Crop insurance coverage alternatives available to most Indiana producers have expanded substantially in recent years. Multiple peril crop insurance provides coverage from losses by an insured producer resulting from weather and most factors beyond the individual farmer’s control. One type of coverage is based on a producer’s actual production his-tory and is commonly referred to as APH coverage. Another type of insurance is also multiple peril coverage but is based on the expected and actual county yields rather than an individual producer’s experiences. This is the group risk plan or GRP coverage. Producers are now able to insure revenue, rather than just physical yields. The APH version of revenue insurance is called Crop Revenue Coverage or CRC. The revenue version of the group risk plan is called Group Risk Income Protection (GRIP) and will be available on a pilot basis for Indiana corn and soy-beans in 1999.

This article briefly reviews the types of insurance coverages avail-able to Indiana producers. The basic multiple peril crop insurance policies are the same from all private companies because of the federal government’s involvement in the reinsurance. However, many companies have special, additional cost options available. Producers should contact a crop insurance agent for specific policy information and premium rates for their individual situation.

Actual Production History (APH)

Coverage is available for most of the major commodities produced in Indi-ana. A producer may select a coverage from 50 to 75 percent of the actual production history (APH) of the farm and an indemnity price election of 60 to 100 percent of the Federal Crop Insurance Corporation expected market price. For corn, soy-beans, and wheat, the spring expected price is based on the Chicago Board of Trade futures market price of the commodity before planting. The minimum level of coverage, Catastrophic Risk Protection (CAT coverage), is based on 50 per-cent of the APH yield, and 60 percent of the expected price is available for an administrative fee. Higher levels of coverage involve additional premiums and provide protection against poor quality, late planting, replanting costs, and prevented planting.

The yield guarantee is the APH yield times the level of coverage, times the number of acres insured, and times the insured’s share of pro-duction. The APH yield is deter-mined from the producer’s production records for a minimum of 4, and a maximum of 10 consecutive crop years. For producers with less than 4 years of actual yields, transitional or “T” yields are used. Producers without yield records are limited to 65 percent of the T yield as their APH yield for the first year the producer is insured.

The basic insurance unit is all of the insurable acreage of an insured crop in a county in which the producer has a 100 percent share or which is owned by one entity and operated by another entity on a share basis. Thus, a farmer owning 240 acres and cash renting 600 acres from landowners would have one basic unit. In contrast, a farmer owning 240 acres and share leasing land from three different landowners would have four basic units. How-ever, if adequate records are avail-able, the cash renting farmer can generally insure on an optional unit basis. Premiums and indemnities would be calculated on the unit basis. An indemnity (loss payment) would be received if the harvested and appraised production on the unit was less then the guarantee level. For example, if a farmer with an APH yield of 120 bushels per acre has coverage at the 65 percent level, an indemnity would be paid if pro-duction was below 78 bushels per acre. The price used in the indemnity calculation would be the price elected by the producer when obtaining insurance coverage.

The APH premium is subsidized by the federal government. The size of the subsidy varies with the level of coverage. The subsidy is at its maximum for the 65 percent yield level and 100 percent price election. The producer pays the full insurance cost of the increase in coverage above the 65 percent of yield level.

An 85 percent yield coverage level is available on a pilot basis for corn and soybeans in some Indiana counties for 1999. The counties in which producers can obtain the higher level of coverage are: Benton, Carroll, Cass, Clinton, Fountain, Jasper, Montgomery, Newton, Pulaski, Tippecanoe, Warren, and White.

Crop Revenue Coverage (CRC)

The CRC insurance builds on the yield protection of APH coverage and protects against price losses for corn, soybeans, and wheat in Indiana. However, CRC does involve a higher insurance premium for producers. Under CRC, the harvest time futures prices are used to establish the value of the crop. For corn, 95 percent of the average daily price of the Chicago Board of Trade futures contract for December during November is used. For soybeans, it is 95 percent of average October daily price of the Chicago Board of Trade soybean contract for November delivery. If these prices are higher than the spring expected market price discussed under the APH coverage, the revenue guarantee is recalculated under the higher price. The price actually received by a farmer has no effect in the revenue calculations for CRC.

