The Federal Crop Insurance Program was established in the 1930s to protect producers from yield losses from most natural causes. The program was used on a limited basis (mostly in the Midwest) for its first 50 years, till the early 1980s when coverages were expanded and producer premium subsidies were increased, making the program more appealing to all producers. The traditional disaster relief programs have been phased out to the point where crop insurance and NAP from FSA are now the only method of protecting growing crops in the United States.
The program is administered by Crop Insurance Commission (FCIC), a department within the United States Department of Agriculture (USDA)'s Risk Management Agency (RMA). Crop insurance is sold by independent companies with oversight by the FCIC. Premium subsidies are provided by the USDA through the 2014 Farm Bill. Because crop insurance is a federally subsidized program, your premium will be the same as any other producer with the exact same yields and elections as you.
Because the cost remains consistent, the only variable will be the service provided by the company from whom it is purchased, so interviewing several agencies and companies before settling on where you will buy coverage will serve you well.
A qualified crop insurance sales person will be able to provide understandable information about the rather complicated crop insurance program. By providing information about, and asking questions pertaining to, your specific operation, you can make an informed decision about coverage levels and price elections. Policies are renewable annually, requiring you to provide documentation of yields after a harvest season ends. Coverage and premiums for the coming year will be based the producers (5 years for perennials, minimum of 4 years building to 10 for most other crops) production history (APH). Transitional yields are available for producers of most crops that do not have the minimum years of history.
There are different sign-up deadlines for different crops. For example, the sign-up deadline for most spring seeded crops is March 15th of the crop year and the sign-up deadline for perennials including tree fruit crops is November 20th of the preceding crop year. The deadline for most Fall seeded annual crops. is 9/30. Please contact your crop insurance sales person for additional crop sign-up deadlines that may impact on what you produce. As you cannot sign-up after the deadline for your specific crop(s), it is essential that you comply with the schedule.
The farm bill provided several variations of the crop insurance program for grain and oil seed crops for farms with base acres at the FSA office. The following programs are available at no cost to the producer, however there was a onetime enrollment in early 2015 that is binding through 2018.
- Price Loss Coverage (PLC)
- Agricultural Risk Coverage (ARC)
- Supplemental Coverage Option (SCO)
Price Loss Coverage (PLC) (ERS, 2014)
PLC provides payments to producers of wheat, feed grains, rice, oilseeds, peanuts, and pulses on a commodity-by-commodity basis when market prices fall below an established reference price. Payments are based on the difference between the reference price and the annual national-average market price (or marketing loan rate, if higher). The payment amount is the payment rate multiplied by the planted acres of covered commodity up to 85 percent of the farm's base acres for that commodity, multiplied by the payment yield. Producers may also receive payments on former cotton base acres ("generic acres") planted to a covered commodity. A one-time opportunity is offered to update the farm's payment yields for covered commodities to their 2008-12 average yields. Payments will be reduced on an acre-by-acre basis for producers who plant fruits, vegetables, or wild rice on base acres.
Agricultural Risk Coverage (ARC) (ERS, 2014)
ARC provides payments for covered commodities on a commodity-by-commodity basis when county crop revenue (actual average yield, multiplied by the national farm price X 85% of base acres) between 76-86% percent of benchmark revenue (5-year Olympic average county yield times 5-year Olympic average national price). Producers may also choose to participate in ARC based on individual farm revenue instead of county revenue. In this case, the payment is based on the difference between an individual benchmark and actual individual revenues. The benchmark is calculated as the sum of revenue for each covered commodity on all farms enrolled in individual ARC in which the individual has a financial interest, divided by the acres planted to all covered commodities on the farm. The maximum payment for ARC is 10 % of the bench mark revenue.
Supplemental Coverage Option (SCO) (ERS, 2014)
SCO offers producers additional insurance coverage of up to 86% of their APH yield or revenue for losses occurring within the deductible of levels generally covered by traditional crop insurance policies. In many years SCO with underlying revenue protection provides additional benefits. This coverage offers an alternative for eligible producers on farms that are that are not enrolled in ARC. Producers can cover a portion of their deductible of their crop insurance policy, and payments are based on a larger area than their farm (usually a county). The premium is subsidized at 65%.
Information source: USDA Risk Management
Several additional new or improved programs are also provided with annual enrollment deadlines. They include:
Whole Farm Revenue Protection (WFRP)
WFRP is available, providing a risk management safety net for all commodities on the farm under one insurance policy. Protection can selected from 50-85% of the producers revenue history and the premium subsidy varies from 55-80%. This protection is discussed further in a separate document.
Noninsured Assistance Program (NAP)
The Noninsured Assistance Program (NAP) is available for those crops not covered by an existing crop insurance program for your county. For example, strawberries are not covered by a crop insurance program in Pennsylvania, so if you wish to provide protection for your strawberry production, NAP is available for this protection. You will need to visit your local Farm Service Agency (FSA) office and discuss this product. Many of the crops covered by NAP follow the same sign-up deadlines as crop insurance programs, but may vary by area so contacting your FSA office to find the sign-up date is good practice.
The covered losses for NAP are the same as other crop insurance programs and so you will need very similar information as you provided to your insurance sales person, when visiting your FSA office. A checklist appears at the end of this document to assist you in collecting this information. The program has recently changed and now offers buy-up protection to 65% of your production and 100% of the average market price. You cannot cover the same crop through both crop insurance and NAP.
Premiums for the crop covered will be calculated based on the lesser of:
- The product of multiplying the producer's share, the number of eligible acres devoted to the crop, the approved yield, the coverage level, the average market price, and a 5.25 percent premium fee; or
- $6,562.50 (the product of the applicable payment limitation of $125,000 and at maximum a 5.25 percent premium fee).
Beginning, limited resource, and socially disadvantaged producers may be eligible for premium reductions of up to 50 percent. This results in a cost of less than 3 cents per dollar of protection. If you believe you may be eligible, ask your FSA office for more information regarding qualifications.
Information source: Farm Services Agency
Checklist for Crop Insurance Discussions
Be prepared to provide your insurance broker or agent with:
- Verifiable production records for the past five years of production
- Acreage for each crop produced
- The method of protection you are considering
- Farm serial numbers for your farms
- Checklist for Noninsured Assistance Program Discussions
- Be prepared to provide FSA personnel with:
- Name of the crop
- Crop type or variety
- Intended use and final use of the commodity (fresh, processed, etc.)
- Type of practice used to grow the crop (irrigated or non-irrigated)
- Location and acreage of the crop (field, sub-field, etc.)
- Share of the crop and the names of other producers with an interest in the crop
- Date the crop was planted in each field
- In addition, the following production information must be provided:
- The total quantity of all production harvested during the 2012 harvest season for the crop
- The disposition of the harvested crop, such as whether it was marketable, unmarketable salvaged or used differently than intended
- Verifiable or reliable crop production records as required by FSA
- A copy of the grower contract if the producer is a contract grower For tree fruits
- Tree spacing and row spacing
- Age of trees
You may find a certified crop insurance sales person at the following USDA web site.
Prepared by Lynn F. Kime, extension associate; Winifred W. McGee, extension educator; Robert Faubel, independent insurance agent, Danner' s Insurance; Maggie Garcia-Taylor, insurance agent, Garcia-Taylor Insurance Agency; and Eugene E. Gantz, U. S. Department of Agriculture, Risk Management Agency.
This document is based on work supported by USDA, Risk Management Agency, 2014 Risk Management Education Partnerships Program, Agreement Number 14-IE-53102-036.