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Insuring Sunflower in 2021
Monday, February 1, 2021
filed under: Marketing/Risk Management
Photo credit: Don Lilleboe
All farm operations need to rely on sound risk management options and practices to keep going. A tool many farmers use to manage risk is crop insurance. More than 90% of U.S. farmers who grow principal crops are enrolled in federal crop insurance programs. Diversification can be another important strategy for mitigating risk; but if there was a lack of access to reliable crop insurance, many farmers would avoid incorporating additional crops into their operation.
Insurance coverage ranges from adverse weather to catastrophic weather events, from failure of irrigation water supply to fire, from insects and disease to damage from wildlife, and, of course, price fluctuation. Having crop insurance probably allows you to sleep better at night knowing you have some protection from the factors outside of your control.
Producers in the Northern Plains states gained first-hand experience on the value of having crop insurance in the 2019 growing season as unprecedented moisture and cooler-than-normal temperatures trimmed yields and reduced return per acre. So, with volatile markets and Mother Nature being unpredictable in recent years, would you ever think of going without crop insurance to help cover your risk? I don’t think so.
Crop insurance for sunflower is available in more than 300 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. A written agreement is a document designed to provide crop insurance for insurable crops when coverage or rates are unavailable in a particular county. RMA has 10 regional offices in various locations across the country that you may contact for information specific to your area using this link: www.rma.usda.gov/RMALocal/ Field-Offices/Regional-Offices .
When insuring sunflower, you have four crop insurance choices: Yield Protection (YP), Revenue Protection (RP), Revenue Protection with Harvest Price Exclusion (RPHPE) or Whole Farm Revenue Protection (WFRP). 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 soy oil 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, use the following link:
prodwebnlb.rma.usda.gov/apps/PriceDiscovery — then click on ‘Your Price’ or ‘Many Prices.’ It will allow you to see how prices are tracking.
Important Additions From Last Year
The National Sunflower Association requested, and RMA approved, some additions to crop insurance for sunflower last year. Producers now have coverage for loss due to Sclerotinia bodies and dark roast in varieties bred specifically for medium seed size for hulling, such as conoil varieties. The market for these varieties continues to grow each year, and this will give producers coverage for discounts they might encounter at the processing plants.
In addition, Master Yields (MY) are now be available in Colorado, Kansas, Minnesota, Montana, Nebraska, South Dakota and Wyoming. Sunflower is grown in a longer rotation and has multiple types (e.g., oil vs. confection sunflower), which can lead to a very slow process to populate a grower’s actual production history (APH) data set. MY will give producers the option of obtaining more-effective crop insurance protection for sunflower when they have four or more years of records for sunflower within a county.
MY is not available to North Dakota producers as they currently have the option of using Personal Transitional Yields to populate their APH dataset.
What’s New for 2021?
RMA has finalized a crop insurance change for spring-planted crops that will require farms nationally to meet the “1-in-4” planting requirement for acres to be eligible for prevented-planting coverage.
The “1-in-4” rule began in the Prairie Pothole region starting in the 2012 crop year. Under the provision, crop acreage must have been planted and harvested at least once in the last four years to be eligible for prevented-planting coverage. The provision applies to physical acreage. The acreage must have been planted and harvested at least once from 2017 through 2020 crop years.
If acreage fails to meet the “1-in-4” rule, the ground must be planted, insured and harvested, or have an adjusted claim for loss after planting, for two consecutive years before becoming eligible again for prevented-planting coverage.
Another insurance change will allow a beginning or veteran farmer with farming experience to use the APH yield on acreage of the previous producer on the ground. To receive that APH profile, the beginning or veteran farmer or rancher must show they were previously involved in decision-making or physical work on the crop or livestock of any farm. This rule expands upon an APH profile that only gave the history to a beginning or veteran farmer who had been previously worked on that specific acreage.
The Enhanced Coverage Option (ECO) and Quality Loss Option (QL) are new crop insurance products that will be rolled out to a wide range of spring planted crops for the 2021 crop year.
ECO allows policyholders to purchase additional area-based coverage for a portion of the deductible for their underlying yield or revenue-based crop insurance policy. ECO must be purchased as an endorsement to the YP, RP, and RPHPE policies. ECO provides coverage in bands from 86% to a choice of either 90 or 95% of expected yield or revenue. ECO pays a loss on an area basis, and an indemnity triggers when the county level yield or revenue drops below 90 or 95% of its expected level.
There is an additional premium associated with ECO coverage, and premium subsidies are offered to make the policy more affordable. Unlike the Supplemental Coverage Option, ECO coverage is unaffected by Agriculture Risk Coverage participation for the same crop, on the same acres. You may select ECO regardless of your farm program election.
An improved APH will allow you to increase your coverage. QL is an option you may elect to improve your APH for years in which you suffered a quality loss. When you elect the QL, you may choose to replace post-quality adjusted production to count with pre-quality adjusted production to count for crop years in your APH database.
Starting in 2021, you may elect the QL for those crop years in your APH database that experienced decreased production to count (PTC) due to quality discounts. The PTC for these crop years can be replaced with pre-quality adjusted PTC if a Notice of Loss was filed in that crop year. QL will be available for YP, RP and RPHPE policies.
Final Planting Dates
The National Sunflower Association offers maps of final planting dates for the Dakotas, Minnesota, Texas, Oklahoma, Kansas, Nebraska, Montana, Wyoming and Colorado. These maps can be found on the NSA website: www.sunflowernsa.com. 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.
Supplemental Coverage Option (SCO)
The Supplemental Coverage Option (SCO) will be available to sunflower producers in most counties in 2021. 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.
The following link shows an interactive map that allows you to see which counties have SCO for 2021: https://prodwebnlb.rma.usda.gov/apps/MapViewer/index.html
Trend-Adjusted APH
Trend-Adjusted APH will give you some options when buying crop insurance in 2021. 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.
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 policies through the federal crop program.
This link shows an interactive map that allows you to see which counties have YE: prodwebnlb.rma.usda.gov/apps/ MapViewer/index.html.
When formulating your crop insurance plan for 2021 with these “new” options, the best advice is to sit down with your local crop insurance agent so that you can put together the best risk management plan for your operation. Your crop insurance agent can help you manage your business risks through effective, market-based risk management solutions offered by RMA.
* John Sandbakken is executive director of the National Sunflower Association