Crop Insurance Alternatives for Hay
Crop Insurance ConferenceFargo, North Dakota
January 20, 2003
Matthew A. Diersen, Ph.D.Economics Department
South Dakota State University
Outline
• Why look at hay insurance?• National perspective• Tri-state perspective• Why isn’t it working?• Looking ahead
Motivation
• Structural changes• Drought bringing awareness• Historic disaster aid ties• Refinements in product(s)
Literature
“The U.S. Hay Market: Higher Prices in 1996/97”- Shields and Baker, Agricultural Outlook (1996)“U.S. Hay Production”- Dismukes and Zepp, Economic Research Service
Staff Paper No. 9607 (1996)“Should This Crop Be Insured?”- Harvey, Hay & Forage Grower (1998)
Literature (cont.)
“Crop Insurance for Hay and Forage”- Dismukes, Zepp and Smith, ERS report on the
RMA website (1996)“Crop Insurance Alternatives for Hay in South
Dakota”- Diersen, SDSU ExEx 5044 (2002)“Noninsured Crop Disaster Assistance Program”- Johnson, AMPC Briefing No. 14 (2002)
U.S. Hay Insurance Policies
0
10,000
20,000
30,000
40,000
1995 1996 1997 1998 1999 2000 2001 2002
U.S. Insured Hay Acres
0
500
1,000
1,500
2,000
2,500
3,000
1995 1996 1997 1998 1999 2000 2001 2002
1,00
0 Ac
res
U.S. Hay Insurance Loss Ratio
0.0
0.5
1.0
1.5
2.0
2.5
3.0
1995 1996 1997 1998 1999 2000 2001 2002
Percent of Land in Hay
0%
2%
4%
6%
8%
10%
SD ND MN
Potential Demand Factors
• Yield variability• Presence of subsidy• Hay is valued input• Some revenue dependence
Percent of Operators Producing and Selling Hay
0%
20%
40%
60%
80%
100%
SD ND MN
Producing Selling
Dollars Related to Hay
0
100
200
300
400
500
600
SD ND MN
$ m
illio
ns
Value of Production Cash Receipts
2002 Hay Acreage
0
1,000
2,000
3,000
4,000
SD ND MN
1,00
0 Ac
res
Alfalfa All Other
NAP Coverage
• Noninsured Crop Disaster Assistance Program
• Administered by Farm Service Agency• Similar to CAT coverage• Deadline is December 1• Coverage for pasture and grass hay
Insured Acres in 2002
0%
5%
10%
15%
20%
SD ND MN
Alfalfa Total
Common Tendencies in 2002
• ¼ S.D. acres under CAT• ½ S. D. acres at 50% level• ¾ N.D. acres under CAT• ¼ M.N. acres under CAT• ¼ M.N. acres under GRP
Shortcomings
• Ignorance about availability• Record-keeping demands• Lack of quality provisions• Only yield products offered
North Dakota Hay Production
0
1000
2000
3000
4000
5000
<25 25-49 50-99 100-249 250-499 500+
Acres of Hay Produced
Num
ber o
f Far
ms
0
500000
1000000
1500000
2000000
2500000
3000000
Cum
ulat
ive
Acre
s Ha
rves
ted
farms cumulative acres
Product Refinements
• Can the DOT weigh bales?• Is there a place for GRP?• Is a revenue product feasible?
– Quality seems distributed like wheat’s– Current yield and price are correlated
• Do WE just need to get the word out?
Summary
• Customer base is slowly changing• Current products may not match needs• NAP may be viable alternative• YOUR input will likely bring change
For More Information• [email protected]• Phone: (605) 688-4864• http://sdces.sdstate.edu/
– Click on the “Markets” tab– Scroll to ExEx 5044
• AMPC website
