Understanding Farm ProgramsUnderstanding Farm ProgramsCrop Insurance, ACRE and SURE:Crop Insurance, ACRE and SURE:

Changes and Hints for 2009Changes and Hints for 2009Paul D. MitchellPaul D. Mitchell

Agricultural and Applied EconomicsAgricultural and Applied EconomicsUniversity of Wisconsin-MadisonUniversity of Wisconsin-Madison

(608) 265-6514 (608) 265-6514 pdmitchell@wisc.edupdmitchell@wisc.edu

January 30, 2009January 30, 2009

OverviewOverview Quickly overview farmer practices and Quickly overview farmer practices and

experience with crop insurance in experience with crop insurance in WisconsinWisconsin

Integrated Risk Management for 2009Integrated Risk Management for 2009 Flexible Cash LeasesFlexible Cash Leases ACRE and SUREACRE and SURE Crop insurance changes: BYE, CRC/GRIP Crop insurance changes: BYE, CRC/GRIP

pricesprices Use new programs and reduce coverage Use new programs and reduce coverage

level?level?

Catastrophic coverage (CAT)Catastrophic coverage (CAT): : 50% coverage level 55% price election50% coverage level 55% price election APH, GRP, GRIP (not CRC)APH, GRP, GRIP (not CRC)

AGR-LiteAGR-Lite: Insure Schedule F income: Insure Schedule F income

IndividualIndividual Area-Wide Area-Wide (County)(County)

YieldYieldAPHAPH

Actual Production Actual Production HistoryHistory

GRPGRPGroup Risk PlanGroup Risk Plan

RevenuRevenuee

CRCCRCCrop Revenue Crop Revenue

CoverageCoverage

GRIPGRIPGroup Risk Group Risk

Income Income ProtectionProtection

Types of PoliciesTypes of Policies

WI vs. neighboring statesWI vs. neighboring states% planted acres insured in % planted acres insured in

20072007StateState CornCorn SoybeansSoybeans WheatWheat

IAIA 92%92% 75%75% 24%24%ILIL 78%78% 71%71% 47%47%

MNMN 91%91% 93%93% 91%91%MIMI 67%67% 66%66% 56%56%WIWI 64%64% 70%70% 41%41%

WI in 2004: 54% corn, 63% Soybeans, 33% WI in 2004: 54% corn, 63% Soybeans, 33% WheatWheat

WI corn policies in 2008WI corn policies in 2008% %

planted planted acresacres

% % insured insured acresacres

% % policies policies

soldsold

Avg. Avg. Units/PolicUnits/Polic

yyAPH CATAPH CAT 6.5%6.5% 9.8%9.8% 9.7%9.7% 1.031.03APH APH BuyUpBuyUp

12.2%12.2% 18.5%18.5% 37.9%37.9% 2.432.43

CRC CRC BuyUpBuyUp

40.7%40.7% 61.6%61.6% 55.4%55.4% 3.243.24

GRIP GRIP BuyUpBuyUp

4.9%4.9% 7.5%7.5% 4.2%4.2% 1.211.21

GRP CATGRP CAT 0.2%0.2% 0.3%0.3% 0.1%0.1% 1.001.00GRP GRP BuyUpBuyUp

1.5%1.5% 2.3%2.3% 2.8%2.8% 1.111.11

All TotalAll Total 66.1%66.1% 2.832.83

WI soybean policies in 2008WI soybean policies in 2008% %

planted planted acresacres

% % insured insured acresacres

% % policies policies

soldsold

Avg. Avg. Units/PolicUnits/Polic

yyAPH CATAPH CAT 4.9%4.9% 6.9%6.9% 6.7%6.7% 1.051.05APH APH BuyUpBuyUp

9.0%9.0% 12.6%12.6% 20.2%20.2% 1.931.93

CRC CRC BuyUpBuyUp

51.2%51.2% 71.7%71.7% 67.5%67.5% 2.662.66

GRIP GRIP BuyUpBuyUp

4.4%4.4% 6.1%6.1% 3.7%3.7% 1.191.19

GRP CATGRP CAT 0.1%0.1% 0.1%0.1% 0.1%0.1% 1.001.00GRP GRP BuyUpBuyUp

1.8%1.8% 2.6%2.6% 1.9%1.9% 1.011.01

All TotalAll Total 71%71% 2.412.41

Corn Coverage Levels in Dane County Corn Coverage Levels in Dane County 20082008

CRCCRC APHAPHCvCvgg

PoliciePoliciess

AcresAcres PoliciePoliciess

AcresAcres

5050 11 215215 7878 17,8617,8688

5555 11 9494 22 89896060 66 777777 11 2852856565 4444 9,0659,065 5252 5,9575,9577070 147147 32,5832,58

