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Interest grows in new risk management toolsGrowers look for revenue protection, new insurance discounts By Sara Wyant Faced with increased risk and price variability, farmers are increasingly moving away from traditional multi-peril crop insurance policies that provide coverage solely against production losses to those that protect against both yield and price risks. An analysis of U. S. Department of Agriculture Risk Management Agency (RMA) sales data, over the last seven years, indicates that the number of Actual Production History (yield-only) policies sold in the last seven years (2001 to 2007) has dropped by over 300,000 policies covering over 46 million fewer acres. At the same time, revenue-based policies, such as Crop Revenue Coverage and Revenue Assurance and group risk policies, have surged in popularity--picking up most of the APH yield policy acreage. Part of the switch could be attributed to changes made in 2001 when the provisions of the Agricultural Risk Protection Act (ARPA) fully came into force. That made revenue based policies more affordable and more recent fluctuations in intra-year crop price changes, increasing the importance of revenue protection as well as yield protection, said RMA's Tim Hoffmann. In addition, coverage was expanded to more states and crops for the Group Risk Income Protection (GRIP) plan of insurance, along with adding a harvest revenue option. "Producers whose crop yields tend to follow county yields and who are interested in price protection, as well, may have found that option on GRIP to be very attractive," added Hoffmann. Traditional yield protection policies may never go away, but RMA is working to combine the yield and revenue products into a single policy. This so-called "combo" policy is targeted to be available in 2010, if RMA can obtain the necessary funding needed to make critical enhancements to its current automated processing systems. According to Hoffmann, "Crop insurance is a vital part of the farm safety net and is able to provide farmers with effective protection against both yield and price risks. With the availability of various plans of insurance and coverage options, farmers can tailor coverage to provide the most effective protection for their individual farming operation." Discounts for crop traits? RMA is also exploring new types of insurance that can be linked to certain types of seeds. The RMA, recently, announced that the new Biotech Yield Endorsement (BYE) will be implemented on a pilot basis, beginning with the 2008 crop year in the states of Illinois, Indiana, Iowa and Minnesota. The BYE will provide producers a premium rate reduction if they plant non-irrigated corn for grain containing three specific biotech traits--YieldGard Corn Borer, YieldGard Rootworm and Roundup Ready Corn 2, which are only marketed under the trade names of "YieldGard Plus with Roundup Ready Corn 2" and "YieldGard VT Triple." Producers with an individual yield or revenue insurance plan (APH, RA, or CRC) at a buy-up level of federal crop insurance coverage will be eligible for the discount on any unit in which they plant at least 75 percent of their non-irrigated corn for grain acres to a qualifying corn hybrid. RMA will release the BYE, containing the eligibility criteria, and instructions to approved insurance providers in the near future. This endorsement does not waive or otherwise affect the Environmental Protection Agency's (EPA) existing refuge requirements. Producers will be expected to be in full compliance with all EPA requirements, the agency noted. RMA officials also note that the BYE is not an endorsement of any particular brand of seed, but this is the only submission to be approved thus far. The BYE was co-submitted to the FCIC by Monsanto Company and Western Agricultural Insurance Co. "The BYE pilot program rewards corn growers for using technologies that help them manage risk on their farms," said Robb Fraley, executive vice president and Chief Technology Officer for Monsanto Company. "Much like a 'safe-driver' discount in auto-insurance, this program recognizes that our technologies are able to consistently deliver higher yields, year after year." Monsanto officials say the average cost of a total policy premium will be reduced by approximately 14 percent on revenue assurance policies, such as Actual Production History, Revenue Assurance and Crop Production Coverage. On average, this discount will amount to more than $2 per acre on the grower-paid portion of the premium. Editor's note: Columnist Sara Wyant is president of Agri-Pulse Communications, Inc. and publishes a bi-weekly newsletter, Agri-Pulse, on food and farm policy. For more information, you can e-mail her at Agripulse@aol.com. 12/24/07 Date: 12/20/07 Advertisement
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