Farmers in Iowa and other parts of the Midwest are facing a tough year as they deal with the impacts of drought and market volatility on their crops. According to the U.S. Drought Monitor, more than 60% of Iowa is experiencing moderate to extreme drought conditions as of September 21, 2023. This has reduced the yield potential and quality of corn and soybeans, the main crops grown in the state.
In addition to the weather challenges, farmers are also facing lower prices for their crops due to the global trade tensions and the COVID-19 pandemic. The U.S. Department of Agriculture (USDA) estimates that the average price for corn in 2023 will be $4.30 per bushel, down from $4.60 in 2022. Similarly, the average price for soybeans will be $11.15 per bushel, down from $11.55 in 2022.
These factors have increased the financial stress for many farmers, who rely on crop insurance to protect them from losses. Crop insurance is a risk management tool that allows farmers to pay a premium to an insurance company in exchange for a guarantee of a certain level of revenue or yield in case of a crop failure. The federal government subsidizes part of the premium and regulates the program.
Crop Insurance Claims Could Reach Record Levels in 2023
According to experts, crop insurance claims could reach record levels in 2023 due to the low yields and prices. Steve Johnson, a farm management specialist with Iowa State University Extension and Outreach, said that he expects crop insurance claims to be higher than in 2012, when a severe drought hit the Midwest.
Johnson said that farmers who have revenue protection policies, which cover both yield and price losses, could receive substantial indemnity payments this year. He said that the projected prices for corn and soybeans, which are used to calculate the revenue guarantee, were $4.58 and $11.87 per bushel respectively when the policies were sold in February. Since then, both prices have dropped significantly, triggering more claims.
Johnson also said that farmers who have yield protection policies, which only cover yield losses, could also benefit from crop insurance this year. He said that the final yields for corn and soybeans will be determined by the USDA in January 2024, based on surveys and data from farmers. He advised farmers to report their actual yields accurately and timely to their insurance agents.
How Crop Insurance Works and How to File a Claim
Crop insurance is a complex and dynamic program that involves many variables and options. Farmers can choose from different types of policies, coverage levels, units, endorsements, and exclusions depending on their needs and preferences. Some of the common types of policies are:
- Revenue Protection (RP): This policy covers both yield and price losses. It guarantees a certain level of revenue based on the higher of the projected price or the harvest price. The projected price is determined in February, while the harvest price is determined in October for corn and November for soybeans. The coverage level ranges from 50% to 85% of the expected revenue.
- Yield Protection (YP): This policy only covers yield losses. It guarantees a certain level of yield based on the projected price. The coverage level ranges from 50% to 85% of the expected yield.
- Area Risk Protection Insurance (ARPI): This policy covers losses based on the county average yield or revenue, rather than the individual farm’s yield or revenue. It is designed for farmers who have similar risks as their neighbors or who want to supplement their individual coverage.
- Whole-Farm Revenue Protection (WFRP): This policy covers losses based on the whole farm’s revenue from all commodities, rather than a specific crop. It is designed for diversified farms that grow multiple crops or livestock.
Farmers who have crop insurance should contact their insurance agents as soon as they notice any damage or loss to their crops. They should also keep records of their planting dates, acreage, inputs, harvests, sales, and any other relevant information. They should follow the instructions from their agents on how to file a claim and provide any required documentation.
Crop insurance claims are usually paid within 30 days after the claim is finalized by the insurance company. Farmers should review their claim statements carefully and report any errors or discrepancies to their agents.
Crop Insurance is a Vital Safety Net for Farmers
Crop insurance is a vital safety net for farmers who face multiple risks from weather, pests, diseases, markets, and other factors. It helps them recover from losses and continue their operations. It also benefits the rural economy by providing stability and liquidity.
According to the USDA, crop insurance has paid out more than $125 billion in indemnities to farmers since 1980. In 2022 alone, crop insurance paid out more than $9 billion in indemnities to farmers, covering more than 380 million acres of farmland.
Crop insurance is a public-private partnership that involves the federal government, private insurance companies, and farmers. The federal government sets the rules and regulations, provides subsidies and reinsurance, and oversees the program. The private insurance companies sell and service the policies, bear part of the risk, and pay the claims. The farmers pay part of the premium, select the coverage, and follow the requirements.
Crop insurance is a voluntary program that farmers can choose to participate in or not. However, most farmers opt for crop insurance as it provides them with peace of mind and financial security.