884040 3,6513,651

7575 146146 33,3233,3299

1919 1,4861,486

8080 2020 6,8026,8028585 1212 5,1925,192

Most PopularMost PopularCRC: 70%-75%CRC: 70%-75%APH: 50% CAT APH: 50% CAT and then 65%and then 65%

Soybean Coverage Levels in Dane Soybean Coverage Levels in Dane County 2008County 2008

CRCCRC APHAPHCvCvgg

PoliciePoliciess

AcresAcres PoliciePoliciess

AcreAcress

5050 22 4334335555 11 60606060 66 896896 11 96966565 2828 3,5793,579 2727 1,921,92

337070 101101 11,0211,02

002222 1,771,77

007575 130130 16,4516,45

551818 938938

8080 4646 4,5504,550 11 89898585 2121 4,5624,562 22 5050

Most PopularMost PopularCRC: 70%-75%CRC: 70%-75%APH: 65% and APH: 65% and no CATno CAT

GRP/GRIP Coverage Levels in Dane County GRP/GRIP Coverage Levels in Dane County 20082008

CornCorn SoybeansSoybeansPlanPlan CvCv

ggPoliciePolicie

ssAcreAcre

ssPoliciePolicie

ssAcreAcre

ss GRIP GRIP 7070 11 238238

8585 11 84849090 2323 6,056,05

8866 595595

GRP GRP 7070 11 33337575 11 1011019090 44 488488 22 132132Most PopularMost Popular: GRP/GRIP: : GRP/GRIP:

90%90%

SummarySummary Lots of WI grain acres insured, more could beLots of WI grain acres insured, more could be CRC most popularCRC most popular

Slightly larger than average sized farms Slightly larger than average sized farms buy itbuy it

Use more than average number of unitsUse more than average number of units 70-75% coverage level popular70-75% coverage level popular

APH popular among smaller farms (cheap)APH popular among smaller farms (cheap) Use fewer than average number of unitsUse fewer than average number of units CAT (corn) and 65% coverage level popularCAT (corn) and 65% coverage level popular

GRIP (and GRP) used by some larger farmsGRIP (and GRP) used by some larger farms 90% coverage level most popular90% coverage level most popular

Experience with Crop Experience with Crop InsuranceInsurance

Loss Ratio measures insurance Loss Ratio measures insurance performanceperformance

Loss Ratio = Indemnities/PremiumsLoss Ratio = Indemnities/Premiums Loss Ratio of 1.5 means, Loss Ratio of 1.5 means, on averageon average, $1.50 in , $1.50 in

indemnities paid for every $1.00 of premiumsindemnities paid for every $1.00 of premiums Crop insurance: Subsidized premiums, Crop insurance: Subsidized premiums,

farmers and government each pay partfarmers and government each pay part ProgramProgram loss ratio = Indemnity/(Govt. + Farmer Premium) loss ratio = Indemnity/(Govt. + Farmer Premium) FarmerFarmer loss ratio = Indemnity/Farmer Premium loss ratio = Indemnity/Farmer Premium

Farmers care about Farmers care about farmerfarmer loss ratio loss ratio

WI Crop Insurance for Corn in WI Crop Insurance for Corn in 20072007

total total prem. /prem. /

AA

farmer farmer prem. /Aprem. /A

indem./Aindem./A

prograprogram loss m loss ratioratio

farmer farmer loss loss ratioratio

APH CATAPH CAT 7.487.48 ---- 1.971.97 0.260.26 ----APH APH BuyUpBuyUp 28.3028.30 11.4811.48 29.6429.64 1.051.05 2.582.58CRC CRC BuyUpBuyUp 53.0353.03 23.1623.16 42.7542.75 0.810.81 1.851.85All TotalAll Total 45.4845.48 19.5019.50 30.9730.97 0.680.68 1.591.59

