It is possible a significant number of corn and soybean producers in some areas of the upper Midwest, as well as in the eastern corn belt, could qualify for crop insurance indemnity payments in 2019. Much of this region dealt with planting delays last spring, excessive rainfall during the growing season, and severe storms at some point during the growing season. These weather issues will likely result in yield reductions, which together with crop insurance harvest prices for corn and soybeans that are lower than the crop insurance base prices on March 1, increases the likelihood of 2019 crop insurance indemnity payments for many producers.

Every year is different, and with the multiple options available to producers, there are many variable results from crop insurance coverage at harvest time. The 2019 crop year will be no different, with some producers choosing yield protection policies (yield only) vs. revenue protection policies (yield and price), and producers having different levels of coverage on various crops. The crop insurance results will also vary depending on if a producer has “optional units” vs. “enterprise units” for their crop insurance coverage.

In the Midwest, most corn and soybean producers in recent years have tended to secure some level of revenue protection crop insurance coverage, rather than standard yield-only policies. Producers like the flexibility of the revenue protection policies which provide insurance coverage for reduced yields, as well as in instances where the harvest price drops below initial base price. In 2019, corn crop insurance loss calculations with yield protection policies and revenue protection policies will function differently. This is due to the likely Chicago Board of Trade harvest price for corn and soybeans being below the 2019 crop insurance base prices (finalized on March 1).

The established 2019 base prices for 2019 yield protection and revenue protection crop insurance policies were $4.00 per bushel for corn and $9.54 per bushel for soybeans. These base prices will be the payment rate for 2019 yield protection policies for corn and soybeans. These base prices will also serve as the final price to calculate revenue guarantees for calculating potential revenue protectioni crop insurance indemnity payments for both corn and soybeans.

The final 2019 crop insurance harvest prices (as of Nov. 1) are $3.90 per bushel for corn and $9.25 per bushel for soybeans. The harvest price is used to calculate the value of the actual harvested bushels for all revenue protection insurance policies. The final harvest price for revenue protection insurance policies with harvest price protection is based on the average CBOT December corn futures and CBOT November soybean futures during the month of October, with prices finalized on Nov. 1. If the final harvest CBOT price for December corn futures or November soybean futures is higher than the established base prices, then the harvest price is used to determine the revenue protection insurance guarantees, which did not occur in 2019.

Corn and soybean producers had the option of selecting crop insurance policies ranging from 60 to 85 percent coverage levels. The level of insurance coverage can result in some producers receiving crop insurance indemnity payments, while other producers receive no indemnity payments — even though both producers had the same adjusted actual production history yield and the same final yield. For example, at an adjusted actual production history corn yield of 190 bushels per acre, a producer with 85 percent revenue protection coverage would have a yield guarantee of 161.5 bushel per acre, and a revenue guarantee of $646 per acre; while a producer with 75 percent coverage would have a yield guarantee of 142.5 bushels per acre, and a guarantee of $570 per acre. If the actual 2019 yield was 150 bushels per acre, with a $3.90 per bushel harvest price, the producer with 85 percent coverage would receive a gross indemnity payment of $61 per acre, while the producer with 75 percent coverage would receive no indemnity payment.

Many growers purchased upgraded levels of revenue protection crop insurance for the 2019 growing season, which included the higher trend-adjusted yields which were available. The lower CBOT prices — especially for soybeans — increases the likelihood of crop insurance indemnity payments on some upper Midwestern farms that have 80 and 85 percent revenue protection insurance policies for 2019. Indemnity payments will be most likely to occur when there was a significant yield loss due to some type of weather problem during the 2019 growing season. However, the lower harvest prices also increases the payment likelihood. 

