HOW YOUR
CROP REVENUE INSURANCE POLICY MAY TRIGGER BENEFITS
We've watched
corn and soybean prices decline this summer. What
you may not be aware of is how lower prices could
trigger claim benefits through your crop revenue
insurance policy, if the trend continues
through harvest.
For example, a
client who purchased a Crop Revenue Coverage (CRC)
policy at the 85% coverage level has a 166 bushel corn
Actual Production History (APH) on one of his optional
units The base price for CRC was set at $2.83 per
bushel last spring. So, the base revenue
calculation is $399.31 (166 x 85% x $2.83) per acre.
If corn prices
are lower than the base price when the Harvest Price is
established, the client will maintain the spring $399.31
figure. (CRC uses the average of the daily close of the
December CBOT corn contracts during the month of
October.) The insured's harvested bushels will be
multiplied by the Harvest Price to establish a
Calculated Revenue per acre. The result will
be compared to base revenue calculation on the CRC
policy (in this example $399.31) for determination for
eligibility of payment.
How could this
benefit you as a CRC policy holder? Continuing
with our example, if the Harvest Price is set at
$2.25 per bushel and your actual yield is 170 bushels
per acre, then your Calculated Revenue will be
$382.50 (170 x $2.25). In this case, you claim
payment check of $16.81 per acre, even if you raise the
170 bushels of corn per acre! CRC coverage
$399.31, less Calculated Revenue $382.50 results in a
payment of $16.81 per acre! In this example, CRC
coverage help provided you some price risk coverage.
Contact your
1st Farm Credit Services Crop Insurance Specialist
regarding specific questions or issues on your coverage
as we proceed into this year's harvest. By the
way, our client who bought CRC at 85% isn't that
concerned about the current lower prices. He
utilized his crop insurance guarantee to sell ahead 140
bushel of his crop at $3.00 per bushel!
WINTER WHEAT MPCI
With the 2004
corn and soybean harvest fast approaching, it's easy to
forget the sales deadline on MPCI for winter wheat is
September 30. Because it can be challenging to get
both consistent yields and consistent quality form
winter wheat, you may want to consider a risk management
tool. The following types of muliti-peril crop
insurance are available for wheat in Illinois: CAT, APH,
GRP or CRC.
Some important
things to remember about MPCI regarding winter wheat:
-
First
crop/second crop rules affect winter wheat followed
by either corn or beans in the same crop year, if
there is a MPCI loss on the wheat.
-
Winter
wheat is eligible for preventative planting.
-
Winter
kill will normally be adjusted after the wheat comes
out of dormancy.
-
Winter
wheat has a late plant period.
-
Claims can
be paid for quality adjustments.
Due to the
rules changed by the RMA, you have three options when
filing a claim on first crop and second crop acres.
-
Collect
the full insurance indemnity on the first crop and
not plant a second crop.
-
Collect
the full insurance indemnity on the first crop.
Plant a second crop, but don't insure it.
-
Collect
35% of the insurance indemnity on the first crop.
Plant a second crop. Insure the second crop.
Wait and see if you have a claim on the second crop.
Currently,
crop insurance policy provisions allow for the insured
to receive 35% indemnity on the first crop, and still
receive the higher of the remaining 65% indemnity on the
first crop or 100% indemnity on the second crop.
At 1st FCS we
understand you have a lot of information to manage.
Insurance rules and requirements can seem very
confusing. Make the process easier! Your 1st
FCS crop insurance specialist will recommend what type
of coverage will work best for you.
IMPORTANT
You must obtain consent from the insurance company
before you:
-
Harvest crops that have deferred claims from hail or
wind .
-
Destroy any portion of a crop not harvested
-
Put a crop to an alternative use (ex. grazing of
livestock).
-
Harvest as silage. (This
needs to be reported in advance to allow the company
to make an appraisal prior to chopping.
-
Abandon the crop. Appraisals will be done on any
portion of a crop not harvested to obtain production
information.
COMMINGLING HARVESTED PRODUCTION
Again, this year you must have authorization from your
insurance company before you place grain from more than
one unit into a storage structure. This authorization
will be written or by phone depending on the insurance
company you are with. If you do not receive this
pre-authorization, the units that you have commingled
will be combined this year and next year. We are in the
process of preparing lists of policyholders who we think
could be commingling this year. You could help us out by
letting us know for sure if you plan to commingle grain.
If you plan to commingle grain and you do not receive
authorization from your insurance company before
harvesting, please let us know. If you do not plan to
commingle grain and you receive authorization, you do
not need to do anything.
COMMINGLING INSTRUCTIONS
You must
have authorization from your insurance company before
you place grain from more than one farm unit into a
single storage structure. This authorization will
be written or given by phone depending on your insurance
company. If you do not receive pre-authorization,
the units you have commingled will be combined this year
and next year for claim purposes. Let us know what
you plan to do.
