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1) Do I have to hire Strategic Farm Marketing for marketing if I only want crop insurance?
No. We have numerous crop insurance clients that are currently not involved in our marketing programs. Although we encourage producers to use insurance as part of their marketing plan, it is not a requirement for a client to hire us as their marketing partner if they are interested in our crop insurance services.
2) Do I have to buy my insurance through Strategic Farm Marketing to take part in a marketing program?
It is highly recommended that you purchase your crop insurance through Strategic Farm Marketing. One of the most critical aspects of our marketing plan is the risk management portion of the plan. When so much of your cash grain sale is tied to insurance, call options, LDP, and counter-cyclical payments, you need to have confidence that all pieces of the puzzle are intact. The marketing managers at Strategic Farm Marketing will help eliminate mistakes and provide you with the highest possible revenue at the lowest rate possible.
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3) Is there low cost insurance to protect from Asian Soybean Rust?
Yes, there is! In most counties, for less than $3 per acre, we can offer a policy that protects 90% of your average county soybean yield. This is an easy policy to apply for, with no yield history necessary from your farm. This is also a very attractive policy, as we feel if Soybean Rust appears in the Midwest, it will affect a wide area, not just your farm.
4) Is there a way to “lock in” a revenue based crop insurance claim when prices are low?
This can be done by hedging your position in the futures market. The understanding of how CBOT futures interrelates to your crop insurance claim, LDP, counter cyclical payments, and cash grain contracts are crucial to “locking in” profitability throughout the growing season. This is where Strategic Farm Marketing really stands out from its competition and the reason people like to do business with us. We have seven commodity brokers on staff that have over 140 years of grain marketing experience. Margins in farming are so thin. In order to survive the downturns in the agriculture, you need every competitive edge possible. Our Revenue Maximizer program helps us determine the profitability of the farm at any given price level and helps us to formulate a plan for you.
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5) How easy is it to transfer my insurance business to you?
It's a very simple process and we do all the work. Just list the policy number and insurance carrier you previously used. We take care of the transfer and we also get copies of your production history from the previous company. Please note that federal guidelines allow only one transfer of business per crop year.
6) What is the process if I've never carried crop insurance before?
You simply complete an application that includes your name, address, phone number, social security number, crops grown, intended planted acreage and desired plan of insurance per county. By April 30, you will need to provide us with the production and yield history for all of the ground that you farm in each county. If you have never carried crop insurance before, you can use a minimum of four consecutive years and a maximum of ten years. Use the number of years that gives you the highest yield history. You will not need to provide us with settlement sheets proving the yield you reported to us unless your farm is audited. If you do not have four years of yield history, you will be assigned a yield. If you have no yield records you will be assigned 65% of the T-yields (county average). If you have one, two, or three years, you will be assigned 80%, 90%, or 100% of T-yields respectively, in addition to the actual production history to give you four years of history. If you are a new producer in a county, you will get 100% of the T-yield.
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7) What documents are needed to sign-up for crop insurance?
At sign-up, you will need to know the approximate number of acres you intend to plant of each crop in each county. If you had insurance in the past year, you will also need your policy number of your previous carrier. If you bring in your APH form from your previous carrier it will have the policy number on it and the production history that we will need shortly after sign up.
8) Do I also need to buy hail insurance?
This is an individual decision. An 85% CRC policy will guarantee the crop up to 85% of its value in February. If you buy hail coverage as well, and were to get wiped out by hail, both policies would pay, generating a windfall profit. A hail policy will generally give you a little better coverage. It will pay based on a percent of damage to the acres that have been hailed multiplied by the dollar amount insured per acre. With CRC policies you will need to wait until harvest to determine if you have a claim.
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9) How do I prove my APH - Actual Production History (yields)?
You can use scale tickets and/or settlement sheets from your elevator(s), combine yield monitors, bin measurements, feeding records, or farm bin weights. Records from the landlord are also acceptable if you are share cropping. Records from a previous tenant who rented the land are NOT permitted.
10) How do I get yield history on land that is new to my farm operation this year?
If the land is being share cropped, you may use records from your landlord to establish an APH. If you use landlords records, an authorization form is required by March 15. If owned or rented land is added to your farm operation, you may use the average APH of your other land in that county if you are not adding more than 640 cropland acres.
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11) Do I have to sell 100% of my guaranteed yield?
No. However, based on past history, it is highly recommended. In the past 22 years, there have been only 4 times when you would have been better off storing your unpriced harvested corn versus making your pricing decision before harvest. We believe selling large quantities of the crop early greatly increases the odds of selling the crop in the upper 1/3 of the market. In the majority of the scenarios we have run, selling the amount of production that is guaranteed by the insurance will generate a higher revenue. Our Revenue Maximizer spreadsheet does allow you to test various cash sale scenarios to see which level you would feel most comfortable with.