WI Crop Insurance for Soybeans in WI Crop Insurance for Soybeans in 20072007

total total prem. /prem. /

AA

farmer farmer prem. /Aprem. /A

indem./Aindem./A

prograprogram loss m loss ratioratio

farmer farmer loss loss ratioratio

APH CATAPH CAT 2.862.86 ---- 0.640.64 0.220.22 ----APH APH BuyUpBuyUp 12.7712.77 5.285.28 10.4810.48 0.820.82 1.991.99CRC CRC BuyUpBuyUp 26.3626.36 11.8711.87 23.7423.74 0.900.90 2.002.00All TotalAll Total 23.4423.44 10.4010.40 18.1218.12 0.770.77 1.741.74

APH+CRC+RA Average County APH+CRC+RA Average County ProgramProgram Loss Ratios for Loss Ratios for CornCorn 1995- 1995-

20072007

0.65 – 1.00

Loss Ratio

0.00 – 0.65

1.00 – 1.501.50 - 2.00> 2.00

0.65 – 1.00

Loss Ratio

0.00 – 0.65

1.00 – 1.501.50 - 2.00> 2.00

Loss Ratio

0.00 – 0.65

1.00 – 1.501.50 - 2.00> 2.00

APH+CRC+RA Average County APH+CRC+RA Average County ProgramProgram Loss Ratios for Loss Ratios for SoybeansSoybeans

1995-20071995-2007

0.65 – 1.00

Loss Ratio

0.00 – 0.65

1.00 – 1.501.50 - 2.00> 2.00

0.65 – 1.00

Loss Ratio

0.00 – 0.65

1.00 – 1.501.50 - 2.00> 2.00

Loss Ratio

0.00 – 0.65

1.00 – 1.501.50 - 2.00> 2.00

Main PointMain Point Farmers, on average over the whole Farmers, on average over the whole

state, generally win on crop insurance state, generally win on crop insurance policiespolicies Especially in the northEspecially in the north Especially for soybeansEspecially for soybeans

Payments come when you need themPayments come when you need them Years 1-3: pay $1 premium, no indemnityYears 1-3: pay $1 premium, no indemnity Year 4: pay $1 premium, $8 indemnityYear 4: pay $1 premium, $8 indemnity 4-Year Avg Loss Ratio = 8/4 = 2.04-Year Avg Loss Ratio = 8/4 = 2.0

Questions?Questions?

Integrated Risk Management in Integrated Risk Management in 20092009

Crop insurance is only one tool availableCrop insurance is only one tool available Flexible cash leases with FSA rule changeFlexible cash leases with FSA rule change ACRE: new federal commodity programACRE: new federal commodity program SURE: new federal disaster aid programSURE: new federal disaster aid program Changes in crop insuranceChanges in crop insurance

BYE and new CRC price limitsBYE and new CRC price limits 2 page Hints: see my web page2 page Hints: see my web page

www.aae.wisc.edu/mitchell/extension.htmwww.aae.wisc.edu/mitchell/extension.htm

Flexible Cash LeasesFlexible Cash Leases Landlords may want higher rent, but lots of Landlords may want higher rent, but lots of

uncertainty in grain price and input costsuncertainty in grain price and input costs Flexible cash leases popular as way for tenant-Flexible cash leases popular as way for tenant-

landlord to landlord to share the risk (up and downside)share the risk (up and downside) FSA has relaxed rules so tenant-landlord FSA has relaxed rules so tenant-landlord

no longer have to share govt. paymentsno longer have to share govt. payments Flexible Cash Lease: Base rental rate with Flexible Cash Lease: Base rental rate with

bonus based on actual yields and pricesbonus based on actual yields and prices You may want to (re-)negotiate with landlords You may want to (re-)negotiate with landlords

to get these leases for 2009to get these leases for 2009

New in 2009New in 2009 Farm BillFarm Bill

ACRE: Average Crop Revenue ElectionACRE: Average Crop Revenue Election SURE: Supplemental Revenue SURE: Supplemental Revenue

Assistance PaymentsAssistance Payments Crop insurance changesCrop insurance changes

BYE: Biotech Yield Endorsement for CornBYE: Biotech Yield Endorsement for Corn Price change limits on CRC and GRIPPrice change limits on CRC and GRIP

