Farm Horizons, August 2013

Weathering weird weather with crop insurance

By Starrla Cray

One season it’s torrential rains, the next it’s a drought. Throw some hail in the mix, and it’s no surprise that insurance is an essential part of most Minnesota farmers’ risk mitigation plans.

“Mother Nature is in total control; there’s never a year that’s the same,” said Becky Scheel-Lang, a financial service officer with AgStar.

Scheel-Lang, who serves Wright and Hennepin counties, said about 95 percent of her clients opt for revenue protection, vs. yield.

“It costs a little bit more, but if they just do yield, there are a lot more sleepless nights,” she said.

According to the Risk Management Agency (RMA) of the United States Department of Agriculture (USDA), yield protection policies determine insurance coverage based on the crop’s projected price. Producers can select the percent of the projected price they want to insure, between 55 to 100 percent.

Revenue protection, in contrast, insures against both yield loss (from natural disasters) and revenue loss (if the projected price is different than the harvest price).

Farmers also get to choose which risks they’d like covered, and can purchase crop hail insurance and/or multi-peril crop insurance (MPCI). The National Association of Insurance Commissions states that while hail insurance is generally limited to losses due to hail, wind, lightning, vandalism, and/or fire, MPCI provides extensive coverage, including weather, pests, and revenue loss.

With multi-peril, government subsidies are available up to a certain percent, depending on the region.

The most popular levels of multi-peril coverage in Wright and Hennepin counties are between 70 and 75 percent, according to Scheel-Lang.

“Over that, the government isn’t there to kick in any more,” she explained.

For crop hail insurance, Scheel-Lang said the rate is determined by township.

“Victor, Woodland, and Middleville townships generally get hit harder, so they have a little higher hail rate,” she said. “I think the worst we’ve had was probably about 30 percent hail damage loss.”

The amount of actual crop loss from hail varies depending on the time of year. If the storm is early in the season, Scheel-Lang said there is a good chance the crop will outgrow the damage before harvest time.

In the past 10 years, technology to track hail damage has improved, and many companies now use radar to spot affected areas.

“They know the exact time and day,” Scheel-Lang said.

Many farmers purchase hail insurance every year, but some wait until an impending storm to obtain coverage. With some companies, coverage can begin two hours after it is purchased.

“They can take that out anytime during the growing season,” Scheel-Lang said.

Other types of crop insurance have specific deadlines. Mid-March is the time producers submit new applications, add or delete crops, and modify their coverage levels.

This year, AgStar states that the deadline for fall crops is Monday, Sept. 30 for forage (hay); Friday, Nov. 15 for pasture, rangeland, forage (rain index); and Saturday, Nov. 30 for group risk plan forage.

“Crop insurance is constantly changing, and you might have coverage you didn’t even know about,” Scheel-Lang said. “Don’t be afraid to review each of your policies every year. The biggest thing is, talk to your agent if you have questions.”

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