12) Do I have to buy options?
You do not have to buy options. However, if options are not used, protection of cash sales will be diminished and a combination of reduced production and higher prices will drastically reduce your revenue potential.
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13) What happens if I forward contract more than I produce?
You are never selling more than your insurance contract guarantees. For example, assume your APH is 150 bu/a and you choose an 80% CRC policy. The average price in February of December corn is $2.50. In this example, your guaranteed production is 120 Bu (150 APH X 80% coverage). Your revenue guarantee is $2.50 X 120 guaranteed yield = $300. Because you have a guaranteed yield of 120 bushels you decide to forward contract 120 bu/acre. Your crop ended up being only 80 bushels and the price rose to $3.50. In this case, your crop insurance guarantee would go up since you're guaranteed 120 bu X the HIGHER of 1) $2.50 average February price of December corn or 2) the average price of December corn in October. The average price in October is higher so your guarantee would go from $300 to $420/acre (120 bu X $3.50). Your actual revenue was calculated at $280 (80 bu X $3.50). This means you would have a crop insurance claim of $ 140/acre ($420-$280). However, you sold the elevator 120 bu/a and you only delivered 80 bu/a. You are short 40 bu/a. Since you're short due to a crop problem, most elevators will cancel the remaining bushels at the difference of the futures prices. You will owe the elevator $3.50 -$2.50 = $1.00 X 40 bula = $40 per acre. In this case you are better off having a short crop because of the insurance contract. The maximum price difference allowed between the average February price and the fall price is $1.50 for com and $3.00 for beans for a CRC contract and it is unlimited for RA.
14) When is the insurance premium due?
For corn and soybeans it is October 1. At that time you have a 30 day grace period to pay for it.
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15) Do I need to keep production records separate for each field/unit?
Production for each unit that you have on your policy must be kept separately. This can be done by marking of scale tickets or settlement sheets, bin measurements, feeding records, yield monitors or farm bin weights. Please note that neither farm bin weights nor yield monitors are acceptable if there is a claim. It must come from any of the other methods. However, you could use your farm bin weights or yield monitors to help you be more accurate in determining the proper yields between fields.
16) Can I insure a portion of my farm, but not all of it?
No. Unless the land has been classified as high-risk land or is in multiple counties. You must insure all of the land in a crop in the county. You may elect to insure one county but not another.
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17) Can I insure one crop but not another?
Yes. You may elect to insure corn but not soybeans. Or, you could decide to have different coverages for each crop. For example, you may wish to buy CRC on com and buy Multi-Peril or
GRP on soybeans.
18) If I decide to sign-up for insurance, can I cancel later if I want to?
You can cancel or change coverage on any government backed crop insurance product by March 15, 2005 which is the sales closing date for corn and soybeans.
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19) Do I have to insure my high-risk land with the same type of insurance I carry on my other ground?
No. You can decide to include it with your other land and pay the high premium, take out a CAT policy on just the high-risk land, or not insure the high-risk land which is done by signing a high risk land exclusion by March 15, 2006.
20) Does the CRC, RA or MPCI policy have a replant guarantee?
Yes. The replant guarantee for corn is 8 bu/a X the guaranteed price of the insurance contract. For soybeans the replant guarantee is 3 bu/a X the guaranteed price. The estimated field appraisal for the acreage must be 90% of the guaranteed yield in order to qualify. You will also need to have to replant at least 20 acres or 20% of the unit insured. In addition, if you have no more than 50 acres to replant, you can self certify without a crop inspection as long as a notice of loss is signed before replanting.
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21) How does the guarantee change if the crop is planted after the final plant date?
In most areas the final plant date for corn is June 5 and May 31 for most northern states. For soybeans, the final plant date is June 15 in most areas and June 10 for most northern states. Each county may differ. If the crop is planted after the final plant date, the guarantee will be reduced 1% per day planted after the final planting date up to a maximum of 25 days.
22) Does the policy have a preventive planting guarantee?
If you are unable to get the crop planted by the final plant date with proper equipment, you may eligible for a claim of 60% of your guaranteed revenue depending on the type of insurance you have. To be eligible, you must have been prevented because of an insured cause of loss that was common in the surrounding area which prevented other producers from planting as well. If you have GRIP/GRP county based insurance, preventive planting is not covered under federal crop insurance. However, one can buy supplemental replant and prevent plant coverage from an insurance company that Strategic Farm Marketing represents at a reasonable cost.
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23) Does the CRC policy cover fire and hail damage?
Yes. It is an all risk policy. If your actual revenue is below your guaranteed revenue because of fire (caused by lightning), wind, hail, insect, drought, or flood, etc. you will have a claim. Basically, if your revenue is below your guarantee you will have a claim. If you have a fire from a cause other than lightning, it is only covered if you have a separate hail policy.