ACRE: Average Crop Revenue ACRE: Average Crop Revenue ElectionElection

New Farm Bill alternative like “GRIP” New Farm Bill alternative like “GRIP” Creates state level revenue guarantee Creates state level revenue guarantee

(NASS state yields and USDA prices)(NASS state yields and USDA prices) If actual state revenue less than If actual state revenue less than

guarantee, triggers ACRE paymentsguarantee, triggers ACRE payments Farmer “premium” = 20% of direct Farmer “premium” = 20% of direct

payments, all counter-cyclical payments payments, all counter-cyclical payments and 30% of loan deficiency paymentsand 30% of loan deficiency payments

Less need for CRC/GRIP coverage?Less need for CRC/GRIP coverage?

ACRE PaymentsACRE Payments Fairly complicated formula main idea hereFairly complicated formula main idea here Two triggers satisfied to receive ACRE paymentTwo triggers satisfied to receive ACRE payment1) Actual State Rev. < ACRE State Rev. Guarantee1) Actual State Rev. < ACRE State Rev. Guarantee2) Actual Farm Rev. < ACRE Farm Benchmark Rev. 2) Actual Farm Rev. < ACRE Farm Benchmark Rev. Trigger calculations: See next slideTrigger calculations: See next slide If triggers met, then receive ACRE payments = If triggers met, then receive ACRE payments =

(State Rev. Guarantee – Act. State. Rev) x 83.3% (State Rev. Guarantee – Act. State. Rev) x 83.3% Farm Planted Acres x Farm Planted Acres x

(5-year avg farm yld/5-year avg state yld)(5-year avg farm yld/5-year avg state yld)

1. STATE TRIGGER Actual State Revenue less than ACRE State Revenue Guarantee

Actual State Yield per Planted Acre90% of Benchmark State Yield per Planted Acre

(5-year Olympicb average)times larger of times

National Average Market Price or 70% of National Loan Rate

ACRE Program Guarantee Price(2-year average of National Market Price)

no more than a 10% change from

previous year

2. FARM TRIGGER Actual Farm Revenue less than ACRE Farm Benchmark Revenue

Actual Farm YieldAverage Farm Yield per Planted Acre

(5-year Olympicb average)times larger of times

National Average Market Price or 70% of National Loan Rate

ACRE Program Guarantee Price(2-year average of National Market Price)

no more than a 10% change from

previous yearplus

Per Acre Producer-Paid Crop Insurance Premium

ACRE State Revenue Guarantee minus Actual State RevenueACRE State Revenue Guarantee times 25%

times

times

c ACRE payments will be issued October 1 with no advance payments made.d Becomes 85% in 2012e Total planted acres for which a producer may receive ACRE payments may not exceed a farm's total base acres. If total planted acres exceeds a farm's base acres, the farm may elect which planted acres to enroll in ACRE.

5-year farm Olympicb average of yield per planted acre / 5-year state Olympicb average of yield per planted acrea Farms participating in ACRE receive no counter-cyclical payments, direct payments reduced by 20%, and a loan rate reduced by 30%.b An Olympic average drops the highest and lowest observations before calculating the average.

BOTH triggers must be met before ACRE payments are made

Calculating ACRE paymentsc

Average Crop Revenue Election (ACRE) Paymentsa

Lesser of:

83.3%d of Farm Planted Acrese

How about a little help?How about a little help? With today’s prices and expected prices, With today’s prices and expected prices,

seems unlikely we will trigger LDP’s or CCP’sseems unlikely we will trigger LDP’s or CCP’s ACRE is kind of like State Level GRIP ACRE is kind of like State Level GRIP

Revenue Insurance with premium equal Revenue Insurance with premium equal to 20% of Direct Paymentsto 20% of Direct Payments

What will make for high ACRE payments?What will make for high ACRE payments? Market prices below average MYA prices from Market prices below average MYA prices from

previous 2 years and/or low state average yieldprevious 2 years and/or low state average yield

