Over the past several growing seasons, the crop insurance industry has seen a major shift in Mid-South producers purchasing higher levels of crop coverage for their farming operations. Many farmers are starting to realize what those in the Midwest have known for years. A revenue-based crop insurance policy is simply a good buy and a wise business decision.
Several factors have contributed to this trend. Last year with some areas receiving more than three feet of rainfall during harvest season, many producers realized that there are weather factors out of their ability to control. In addition, input costs have risen dramatically, and many farmers see the need to put a revenue floor under their operation.
With the passage of the last Farm Bill, Congress instituted a new premium discount for those producers who elect to insure by enterprise units. One of the features of buying higher levels of coverage is to allow a farmer to split his farm up into separate insurable units. First, each farm number would have its own guarantee. Then, that farm number could be further split into irrigated and non-irrigated units. An enterprise unit simply combines all farm numbers and practices into one final guarantee.
Discount Leads To Lower Premiums
For giving up optional units, the producer pays a substantially lower premium. More than 70 percent of all policies written this year will be revenue-based and carry an enterprise unit discount. To qualify for this discount, two separate FSA farm numbers must be planted to the insured crop with a minimum of 20 acres on the second number.
Every insurance agent is finding that a larger number of farmers want to get the facts and understand how crop insurance may fit into their farm plans. For example, let’s look at a cotton revenue policy in Coahoma County, Miss., on a producer with a 1,000 pounds of proven yield. 1,000 (lb) proven yield at 75 percent coverage level = 750 pounds (guarantee) at $.72 per pound or a $540 guarantee.
With an enterprise unit discount, the premium would be $10.35 an acre. The same coverage for optional units would cost $27.53. Compare these dollar figures to the once popular catastrophic policy which guarantees only $170 per acre. With most farmers now carrying higher levels of coverage, it is very important that they stay in touch with their crop insurance agent. Any changes in your farming operation or potential losses should be reported immediately.
Information for this article was compiled by Pete Dunn of Dunn, Marley and Harris Crop Insurance Agency in Clarksdale, Miss.