24) Explain the differences between optional, basic, and enterprise units.
| Optional= |
The land is separated into different sections and/or have separate ownership shares in the crop. In order to qualify, the production records for at least the most recent year have to have been kept separate, and the planting pattern must not join the two sections. This method will allow you to have a claim where each line is paid independently of each other. |
| Basic= |
Basic units separates land by share ownership in the crop. A 10% discount is given for land divided into basic units. |
| Enterprise= |
Minimum of 50 acres in a single county and two or more basic units or optional units for CRC. For RA, 2 or more sections are required. Essentially enterprise units combine all of your acres of one crop together for insurance purposes. It may make it harder to get a claim versus basic or optional units, but there is a very substantial discount given. The enterprise unit discount for CRC corn is 22% if you plant 50-299 acres. It jumps to 28% if you plant 300-549 acres of corn and reaches 34% if you plant 550 acres or more. For soybeans, the discounts are 22% for 50-299 acres, 37% for 300-549 acres, and 41% for 550 acres. The acres are calculated using full share acres not just the farmer’s portion of the crop planted. Because of the discount provided, enterprise units can allow larger farm operations to increase their coverage at a very reasonable rate. |
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25) What shrink factor is used in determining bushels for insurance loss purposes?
Most elevators use a 1.4% shrink factor. However, for insurance loss purposes, a 1.2% shrink factor is used. This would slightly increase your yields. A 150 bu/a yield at 25% moisture would equal 153 bu/a using a 1.2% shrink rather than 1.4%. For years that you do not have a claim, you should adjust your yields to 1.2% shrink to get a higher APH.
26) If I have a choice of having my potential crop insurance claim measured in the bin or delivering the crop to the elevator and using settlement sheets, which should I choose?
Because crop insurance loss procedures now adjust for a pack factor (change made in 2005), it probably won’t make much difference. However, some farmers still feel that high test weight corn adjusted in the bin may still have a slight tendency to be measured lower than the actual yield resulting in a slightly larger claim.
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27) What are the advantages of Group Risk Income Protection (GRIP)?
GRIP & GRIP-HRO (Harvest Revenue Option) are the only insurance products that offer coverage levels up to 90%. GRIP guarantees county revenue. GRIP-HRO guarantees county revenue and yield. In eight of past ten years, the market has fallen from spring to fall. By locking in 90% insurance, with a price drop from spring to fall, you will have a very good chance for a claim. Also with GRIP, you can adjust your coverage level and protection level which allows you to select the right combination that fits your budget.
28) Why is CRC better than Income Protection (IP)?
IP, and basic RA do not protect the insured if prices go up in the fall. An increase in fall prices with either of these types of policies actually works against the insured. When prices go up, it takes fewer bushels to reach the revenue guarantee. The guarantees for these two products don’t increase when prices go up. NO UPWARD PRICE PROTECTION.
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29) What is the difference between a CRC policy and the RA-HPO policy?
When the Harvest Price Option is added to the RA policy it becomes very similar to the CRC policy. There are some differences that need to be mentioned.
The CRC policy is limited to the amount the Fall price can increase for both corn and soybeans. Corn is limited to $1.50 per bushel, and soybeans to $3.00. The upward price movement on RA-HPO is unlimited.
The Spring price is determined in the same manner for both corn and soybeans on both plans. The Fall harvest price for soybeans is also determined in the same manner for both plans. However, the Fall harvest price for corn is calculated differently, depending on the plan that is chosen. The CRC price is determined during the month of October using the December Closing Prices, while the price for RA and RA-HPO is determined using the December Futures Contract during November.
Both plans use Basic and Optional unit structures. Both plans also offer Enterprise Units. The number of acres planted in that crop season determines the discount on a CRC policy. RA and RA-HPO each use the actual number of sections in which the insured crop is planted to determine the Enterprise discount.
Whole Farm Units are available on RA and RA-HPO plans but are not available on CRC
30) How do you know if GRP or GRIP is suitable for your farm?
Because the Expected County Yield is based on a 40 year trend average, there are some counties that appear to be treated more favorably than others depending on the crop. One needs to study your own individual yield and claim history to the county statistics. The correlation of your yield history to the county is a very important factor that needs to be considered.
This is where the expertise of Strategic Farm Marketing agents is really helpful. We do all the research that is necessary for the producer to make a very informed, well thought out decision. We don’t push any farmer to one particular crop insurance product. We let the facts and research do the talking. That is the job of a good agent. Unfortunately, many producers (or their agents) never take the time to thoroughly understand what it is they are buying (or selling). All too often producers simply take the same product they had the year before.
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