WI Corn YieldsWI Corn Yields

0

20

40

60

80

100

120

1996 1998 2000 2002 2004 2006 2008

bu/a

c Yld/Planted Acre

ACRE Benchmark Yld

5-Year Olympic Avg

These are yields per These are yields per plantedplanted acre, which includes acres used for silage. WI acre, which includes acres used for silage. WI uses 20-25% of planted acres for silage. Yield per uses 20-25% of planted acres for silage. Yield per harvestedharvested acre would acre would

be much higherbe much higher

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

1996 1998 2000 2002 2004 2006 2008

$/bu

MYA price

ACRE Guarantd price

National MYA Corn PricesNational MYA Corn Prices

2-Year Avg

ACRE State Guarantee and ACRE State Guarantee and Actual State RevenueActual State Revenue

0

50

100

150

200

250

300

350

400

450

500

1996 1998 2000 2002 2004 2006 2008

$/ac ACRE State Guarant

Actual State Rev

90% of Yield x Price

Corn Data for 2007-2009Corn Data for 2007-2009

YearYear

YielYield d

per per PlntPlnt

d d AcreAcre

ACRE ACRE BencBenc

h h mark mark YieldYield

MYA MYA PricPricee

ACRACRE E

GuarGuar--

anteantee e

PricePrice

ACRE ACRE State State Rev Rev

Guar-Guar-antee antee

Actual Actual State State RevRev

ACRACRE E

Pay-Pay-menmen

tt200200

77109109 105105 4.24.2

002.522.52 238.1238.1

44457.8457.8

000.00.000

20020088

104104 106106 ?.???.?? 3.623.62 344.2344.266

???.?????.?? ?.???.??

20020099

108108

WI Soybean YieldsWI Soybean Yields

0

5

10

15

20

25

30

35

40

45

50

1996 1998 2000 2002 2004 2006 2008

bu/a

c Yld/Planted Acre

ACRE Benchmark Yld

5-Year Olympic Avg

National MYA Soybean National MYA Soybean PricesPrices

0.00

2.00

4.00

6.00

8.00

10.00

12.00

1996 1998 2000 2002 2004 2006 2008

$/bu

MYA price

ACRE Guarantd price

2-Year Avg

ACRE State Guarantee and ACRE State Guarantee and Actual State RevenueActual State Revenue

0

50

100

150

200

250

300

350

400

450

1996 1998 2000 2002 2004 2006 2008

$/ac ACRE State Guarant

Actual State Rev

90% of Yield x Price

Soybean Data for 2007-Soybean Data for 2007-20092009

YearYear

Yield Yield per per

Plntd Plntd AcreAcre

ACRE ACRE BencBenc

h h mark mark YieldYield

MYA MYA PricePrice

ACRACRE E

GuarGuar--

anteantee e

PricePrice

ACRE ACRE State State Rev Rev

Guar-Guar-antee antee

Actual Actual State State RevRev

ACRACRE E

Pay-Pay-menmen

tt200200

774040 4040 10.110.1

006.056.05 215.9215.9

99404.0404.0

000.00.000

20020088

3535 3939 ?.???.?? 8.278.27 287.8287.800

???.?????.?? ?.???.??

20020099

3939

““Historical” ACRE PaymentsHistorical” ACRE PaymentsYearYear CornCorn SoybeansSoybeans20012001 0.000.00 14.4514.4520022002 0.000.00 0.000.0020032003 0.000.00 0.000.0020042004 17.8217.82 38.5638.5620052005 0.000.00 0.000.0020062006 0.000.00 0.000.0020072007 0.000.00 0.000.0020082008 ?.???.?? ?.???.??

Avg 2001-Avg 2001-20072007

2.552.55 7.577.57

ACRE in 2008ACRE in 2008 ACRE State Revenue GuaranteeACRE State Revenue Guarantee

Corn = $344.26, Soybeans = $287.80Corn = $344.26, Soybeans = $287.80 Yield per Planted Acre = 104 bu/ac and 35 Yield per Planted Acre = 104 bu/ac and 35

bu/acbu/ac To trigger ACRE payments, 2008 MYA priceTo trigger ACRE payments, 2008 MYA price

< < $3.31$3.31 for corn and < for corn and < $8.22$8.22 for soybeans for soybeans Established prices so farEstablished prices so far

CornCorn SoySoySepSep 5.025.02 10.7010.70OctOct 4.374.37 9.949.94NovNov 4.264.26 9.389.38DecDec 4.104.10 9.249.24

