FNC News

As the March 17th deadline approaches for making crop insurance coverage choices for this year’s spring planted crops, it is important to consider not only the cost of inputs to produce the crop but also your level of risk tolerance. The cost to produce a crop is certainly not decreasing and that makes it more valuable to protect. There are a variety of plans and coverages available that can complement your farming operation as well as your risk tolerance.  And, with commodity coverage prices trending comparable to last year for corn and milo and slightly less for soybeans, a typical revenue or yield protection policy may not provide enough coverage. Crop insurance companies offer “private products” to help fill in the gaps, providing additional revenue coverage, additional bushel coverage, and increased commodity prices. 

Also, keep in mind the programs offered at FSA – Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC).  ARC pays when actual revenue is less than a specified guarantee using a five-year Olympic moving average price and a county yield, and PLC pays when the effective price for a commodity is below its reference price. The sign-up deadline for program selection this year is extended to April 15, compared to March 15 the last few years. These programs have no premiums, but potential payments aren’t made until October of the following year.

Supplemental Coverage Option (SCO) is a federally subsidized product that provides coverage up to 86% of your approved yield, building on your underlying revenue protection (RP) or yield protection (YP) policy. For example, if your RP policy is at the 75% level, SCO will add an additional 11% coverage. While the coverage and liability are farm-specific, losses are triggered only when there is a county-level revenue or yield loss. Even though your farm may have a loss, if the county does not, no claim is paid out. The opposite can also be said, if your farm produces well but the county yield overall is low enough to generate a loss, you could still collect a claim payment. Because the county yield is calculated using RMA crop insurance data, claim determinations are not able to be made until the summer of the following year. It is important to note that SCO can only be used if PLC is chosen at FSA. It is not available when ARC is selected. 

Another federally subsidized insurance product is Enhanced Coverage Option (ECO). It is getting a lot of attention this year due to the premium subsidy rate increased from 44% to 65%. ECO provides coverage at 86% of your approved yield (where SCO coverage ends) up to your choice of 90% or 95%. You can also insure at a percentage of the projected price from 50% to 100%. Unlike SCO it does not matter which farm program you are signed up for between ARC and PLC. Plus, you do not have to purchase SCO to use ECO. How the coverage works, however, is like SCO. While the coverage is based on the liability of your underlying revenue protection or yield protection policy, loss payments are triggered by how the county does. When thinking about SCO and/or ECO, you want to consider how your farm yields compared to how the county yields. If you typically follow with the county, these coverages might be a good fit for your operation. 

When reviewing crop insurance coverage options for this year, consider how much protection you need, what combination of products will get you there, and ultimately, what will help you sleep at night. 

Contact Farmers National Company today to discuss your crop insurance options and find the best coverage for your operation.