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Insuring Your Sunflower in 2017

Monday, January 30, 2017
filed under: Marketing/Risk Management

       Would you ever think of going without crop insurance to help cover your risk? I don’t think so, because one bad year could have devastating financial consequences. You are not alone; crop insurance is purchased by most agricultural producers, to protect themselves against either the loss of their crops due to natural disasters, or the loss of revenue due to declines in the prices of agricultural commodities. Having crop insurance is something you absolutely must look at to have some protection from the factors outside of your control, like volatile markets and Mother Nature.
       Crop insurance for sunflower is available in 306 counties in the Dakotas, Minnesota, Texas, Oklahoma, Kansas, Nebraska, Montana, Wyoming and Colorado. If crop insurance for sunflower is not available in your county, have your crop insurance agent check into obtaining a written agreement at the USDA Risk Management Agency (RMA) regional office that covers your state. RMA has 10 regional offices in various locations across the country that you may contact for information specific to your area using this link. A written agreement is a document designed to provide crop insurance for insurable crops when coverage or rates are unavailable in a particular county.
       When insuring sunflower, you have three crop insurance choices: Yield Protection, Revenue Protection or Revenue Protection with Harvest Price Exclusion. The “Basic Provisions” are the same for all crops and all policies, making paperwork much simpler to digest. Revenue and yield policies have the same (minimum) starting price, and are based on December soyoil prices traded on the Chicago Board of Trade during February and October. If you are interested in following spring and fall price information for all crops covered by crop insurance, click here, then click on ‘Your Price’ or ‘Many Prices.’ It will allow you to see how prices are tracking.
So, What’s New for 2017?
       Well, there are a few things of which you should be aware. First, 2017 crop insurance guarantees will likely be about the same as last year. This suggests that crop insurance guarantees will once again be lower per acre and downside revenue risk will be greater in 2017 as compared to just a few years ago. In some cases, revenue guarantees for crop insurance products will be below total costs of production, depending on your individual circumstances. Also, there was a change to the definition—Practical to Replant—in the Basic Provisions. It now provides a clear known deadline for when replanting is practical due to concerns that were being raised.
       Here are some things you should consider when sitting down with your local crop insurance agent to make decisions on how to insure this year’s crop.
Whole-Farm Revenue Protection (WFRP)
       If you have a diversified operation, you may want to ask your agent about Whole-Farm Revenue Protection (WFRP) insurance. WFRP is available in all counties across the U.S. and provides coverage against the loss of revenue that you expect to earn, or will obtain from commodities you produce or purchase for resale during the insurance period under one policy.
       Coverage levels range from 50 to 85% to fit the need of the operation. A level of 80-85% is only available when a minimum of three commodities that significantly contribute to an operation are insured under the policy.  Operations that have a commodity insurable under revenue protection, revenue protection with harvest price exclusion, or the actual revenue history plan of insurance must have a minimum of two commodities on the farm in order to qualify for WFRP insurance.                                                                        
       Whole-farm subsidy is available for WFRP if the producer qualifies through diversification of commodities. If there are two or more commodities, the operation will receive a whole-farm subsidy. If not, the operation will receive the basic subsidy. 
       An underlying individual Federal Crop Insurance Corporation (FCIC) policy may be purchased for any of the commodities insured in the county at the “buy-up” coverage level. Having a “catastrophic” (CAT) policy would void the WFRP policy.
       Details about WFRP can be found here.
Supplemental Coverage Option (SCO)
       The Supplemental Coverage Option, or SCO, will be available to sunflower producers in most counties in 2017. SCO is an area-based policy endorsement that can be purchased to supplement an underlying crop insurance policy. It covers a portion of losses not covered by the underlying policy. SCO will be available on a county-wide level or on the basis of a larger area in counties that lack sufficient data.
       SCO indemnities will be triggered if losses in the area exceed 14% of expected levels, with SCO coverage not to exceed the difference between 86% and the coverage level selected by the producer for the underlying policy.
       Click here for an interactive map that allows you to see which counties have SCO for 2017.