ACRE SummaryACRE Summary If 2008 were an ACRE year, you would If 2008 were an ACRE year, you would

not know if you received ACRE not know if you received ACRE payments until the end of the 2008 payments until the end of the 2008 marketing yearmarketing year Marketing year ends Aug 2009Marketing year ends Aug 2009

Main Point: If due, ACRE payments will Main Point: If due, ACRE payments will come long after the harvest year is pastcome long after the harvest year is past Oct 2009 for 2008 ACRE paymentsOct 2009 for 2008 ACRE payments Oct 2010 for 2009 ACRE paymentsOct 2010 for 2009 ACRE payments

ACRE SummaryACRE Summary For 2009, if you signup for ACRE, you For 2009, if you signup for ACRE, you

will not know the ACRE price and state will not know the ACRE price and state revenue guarantee for 2009revenue guarantee for 2009 Yield = 108, Price = average of 4.20 Yield = 108, Price = average of 4.20

and and ?.???.?? Yield = 39, Price = average of 8.27 and Yield = 39, Price = average of 8.27 and ?.???.??

ACRE state revenue guarantee should ACRE state revenue guarantee should be high, but how high???be high, but how high???

ACRE: Final CommentsACRE: Final Comments ACRE will have an annual signup periodACRE will have an annual signup period ACRE is an irrevocable choice, so be ACRE is an irrevocable choice, so be

sure you want to do itsure you want to do it When will the 2009 signup be?When will the 2009 signup be?

DP and CCP signup begin Oct. 1, as usualDP and CCP signup begin Oct. 1, as usual Software for ACRE out sometime after Jan 1Software for ACRE out sometime after Jan 1stst

FSA talking April or May 2009FSA talking April or May 2009 Will be able to change your 2009 decision Will be able to change your 2009 decision

once ACRE signup details are outonce ACRE signup details are out Talk to FSA office to find out datesTalk to FSA office to find out dates

Questions?Questions?

SURE: Supplemental Revenue SURE: Supplemental Revenue Assistance PaymentsAssistance Payments

New comprehensive permanent disaster New comprehensive permanent disaster program for crop farmersprogram for crop farmers

Whole farmWhole farm revenue guarantee on top of revenue guarantee on top of crop insurance guaranteescrop insurance guarantees

If actual farm revenue below guarantee, If actual farm revenue below guarantee, SURE pays up to 60% of the differenceSURE pays up to 60% of the difference

Free increase in your crop insurance Free increase in your crop insurance coverage, but at whole farm levelcoverage, but at whole farm level Free reduction of your insurance “deductible”Free reduction of your insurance “deductible”

SURE GuaranteeSURE Guarantee Guarantee equals sum of all crop Guarantee equals sum of all crop

insurance guarantees for farm insurance guarantees for farm increased by 15% increased by 15% at the whole farm at the whole farm levellevel 75% coverage becomes 75% x 1.15 = 75% coverage becomes 75% x 1.15 =

86.25%86.25% Guarantee capped at 90% insurance Guarantee capped at 90% insurance

guaranteeguarantee With SURE, less need for buying With SURE, less need for buying

80% or 85% CRC80% or 85% CRC

SURE Actual RevenueSURE Actual Revenue Actual yields x USDA marketing year Actual yields x USDA marketing year

average price (Sept-Aug) (Not CBOT)average price (Sept-Aug) (Not CBOT) Crop insurance indemnities Crop insurance indemnities

(including replant and prevented (including replant and prevented planting)planting)

15% of DP’s, CCP’s, LDP’s, and ACRE15% of DP’s, CCP’s, LDP’s, and ACRE Other disaster payments receivedOther disaster payments received

SURE CalculatorSURE Calculator This overview glosses over detailsThis overview glosses over details FSA has SURE calculator on web for farmers FSA has SURE calculator on web for farmers

to useto use www.fsa.usda.gov/Internet/FSA_File/sure_calculator.xlswww.fsa.usda.gov/Internet/FSA_File/sure_calculator.xls www.fsa.usda.gov/Internet/FSA_File/sure_calc_instructions_v1.pdfwww.fsa.usda.gov/Internet/FSA_File/sure_calc_instructions_v1.pdf Informational only—not binding, does not Informational only—not binding, does not

deal with all possible scenarios (yet)deal with all possible scenarios (yet) FSA still finalizing SURE details—be patientFSA still finalizing SURE details—be patient

