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					        COMBO: Crop Insurance for 2011

                                Crop Advantage Series
                                      Jan. 2010




                          Farm Management Extension Staff




University Extension/Department of Economics
    Common Crop Insurance Policy
      • Known as COMBO
      • In effect for 2011 crops
      • Combines major policy plans
      • Simplifies guarantees and payments
      • Clarifies enterprise and whole farm units
      • Clarifies replant and prevented planting


University Extension/Department of Economics
               COMBO is available for:
    •   Corn                    •              Cotton
    •   Soybeans                •              Rice
    •   Grain sorghum           •              Canola/rapeseed
    •   Wheat (spring & fall) •                Sunflowers
    •   Barley (feed & malting)




University Extension/Department of Economics
                  OLD                                  NEW

   Actual Production History (APH)                 Yield Protection (YP)



   Crop Revenue Coverage (CRC)
     Revenue Assurance with                     Revenue Protection (RP)
   harvest price option (RA-HPO)


      Revenue Assurance (RA)                   Revenue Protection with
       Income Protection (IP)                   harvest price exclusion
                                                      (RP-HPE)



University Extension/Department of Economics
           Acres Insured in 2010
          Corn and Soybeans--Iowa




University Extension/Department of Economics
                   Yield Protection (YP)

  • Same as old APH (or MPCI) policy
  • No change to APH yield determination
  • Projected price is the average closing
    futures price during February
    (same as for revenue insurance)
       – Corn: December contract
       – Soybeans: November contract


University Extension/Department of Economics
                   Yield Protection (YP)
  • Price Election = 55-100% of the
    projected price
  • Insured Yield = 50-85% of APH yield
  • Indemnity Payment =
            (Insured Yield – Actual Yield)
             x Price Election


University Extension/Department of Economics
                   Yield Protection (YP)

  • Catastrophic coverage is 55% of the
    projected price and 50% of your APH
    yield
       – $300 per crop per county administrative
         fee




University Extension/Department of Economics
             Revenue Protection (RP)
   • Same as old CRC and RA-HPO
   • No change to APH yield determination
   • Projected price is the average closing
     futures price during February
        – Corn: December contract
        – Soybeans: November contract



University Extension/Department of Economics
             Revenue Protection (RP)
   • No price election - must take 100%
   • Coverage levels (revenue guarantees)
     are between 65-85%
   • Harvest price is average of October
     futures price
        – Old RA corn coverage used November



University Extension/Department of Economics
             Revenue Protection (RP)
   • Final guarantee is based on the higher of
     the February or October price
   • Catastrophic level is not available
   • Indemnity Payment =
            (Coverage Level x APH Yield
              x Max(Proj. Price, Harvest Price))
              – Actual Yield x Harvest Price

University Extension/Department of Economics
   Revenue Protection with Harvest
     Price Exclusion (RP-HPE)
   • Same as old RA or IP policy
   • Projected price is the average closing
     futures price during February
        – Corn: December contract
        – Soybeans: November contract
   • Final guarantee is based on the projected
     price

University Extension/Department of Economics
   Revenue Protection with Harvest
     Price Exclusion (RP-HPE)
   • No increasing guarantee if harvest price
     exceeds projected price
   • No catastrophic coverage
   • Indemnity Payment =
            Coverage Level x APH Yield x Proj. Price
              – Actual Yield x Harvest Price


University Extension/Department of Economics
                    Corn Insurance Prices
           Harvest prices have been higher
           3 out of last 11 years




University Extension/Department of Economics
                   Soy Insurance Prices
             Harvest prices have been higher
             6 out of last 11 years




University Extension/Department of Economics
                           Group Policies

      • Group Risk Plan: GRP
      • Group Risk Income Protection: GRIP
      • Group Risk Income Protection with
        harvest price option: GRIP-HPO




University Extension/Department of Economics
                           Group Policies
      • No changes made
      • GRP uses the RMA projected price
      • GRIP uses the Feb. and Oct. futures
        prices
      • Expected yields based on historic trends
      • Actual yield is based on county averages
        (per planted acre)



University Extension/Department of Economics
                                 Premiums
 • Only one rating system for revenue policies
 • Similar to RA system
 • RP > RP-HPE > YP
 • May be higher or lower than before




University Extension/Department of Economics
             What Units to Choose?
 • Optional Units: Each farm is separate
 • Basic Units: Combine owned and cash
   rented acres in same county
 • Enterprise Units: Combine all acres of
   the same crop in same county
 • Whole Farm: Combine all crops in county


University Extension/Department of Economics
                 Current Subsidy Rates
     Coverage            Basic Units           Enterprise   Whole Farm
       level            Optional Units           Units        Units
         60%                  64%                80%         not avail.

         65%                  59%                80%           80%
         70%                  59%                80%           80%
         75%                  55%                77%           80%
         80%                  48%                68%           80%
         85%                  38%                53%           80%


University Extension/Department of Economics
University Extension/Department of Economics
                         Enterprise Units

      •   Available for YP, RP and RP-HPE
      •   Must include at least 2 sections
      •   CRC used acres instead of sections
      •   At least 2 sections must have acres
          equal to or greater than the lesser of 20
          acres or 20% of the total



University Extension/Department of Economics
                                   Example
      • 300 total acres of corn in 2 sections
      • Must have at least 20 acres in each
        section
      • 20% rule applies if total acres is less than
        100 acres




University Extension/Department of Economics
      You Can Aggregate Acres Across
                Sections
    • Example: 300 total acres
        – 278 acres in Section 1
        – 12 acres in Section 2
        – 10 acres in Section 3
    • Can combine acres in Sections 2 and 3




University Extension/Department of Economics
                         Enterprise Units
   • Generally, the more acres you
     combine into one unit, the lower the
     cost per acre
   • Probability of collecting a payment is
     lower, too
   • But grain and dollars are commingled



University Extension/Department of Economics
                       Whole Farm Units

    • Combine all insurable crops in county

    • Available for Revenue Protection only

    • Must include at least 2 crops that are each
      10% or more of the total planted acres



University Extension/Department of Economics
              Prevented Planting/Replant
                      Payments
      • Based on Feb. futures price, not October
      • Replant payments are no longer based
        on actual costs

      • Replant Payments:
           – Corn: 8 bu. x Feb. price, per acre
           – Soybeans: 3 bu. x Feb. price, per acre


University Extension/Department of Economics
              Looking Forward to 2011

      Corn: Dec. 2011 futures $ 5.53
      Soy: Nov. 2011 futures $12.94
       as of Jan. 3, 2010




University Extension/Department of Economics
                    Corn Insurance Prices




University Extension/Department of Economics
                   Soy Insurance Prices




University Extension/Department of Economics
                    Thank you for your time!

                              Any questions?
                                    My web site:
                         http://www.econ.iastate.edu/~chart/

                                   Iowa Farm Outlook:
                            http://www.econ.iastate.edu/ifo/

                                 Ag Decision Maker:
                       http://www.extension.iastate.edu/agdm/


University Extension/Department of Economics

				
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