At a harvest price of $9.25 per bushel, the threshold yield to receive a soybean insurance payment is at 88 percent of actual production history yield with an 85 percent revenue protection policy; 83 percent with an 80 percent revenue protection policy, and 77 percent with a 75 percent revenue protection policy. For example, with a 55 bushel per acre actual production history yield and a $9.25 per bushel harvest price, soybean insurance payments would begin if the final soybean yield falls to about 48.2 bushels per acre with an 85 percent revenue protection policy; 45.4 bushels per acre with an 80 percent revenue protection policy; and 42.5 bushels per acre with a 75 percent revenue protection policy.

Using a harvest price of $3.90 per bushel for corn, the threshold yield to receive a corn insurance payment is at about 87 percent of actual production history yield with an 85 percent revenue protection policy, 82 percent with an 80 percent revenue protection policy, and 77 percent with a 75 percent revenue protection policy. For example, with a 190 bushel per acre actual production history yield and a $3.90 per bushel harvest price, corn insurance payments would begin if the final corn yield is at about 165.6 bushels per acre with an 85 percent revenue protection policy; 155.9 bushels per acre with an 80 percent revenue protection policy; and 146.1 bushels per acre with a 75 percent revenue protection policy.

A large majority of Midwest corn and soybean producers utilize enterprise units for their crop insurance coverage, which combines all acres of a crop in a given county into one crop insurance unit. By comparison, optional units allow producers to insure crops separately in each township section. Premium rates are somewhat higher with optional units. Enterprise units work quite well with revenue protection policies to protect against price drops during the growing season, and when a producer has most of their land in the same general area. Optional units are preferable when a producer has a variety of land that is spread across a wide area in a county, or when producers have individual farms which are highly susceptible to natural disasters — such as flooding, drought, etc.

For example, assume that Producers A and B both have five separate farms in the same county with an actual production history corn yield of 190 bushels per acre, and with an overall average 2019 corn yield of 171 bushels per acre. However, three of the farms average 185 bushels per acre and two of the farms average 150 bushels per acre. Producer A has an 85 percent revenue protection policy with optional units and producer B has an 85 percent revenue protection policy with enterprise units. Assuming a $3.90 harvest price, Producer A would receive no insurance payment on three farms. However, Producer A would receive a gross indemnity payment of $61 per acre on the other two farms. Producer B would receive no insurance indemnity payments on any farms.

Refer to accompanying table for 2019 crop loss examples for corn with an 85 percent revenue protection coverage insurance policy; and soybeans with 8 percent revenue protection coverage utilizing enterprise units with trend-adjusted yields selected. Use the table for the calculation of threshold yields where insurance payments begin.The table also contains space for producers to put in their own actual production history yields, insurance coverage levels, premium costs, projected yield and harvest prices, in order to make their own estimates for potential 2019 crop insurance indemnity payments for corn and soybeans.    

Late harvest considerations

Many farm operators are struggling with a very delayed harvest season in 2019, which could approach the crop insurance harvest deadline in some areas. For most spring planted crops (including corn and soybeans) the crop insurance period for a given year ends on Dec. 10 — which means that harvest must be completed by that date and any potential crop insurance claims must be reported. However, that are federal crop insurance provisions for years with delayed harvest (such as 2019) for producers to request additional time to complete the harvest of a crop. Any producers in this situation should contact their crop insurance agent before the Dec. 10 deadline to find out more details.

Producers who have crop revenue losses in 2019, with potential crop insurance indemnity payments, should properly document yield losses for either optional units or enterprise units. A reputable crop insurance agent is the best source of information to make estimates for potential 2019 crop insurance indemnity payments, and to find out about documentation requirements for crop insurance losses. It is important for producers who are facing crop losses in 2019 to understand their crop insurance coverage, and the calculations used to determine crop insurance indemnity payments.

The University of Illinois FarmDoc web site (www.farmdoc.illinois.edu/cropins/) contains some good crop insurance information and spreadsheets to estimate crop insurance payments.

Kent Thiesse is a government farm programs analyst and a vice president at MinnStar Bank in Lake Crystal, Minn. He may be reached at (507) 726-2137 or kent.thiesse@minnstarbank.com.