SURE RequirementsSURE Requirements Risk Management Purchase RequirementRisk Management Purchase Requirement To eligible for SURE payments, you must To eligible for SURE payments, you must

have have all crops insuredall crops insured, including pasture, including pasture SURE supplements crop insurance and SURE SURE supplements crop insurance and SURE

guarantee depends on insurance guaranteesguarantee depends on insurance guarantees Small acreage exclusion appliesSmall acreage exclusion applies

APH, CRC, GRP, GRIP (AGR-Lite?)APH, CRC, GRP, GRIP (AGR-Lite?) Cheapest route: APH CAT or NAP policyCheapest route: APH CAT or NAP policy

BYE: Biotech Yield BYE: Biotech Yield EndorsementEndorsement

RMA approved for WI starting in 2009RMA approved for WI starting in 2009 For corn CRC and APH only (non-irrigated)For corn CRC and APH only (non-irrigated)

If plant 75% of corn as triple stack Bt corn (RR, Bt-If plant 75% of corn as triple stack Bt corn (RR, Bt-CB and Bt-RW), then lower premiumCB and Bt-RW), then lower premium

Must still plant refuge (20% acres as non-Bt)Must still plant refuge (20% acres as non-Bt) Refuge can be a different insured unitRefuge can be a different insured unit

Premium reductions last year in IA, IL, IN, MNPremium reductions last year in IA, IL, IN, MN Around 20% for CRC, 30% for APHAround 20% for CRC, 30% for APH Depends on location and coverage levelDepends on location and coverage level Don’t expect reductions of this magnitude for WIDon’t expect reductions of this magnitude for WI

CRC and GRIP Price LimitsCRC and GRIP Price Limits CRC and GRIP previously had maximum changes in CRC and GRIP previously had maximum changes in

crop prices coveredcrop prices covered Corn $1.50 price change up or downCorn $1.50 price change up or down Soybeans: $3.00 price change up or downSoybeans: $3.00 price change up or down Under old markets, didn’t matterUnder old markets, didn’t matter

2008 bases prices and harvest prices2008 bases prices and harvest prices Corn $5.40 base price, $4.13 harvest priceCorn $5.40 base price, $4.13 harvest price

Above limit by 23 centsAbove limit by 23 cents Soybeans: $13.36 base, $9.22 harvest priceSoybeans: $13.36 base, $9.22 harvest price

Price limit bound! Indemnities calculated Price limit bound! Indemnities calculated with harvest price of $10.36, not $9.22, so with harvest price of $10.36, not $9.22, so losses paid at a lower price than for RA policylosses paid at a lower price than for RA policy

Changes for 2009Changes for 2009 CRC and GRIP limits changed for 2009CRC and GRIP limits changed for 2009

No downward limit, No downward limit, 200% of base price upward limit200% of base price upward limit $5.40 now would be $0 to $10.80$5.40 now would be $0 to $10.80 $13.36 now would be $0 to $26.72$13.36 now would be $0 to $26.72

Increases risk protection (and premiums!)Increases risk protection (and premiums!) RA has the same limits now as wellRA has the same limits now as well

SummarySummary Think about using flexible cash leasesThink about using flexible cash leases Think about ACRE, sign up for SUREThink about ACRE, sign up for SURE

Can you decrease crop insurance Can you decrease crop insurance coverage?coverage?

CRC/GRIP offer more price protectionCRC/GRIP offer more price protection Expect (slightly) higher premiumsExpect (slightly) higher premiums

If you plan to use triple stack Bt corn, If you plan to use triple stack Bt corn, use BYE for CRC/APH to reduce use BYE for CRC/APH to reduce premiumspremiums

Questions?Questions?Paul D. MitchellPaul D. Mitchell

UW-Madison Ag & Applied EconomicsUW-Madison Ag & Applied EconomicsOffice: (608) 265-6514Office: (608) 265-6514Cell: (608) 320-1162Cell: (608) 320-1162

Email: pdmitchell@wisc.eduEmail: pdmitchell@wisc.eduExtension Web Page:Extension Web Page:

www.aae.wisc.edu/mitchell/extension.htmwww.aae.wisc.edu/mitchell/extension.htm