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Doing what you’ve done before — particularly if it has worked — can become a tempting trap. It’s vital to your business, however, to constantly explore ways to reduce risk and improve profitability. Taking a fresh look at crop-insurance coverage offers one way to do both.

The key steps to purchasing crop insurance start with updating each field’s actual production history (APH) to determine how much insurance coverage is needed. Next, it’s time to sit down with the lender and have a frank discussion about your current coverage and risk exposure. Then field-by-field, outline planting intentions and establish how that pairs with your capital needs for the next year.


Step 1: Update APH

A grower should begin each year by updating their APH. This includes gathering harvest records from the prior year and meeting with the insurance agent to add the farmer’s production data and 2019 yields to the continuous record for each unit. This determines what the APH is on each section and per commodity grown. The agent processes that information and provides a calculated yield, accounting for any prevented planting acres and ensuring those are updated properly.

“This process tells us the updated and computed APH yields for the next year, and it all starts with good on-farm record keeping, which is critical to calculating and supporting your APH in the event there is ever a review,” says Billy Moore, chief operations officer at Ag Resource Management (ARM).

Examples of records needed:

  • Bin measurements
  • Sales tickets on sold production
  • Amount of stored grain fed to livestock


Step 2: Talk with Agent about Insurance Options

Now, it’s time to look at the various crop-insurance coverage options available. Many options merit your consideration. Take the time required to find the right overall plan for your operation.

“To start, look at projected prices by reaching out to commodity futures contracts to see current year rates and then begin to look at coverage policies offered in the area,” says Moore. “Revenue protection is standard coverage for most row crop producers, and then step outside of that and consider if any additional coverage is needed to cover expenses and capital needs.”

Private insurance products offer additional protection against specific perils that may affect a particular field or to cover a gap between what federal crop insurance protects and actual cost of production or capital needs.  There are many private products on the market that offer an “over the top band of coverage” that can help the grower feel comfortable that they are covering the full exposure and leaving zero gaps.  Growers should also consider other risks that lie outside of the production of the crop, transportation are two that come to mind and those can easily be protected by a crop hail policy.  It is important to think about all exposures that exist, have open and detailed conversations with your agent and ask a lot of questions.  Don’t just assume that if it right for your neighbor it is right for your operation.

For example, if a farmer has a 200-bushels-per-acre APH and chose to take out coverage at an 80-percent level, that provides a 160-bushels-per-acre coverage guarantee. At $4 per bushel, the farmer would have $640 of coverage per acre. If, given expenses, the farmer’s capital need is $700 per acre, it may be appropriate to consider coverage options from the private market to cover the gap.

“Farmers need to determine how much risk they want to take on. And it might be worth it to pay a little more to ensure all their production costs are covered,” he notes. “Every farmer takes on risk when they put a crop in the ground. However, they still have a return on investment to try to achieve and protect.”

Proper insurance coverage provides farmers with maximum flexibility for managing their revenue potential throughout the crop year.

“It really allows farmers to market their crop with confidence,” says Moore. “If a pricing opportunity comes along in late spring and you want to price some crop at that time, it would allow you to do so knowing that you’re covered. Benefiting from opportunities that present themselves helps farmers manage risk and improve profitability.”