Book your annual crop insurance checkup now

The morning of August 10, 2020, Dave Hommel was walking his fields in Grundy County, Iowa. The wind was picking up and he knew a big storm was on its way when he saw oak trees starting to bend.

The derecho was coming with wind speeds exceeding 120 mph.

When it finally passed, Hommel's 500 acres of corn were flat. While the storm was devastating, Hommel's business survived, largely he says because of his "very, very, very important" crop insurance.

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Time for a Checkup

Crop insurance is a vital tool for many American farmers, and like any tool, it needs to be evaluated regularly.

"A producer should have an annual checkup with [his or her] crop insurance agent because things do change," says Doug Burns, vice president of insurance at Farm Credit Services of America.

He says a simple change like adding ground or rotating crops could warrant a policy adjustment. Checking in with an agent ensures farmers have the coverage they need for the crop year.

March Madness

March 15 is the national deadline to make changes to crop insurance policies for spring-planted crops. Farmers who miss the deadline will have the same coverage they had in 2022.

Premiums and projected prices for corn and soybeans guaranteed by revenue protection crop insurance are also released in early March.

"We are in a time of the best commodity prices we've ever seen," Burns says. "That means we're going to have some really high crop insurance guarantees. Some of the highest we've ever seen."

Steve Johnson, a retired farm management field specialist with Iowa State University Extension, says he calls the first two weeks of March "March Madness" because so many farmers wait to make decisions until after those projected prices and premiums are announced.

However, Burns says agents can provide fairly accurate quotes to help producers make decisions before then. He also points out farmers who make early selections can still make changes up to March 15.

"Don't wait until the last minute," he says.

Know Your Production Costs

Johnson emphasizes the importance of knowing production costs to ensure farmers purchase enough coverage in case of a revenue or yield loss.

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"It's critical," Johnson says. "I think that's one of the most important things a farmer does."

Burns says farmers should also know the risks they want to protect, such as areas susceptible to dryness, hail, and wind, to make informed selections.

Sifting Through Alphabet Soup

In addition to the base policy, an alphabet soup of add-ons should be considered.

For example, a revenue protection base policy on corn may go as high as 85% coverage. Supplemental Coverage Option (SCO) can increase coverage to 86%. Enhanced Coverage Option (ECO) goes as high as 95%. Margin Protection (MP) can also get you to that 95% coverage level.

Additionally, farmers can annually enroll in either the Agricultural Risk Coverage (ARC) or Price Loss Coverage (PLC) programs under the farm bill. Burns says it's important to make insurance selections first because choosing ARC precludes a farmer from choosing SCO coverage.

With so many options to consider, Rod Pierce, a farmer from Boone County, Iowa, says an agent who can explain the details and help a farmer make the best decisions is key.

"To me, crop insurance is very important, but a knowledgeable, top-notch crop insurance agent is the top of the line," he says.

Pierce has worked with the same agent for nearly 20 years. He advises other farmers to find someone who asks them questions about their specific operation and gives individualized advice.

Leveraging Your Protection

Ensuring a crop insurance revenue policy will cover a farmer's costs in the event of a major loss has more than one benefit, experts say. Johnson says it empowers farmers to preharvest market grain. This is important because high prices tend to come in the spring months.

"I try to have 80% of my new crop sold by July 1," Pierce says. "To be able to feel comfortable doing it, I have to know that if I have a big loss, I'm going to be covered with both price and yield changes."

Hommel says he likes to sell in the preharvest market, so he has cash on hand at the end of the year.

"We've been doing it this way for quite a while," he says. "It really works pretty slick."

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The Bottom Line

Going into the 2023 growing season, farmers are feeling the pinch of rising input costs. A report published by the University of Illinois in August projected higher costs across the board for all regions of the state in 2023.

Experts say insurance is not the place to look for savings.

"Crop insurance is the only input that guarantees revenue," Burns says.

Crop Insurance Alphabet Soup

ARC (Agricultural Risk Coverage)

ARC is not a crop insurance policy but a farm bill program. The annual deadline to enroll coincides with the spring-planted crop insurance enrollment deadline. There is a county and individual option for ARC. ARC is triggered when revenue for a protected commodity falls below the ARC revenue guarantee.

ECO (Enhanced Coverage Option)

This add-on policy can increase revenue coverage up to 95%. Losses are determined based on county yield data. ECO can be purchased with SCO but not MP.

MP (Margin Protection)

This add-on policy can increase revenue coverage up to 95%. Losses are determined based on county yield data. If MP is purchased, SCO and ECO cannot be purchased. The deadline for purchasing MP is September 30, or more than six months before the crop is planted.

PLC (Price Loss Coverage)

This is another farm bill program. Farmers must choose between ARC and PLC. PLC payments are triggered when the price of the commodity falls below the established reference price for that commodity specified by the program.

RP (Revenue Protection)

This policy protects farmers from both yield losses due to natural causes and revenue losses when harvest prices fall below a guaranteed price.

SCO (Supplemental Coverage Option)

This add-on policy can increase revenue coverage up to 86%. Losses are determined based on county yield data. SCO can be purchased with ECO but not MP.

YP (Yield Protection)

This policy protects farmers from yield losses from natural causes.