purchase 65% or 70% of the guarantee as a prevented planting guarantee. Growers needed to purchase the higher prevented planting guarantee before the end of sign-up, which is March 15.
Growers should evaluate PP coverage offered by MPCI compared to revenue products such as RA and Crop Revenue Coverage (CRC), which is offered for a number of primary field crops, but not sunflower. A higher price election for MPCI may result in a larger PP payment than a revenue product with a lower price election.
Art Barnaby, Kansas State University extension ag economist, points out that in order to be eligible for PP payments, growers will need to meet the 20/20 rule. This means growers would need to have the lesser of 20% of the insurance unit prevented from planting or 20 acres. It also has to be clear that the grower was prevented from planting and simply did not make the choice not to plant. If the surrounding area is planted but an individual grower failed to plant, that grower may not be eligible for a PP payment. “It really depends on why the grower did not plant the crop,” he says.
Barnaby points out that there is a limit on the number of years a grower can claim PP payments on the same acre. Growers should check with their agents to determine the underwriting rules that affect their situation. – Tracy Sayler