Subsidy levels boosted for crop insurance product

CHAMPAIGN, Ill. — While the 2018 farm bill might be on its second extension, the subsidy for one crop insurance product will increase without the benefit of new legislation, benefiting farmers.

“This is the most revolutionary change we’ve seen in crop insurance in at least 10 to 15 years,” said Dave Janson, owner and president of Strategic Farm Marketing, a commodity brokerage and crop insurance agency that serves clients in 12 states.

In July, the U.S. Department of Agriculture’s Risk Management Agency announced that the premium subsidy for the Enhanced Coverage Option, a multi-peril crop insurance product, would be increased from 44% to 65%.

“The biggest thing we were thinking we needed to get done via crop insurance was this subsidy change. But the Federal Crop Insurance Corporation board approved it without having to be in the farm bill, so this is in place,” Janson said.

He said the subsidy expansion results in a more affordable product for farmers.

“In a lot of our areas, we’re going to see a drop in crop insurance rates, and it’s mainly because these products have, specifically this ECO product, have gone from a 44% subsidy to a 65% subsidy,” he said.

“For a lot of farmers, it is very difficult to be able to afford 95% coverage because it is so likely to pay. It doesn’t take much of a yield drop or a price drop to pay.

“So, when the government changed those subsidy rates for that county-based product, it made it really, really affordable.”

Janson illustrated how private, county-based ECO products offer coverage for more bushels.

“They have these products, like an ECO offset product, that gives you the better of a county-based claim or an individual claim,” he said. “If a farmer had 85% crop insurance and he has a 220 yield. At 85%, he’s only protected at 187 bushels per acre.

“But now he would be protected at basically about 209 bushels. So, the revenue guarantee goes up significantly. He’s getting a lot more coverage for what he’s spending because of the change in the government subsidy.”

Janson said farmers can add the ECO products in a variety of ways.

“They could go ahead and purchase anything, they could lower their individual coverage and buy the county-based coverage. Or, they can add an individual coverage on top,” he said.

“They could take 80% coverage rather than 85%, but then go ahead and buy this coverage that goes from 86% to 95% and put an individual rider on it.

“So, if they have a gap from 80% to 85% that might not be covered, to make it more affordable, but they are starting to trigger at 95% now, rather than 85%. That’s a big, big thing.”

With commodity prices at a low ebb, Janson said farmers may want to review their crop insurance coverage.

“What we are trying to do is develop plans that can, for the most part, take almost all of the red ink out of their operation,” he said. “With commodity prices this low, it’s very, very difficult to do, but we can eliminate probably 80% of it if we pick the right mix of products and plans.

“That’s why those farmers who pick the same plan every year are leaving a lot of opportunities on the table sometimes. Some years you just can’t eliminate the red ink, but we can limit it and still give ourselves upside potential.”

Farmers have the opportunity to learn more about the changes to crop insurance, including the new premium subsidy increase for ECO, and the ECO offset products and how those work, at a series of seminars that Strategic Farm Marketing will be offering, starting with sessions Jan. 27 in Aledo in west-central Illinois and Liberty in east-central Indiana.

More information and registration for the seminars, including the complete schedule, is available at www.sfarmmarketing.com/events, or by calling 217-356-0046.