For example, let’s assume a producer has a 120 bushel per acre APH yield for corn and selects coverage at the 65 percent level. The spring expected price for corn is $2.40. Thus, the revenue guarantee level would be 120 bushels, times 65 per-cent or 78 bushels, times $2.40 or

$187.20 per acre. If the producer had a production of 70 bushels per acre and the harvest time price was $2.40, then the producer would have a revenue of $168 per acre and would receive an indemnity of $19.20 per acre. This is the same as with APH coverage. However, assume that the farmer had a yield of 80 bushels per acre and the harvest time price was$2.00 per bushel. In this case, the farmer would have revenue of $160 per acre. With CRC, this would trig-ger an indemnity of $27.40 per acre. If the farmer had APH coverage, no indemnity would have been paid because the yield was not below the guarantee level. In another situation, assume the farmer had a yield of 70 bushels per acre and the harvest price was $2.80 per bushel. In this case, the revenue would be $196, but the revenue guarantee level would be recalculated using the higher, $2.80 harvest time price. The 78 bushel guarantee level at $2.80 would be a$218.40 revenue guarantee. Thus, the producer would receive an indemnity of $22.40 per acre, the difference between the guaranteed $218.40 revenue and the $196 revenue obtained.

Group Risk Plan (GRP)

The group risk plan (GRP) insurance is based on the expected county yield rather than the yields of individual farms. A loss occurs when the actual county yield is less than the yield level coverage selected by the producer. Thus, an individual producer may suffer a loss in production and collect no indemnity because the actual county yield is near normal. Conversely, a producer may have normal yields and collect an indemnity if the county yield is low. GRP is currently available only for corn, soy-beans, and wheat in Indiana.

The expected county yield is based on historical county yield data collected by the National Agricultural Statistics Service and adjusted for yield trend. A producer may select one of five coverage levels (70, 75, 80, 85, or 90 percent) of the expected county yield. For example, if the expected county yield is 135 bushels per acre, the “trigger yield” would range from 94.5 bushels per acre at the 70 percent level to 121.5 at the 90 percent level. If a producer insured at the 70 percent level, an indemnity would be paid if the county yield dropped below 94.5 bushels per acre, while a yield below 121.5 bushels per acre would trigger an indemnity if the farmer had insured at the 90 percent level. The dollar level of coverage can be the equivalent of up to 150 percent of the expected county yield. This allows a producers with yields above the county average yield to protect this higher level of production. For example, if the county yield was 120 bushels per acre and the price was $2.50 per bushel, the maximum coverage level which could be purchased would be $450 per acre.

Producers selecting GRP coverage do not have to provide production history or evidence of loss because indemnity payments are based on county yields. However, GRP does not provide prevented planting, late planting, or replanting coverage.

GRP premium rates are lower than APH insurance and require less paperwork. GRP may be attractive to producers whose ups and downs in yields track the county’s ups and downs in yields closely. However, it is possible for a producer to have a loss and not receive an indemnity payment under GRP.

Group Risk Income Protection (GRIP)

The group risk income protection (GRIP) insurance is being offered on a pilot basis in Indiana for 1999 corn and soybean crops. GRIP, like GRP, is based on expected and actual county revenue, rather than the experiences of an individual producer.

Only limited information on GRIP is currently available. It is likely that the revenue coverage will be based on the spring expected har-vest price. Thus, if the expected har-vest price of corn is $2.50 per bushel and the expected county yield is 135 bushels per acre, the expected county revenue would be $337.50 per acre. If a producer insured at the 90 percent level and actual county revenue dropped below $303.75 because of low yields and/or low prices, then the producer would receive an indemnity. Producers need to understand the specifics of this pilot program coverage before purchasing it.

Crop Insurance Decisions

Producers’ crop insurance options have expanded significantly with respect to type and level of coverage. Protection can be obtained for physical losses based on a producer’s historical and actual yields. Alternatively, protection can be based on county experiences. Revenue coverage is also available for both types of policies. There are often many options available even within a specific type of program. Consultation with a crop insurance agent to determine available cover-age options and premium rates for one’s specific situation is an important step in informed decision making.