Anyone with revenue crop insurance may be wringing their hands with glee as a result of the movements in grain prices this year. But across the spectrum of various types of crop insurance, there will be some folks happier than others. Which group will you be in?

If you have Crop Revenue Coverage, Revenue Assurance, or Group Risk Income Protection there may be an indemnity check with your name on it says Art Barnaby, agricultural economist and risk management specialist at Kansas State University. His recent newsletter indicates that the lower prices in the grain market, compared to the spring base prices last March, should trigger payments to many farmers with revenue coverage.

For example, the spring guaranteed price for soybeans was $13.36 per bushel. Currently, the closing Futures prices for the November contract are shaping up to be $9.38. If that continues:
1) Holders of RA policies could receive a $3.98 check per bushel, unless they had an extraordinary yield.
2) Holders of CRC policies, which limit the loss to no more than $3.00 per bushel, should receive the maximum $3.00.
3) Holders of GRIP policies, which limit the loss to no more than $3.00 per bushel, should receive the maximum $3.00.

Regarding the CRC soybean policies, Barnaby says, “Based on current market prices, it will require no yield loss for 80% and 85% CRC coverage insured corn and soybean farmers to collect on their CRC policy. However, most CRC coverages are 75% or less.”

The GRIP policies analyzed by Barnaby will likely pay indemnities for both corn and soybeans. Since GRIP uses the October closing prices for both November soybeans and December corn Futures. Currently, that unofficial average is $4.23 per bushel, compared to the spring guaranteed price of $5.40 per bushel. If you have a GRIP policy, Barnaby says your county yield will have to exceed its expected average by 16% on beans and 12% on corn to prevent a payment.

While all three types of revenue crop insurance are based on the combination of yield and price, CRC and RA are more yield oriented and GRIP is more price oriented, since it is based on a county’s average yield. Barnaby says he’ll be surprised if there is not a large number of counties generating GRIP payments because of the decline in grain prices from the spring to the fall. And he says it will be a test of the accuracy of the USDA’s yield estimates made by the Risk Management Agency.

If you are in the category of “I didn’t get as much as my neighbor,” changing types of crop insurance may be your priority for next year. However, that may not really be the answer. One of the uncontrollable issues is what the USDA’s Risk Management Agency does with the yield expectations. If your county yield is set too low, GRIP will never pay off. If it is set too high, GRIP is guaranteed income. Additionally, RMA's crop insurance ratings for some counties are not actuarially sound, and in some counties farmers will almost always get a payment and in others they almost always will never get a payment.

There may be icing on the cake for those who signed up for SURE (the new permanent disaster program). Although the rules had not been written by sign-up time, it was created to provide a payment to producers who suffered a revenue loss as a result of yield or price declines. Don’t spend the money yet because it is based on the marketing year average and since that will not be known until next September, a payment for problems during the 2008 growing season will not arrive for another year at the earliest. Two qualifiers are either a 50% yield (or revenue) loss or the alternative is a disaster declaration by the Secretary of Agriculture. Since rules are still being written, a SURE payment is not yet a “sure” thing.

Summary:
Corn and soybean prices last spring were higher than they are currently, and that decline figures into the calculation for payments for revenue types of crop insurance, such as CRC, RA, and GRIP. Indemnity payments for each may be slightly different because of different rules applying to each of them, however, the payment will replace some of the value lost with the decline in commodity prices in the past several months. The USDA may also provide a SURE disaster program payment to some producers, based on the price performance, that payment will not be issued for another year, if at all.