When the calendar turns to January, that usually means it’s very cold outside, and it’s time to make sure that there is plenty of number one diesel on hand. There is also the thought of the upcoming planting season and what parts need to be purchased for the planter before spring. After all, a properly set up planter is vital to harvesting a great crop like most experienced in 2016. However, January is also the time to think about your upcoming crop insurance decisions. Like that properly tuned planter, a well-planned insurance policy can make sure that your farm has a good year, even without a bin-busting crop!
As we all know, current insurance prices for corn and soybeans are significantly lower than the high prices of 2012 and 2013. In 2013, for example, a farmer that had an APH of 170 bushels on his corn fields and purchased 75% coverage would have $720/ac guarantee. Compare that to 2016 with the coverage level and APH staying the same, he would only have $492/ac guarantee, a difference of $228! Soybeans are much the same with prices falling from a high of $12.87 in 2013 to $8.85 in 2016. The 2012 drought is the main reason for these high prices and the stair step down we are in now. However, we still have had plenty of weather risks to take into consideration. As we know, South Dakota weather can change pretty fast, and we saw that this past year. Some areas experienced a very wet spring that led to planting issues. The summer got hot and dry in many places, and the risk for losing a crop was there. These issues make your crop insurance choices very important!
A few questions to ask yourself as a farmer…what is your risk tolerance for your crop and how much are you willing to spend on insurance? There are many products out there that can increase your insurance base price, but they can also be quite expensive. There are also a few products that can guarantee revenue across your whole farm. These can get very costly and need very good accounting information to go with them. Hail insurance is another product that has many options, and like the others listed, can be costly if purchased incorrectly.
As an insurance agent, as well as a farmer, I look for the best possible way to combine the risk-bearing needs of my farm along with cost. Too often I think we, as farmers, simply see a cost per acre and not a potential return per acre. While no one ever really wants a crop insurance claim, having a good understanding of your insurance plan can give you great piece of mind. For 2017, I challenge everyone to sit down and really examine your insurance policy and make sure it fits your farm’s needs. As an agent, I will assure you we will find the best solutions tailored to your operation. I would be happy to sit down and discuss any questions you may have!
Tyler Urban, Crop Insurance Specialist