While non-land crop cost estimates forecast by ISU in 2013 aren’t expected to increase significantly, perhaps farms at the most risk for low and negative net farm incomes are grain farms that don’t use crop insurance or perhaps those that cash rent a large portion of their farmland at high cash rent levels. Many of these farms paying high cash rent can’t assure themselves positive revenue guarantees in 2013 even if they take high levels of crop insurance and use the TA-Option. That’s because the high cash rental rates are so large, the crop insurance revenue guarantee is still less than the overall farm’s total costs.
Expect few crop insurance changes for 2013
Farmers have some good news for 2013. They can expect very few changes to the federal crop insurance program from 2012. There will be little impact on crop insurance that results from the fate of the 2012 Farm Bill still pending in congress. Crop insurance is still operating under the 2001 Federal Crop Insurance Act and the current program has permanent authorization under the original 1938 legislation.
Congress occasionally makes small reforms to the program. The 2012 Farm Bill proposes combining the traditional commodity program with a separate title to address the crop insurance program as the center-piece for crop risk management.
2013 rate reductions
USDA’s Risk Management Agency (RMA) plans to fully implement the rate reductions for corn and soybeans that farmers began to see in 2012. For Iowa corn and soybean farmers, this means a rate reduction averaging 6% lower for corn and 9% lower for soybeans beginning in 2013.
Previously, a yield history dating back to 1975 was used to determine rates. Once the policy changes are in effect, a 20-year yield history will be used. The new rates are designed to reﬂect advancements in technology, management and seed.
Trent-adjusted APH yield endorsement
Again for the 2013 crop year, farmers purchasing crop insurance for corn and soybeans in major Midwestern states will have the option to use the Trend-Adjusted Actual Production History (TAAPH) Yield Endorsement. This “TA-Yield Option” allows farmers to increase yields used in calculating crop insurance guarantees. Because APH yields lag expected yields, guarantees will also lag.
The TA-Yield Option corrects this issue by allowing a trend adjustment to be added to the APH yield. The resulting TA-APH yield then is used in calculating guarantees. Each county and crop has a TA-APH trend rate estimated using National Agricultural Statistical Service (NASS) county yields, with controls included for weather and spatial considerations. These rates are county specific and are published by the RMA for the 2013 crop year.
Any sign-up or changes in coverage for 2013 requires that farmers sign up for coverage or notify their crop insurance agent by the sales closing date, which is March 15.
RMA pilot programs
RMA will continue to offer a pilot program that allows producers to participate based on whole farm and enterprise units. The program will give producers increased coverage at the same price.
RMA also indicated that farmers can expect to see two more changes for 2013, a high-risk land exclusion option and revenue protection for pulse crops.