Trend-Adjusted APH
       This is not new for 2017, but it is something you may want to consider if you farm in a county that offers this option.  Many producers felt that the 10-year average Actual Production History (APH) yields used to determine their crop insurance guarantees did not accurately reflect their current yield potential, due to improved crop genetics and cultural practices that have been introduced in recent years. Moreover, farms with the maximum 10 years of yield history were penalized compared to farms with fewer years.
       “With this in mind, the National Sunflower Association urged RMA to include Trend-Adjusted APH for sunflower to address this concern,” states Karl Esping, Lindsborg, Kan., sunflower producer and NSA president. “NSA was able to get 26 more counties added for 2017. We plan to continue to work with RMA to get all counties in all states that have sunflower crop insurance coverage to offer Trend-Adjusted APH in future years.”
       So how does Trend-Adjusted APH work? Basically, a trend adjustment factor is estimated for each crop and county. This factor is equal to the estimated annual increase in yield, and is based on county average yields as determined by the USDA National Agricultural Statistics Service (NASS) each year. Each yield reported in the individual insurance unit’s APH history is adjusted upward by the trend adjustment factor, times (x) the number of years that have passed since the yield was recorded.
       Trend-Adjusted APH will give you some options when buying crop insurance in 2017. If the same percent guarantee is chosen, the dollar value of coverage will be increased and the premium you pay will be slightly higher.  As an alternative, you can elect a lower percent guarantee for approximately the same dollars of coverage. The total premium would be the same as before, but your share of the premium would be smaller because the percent subsidy from the USDA is higher for lower-percent guarantee levels.
       The Trend-Adjusted APH is available for either yield protection or revenue protection policies, at all levels of guarantee except catastrophic (CAT) coverage (50% yield guarantee). The Trend-Adjusted APH election must be made by the insured producer by the sales closing date each year, which is March 15 for sunflower in the eligible counties. Most counties in the Dakotas and Minnesota are eligible for Trend-Adjusted APH. Counties added for 2017 include:
  • Colorado: Adams, Kit Carson, Weld
  • Kansas: Cheyenne, Rawlins, Scott, Sherman, Stevens, Thomas
  • Minnesota: Traverse
  • Nebraska: Box Butte, Cheyenne, Kimball, Perkins, Sheridan
  • North Dakota: Billings
  • South Dakota: Bennett, Buffalo, Haakon, Jackson, Jerauld, Mellette, Shannon, Stanley
  • Texas: Hale, Lamb
Actual Production History Yield Exclusion (YE)
       Under this program, yields can be excluded from your APH when the county average yield for that crop year is at least 50% below the 10 previous consecutive crop years' average yield.  The YE allows eligible producers who have been hit with severe weather, including drought, to receive a higher approved yield on their insurance policies through the federal crop insurance program.
       “APH yield exclusion is extremely important because of the effect drought has had on the High Plains region,” says Leon Zimbelman, Keenesburg, Colo., sunflower producer and NSA board member.  “The APH exclusion is something all sunflower producers in every state should check out with their crop insurance agent to see if it can benefit their operation and enhance risk coverage.”
       Click here for an interactive map that allows you to see which counties have YE.
       The National Sunflower Association offers maps of final planting dates for the Dakotas, Minnesota, Texas, Oklahoma, Kansas, Nebraska, Montana, Wyoming and Colorado. The maps can be found on NSA’s website, Go to the “Growers” link, then “Crop Insurance Planting Maps.” The final planting date as listed on these maps is the last day that you can plant the crop and still get full coverage. After this date, the coverage is reduced by 1% per day. The actual final date that RMA allows the crop to be planted with reduced coverage is anywhere from 20 to 25 days after the date listed on the NSA maps, depending on the county. 
       When formulating your crop insurance plan for 2017, you’ll need to crunch the numbers to see what the best risk management plan for your operation would be, given current prices.  The best advice is to sit down with your local crop insurance agent. Your agent can describe the different insurance products available, and the policy rates and terms. Your agent will help you choose the best coverage for your crop based on your particular farm operation and your risk management and budgetary needs.    
* John Sandbakken is executive director of the National Sunflower Association.                                 
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