Price and weather volatility will affect insurance decisions

As harvest wraps up in many areas, decisions on the 2023 season are already being made, including planning out crop insurance.

Doug Burns, vice president of related services with Farm Credit Services of America, spoke about what producers should look at when making their insurance decisions amid price volatility.

IFT: Has this been a busy year for insurance adjusters?

BURNS: It has been, but it's sporadic. I talk to my insurance team all the time, and the variability in yields is really significant. I'm talking a mile or two apart. I've heard producers can have some of their best yields and some producers are having not very good yields. It's very pocket-driven. Some got those rains in a timely manner this summer, depending on when it was planted.

There will be some claims, there'll be no question. There are some droughty areas where some producers aren't having a good crop, but there are some surprising yields too.

IFT: We've been dealing with higher crop prices over the past few years, but there is plenty of volatility. Between variable yields and price volatility, is that affecting the way people are approaching crop insurance?

BURNS: Yes, it does. We are seeing some of the highest crop insurance guarantees we've seen because of the higher commodity prices. Producers can lock in an incredibly high crop insurance guarantee — some may be covering the cost of production, some may be at profit levels, but we are locking in those guarantees.

IFT: Enrollment for ARC and PLC coverage programs recently started and runs until March 15 for the 2023 growing season. Is there a benefit to enrolling now or is it better to wait?

BURNS: We always say to producers not to wait until the last minute. They can make a number of changes all the way up until March 15, so producers won't make that decision now, but don't make it March 15 either. We start tracking commodity prices for 2023 in the month of February, but you don't have to wait until that time.

There are some producers that will lock in really early, but my advice is to do a crop insurance checkup with your agent before making decisions. Crop insurance is a continuous policy. If you don't do anything, it just goes into the next year. But we've had so many changes that they need to think about — if they had a claim, what are the prices, what are the volatility in the prices — and all those things can change from year to year.

IFT: We are seeing higher premiums and good payout prices in the event people need it. Are there any changes we should expect in the future for crop insurance?

BURNS: There are always some changes it seems, but we'll find out next month or December. Last year, they had a split-nitrogen program. I don't know, but I think that's going to be expanded. Typically we'll find out in about 45 days.

We are telling producers as we have harvest lunches that we just got done with margin protection crop insurance sales. If you opted not to look at margin protection, supplemental coverage and enhanced coverage options are not new, but I think they'll look very attractive for 2023.

IFT: We don't know what final insurance figures will be, but what are some factors we need to keep in mind when making these decisions?

BURNS: Knowing your cost of production is going to be really important. That helps you make a choice of where you want your insurance coverage level to be. Most producers want to cover that cost. We are a long ways away from figuring it out in February, so we don't want to speculate on that, but that's a big determining factor.

There's always a lot of products and options. Hail insurance, wind insurance and other products are becoming more popular than ever. Sometimes they have the same deadline but sometimes they don't. Don't forget about those options.