With federal crop insurance , every year is different, and with the multiple options available to producers, there are many variable results from crop insurance coverage at harvesttime. This year (2010) will be no different, with some producers choosing APH  (yield-only) policies vs. crop revenue coverage  (CRC) or revenue assurance (RA), with a harvest option (RA-HP), policies (yield and price). Producers also have differences in the level of coverage; some producers chose optional units, while others chose enterprise units for 2010.
In the Midwest, most corn  and soybean  producers in recent years have tended to secure some level of CRC or RA-HP policies for their crop insurance coverage rather than standard APH policies. Producers like the flexibility of the CRC and RA-HP policies that provide insurance coverage for reduced yields, as well as in instances where the harvest price drops below initial base price. In 2010, the APH policies and CRC or RA-HP policies will function similarly, with all losses being based on yield losses below guaranteed yields. The only difference will be that the payment rate that is used to calculate potential crop insurance indemnity payments in 2010.
The payment rate for APH policies is set at $3.90/bu. for corn and $9.15/bu. for soybeans, for every bushel that the harvest yield drops below the guaranteed yield. However, potential indemnity payments with CRC or RA-HP policies will be paid at a much higher rate for every bushel of yield below the guarantee yield. Final prices for CRC or RA-HP policies will not be finalized until later, but were estimated at $5.36/bu. for corn and $11.44/bu. for soybeans, as of Oct. 25, 2010.
Corn and soybean producers have the option of selecting crop insurance policies ranging from 60% to 85% coverage levels. While 85% coverage levels are fairly common with APH policies, coverage levels of 70%, 75% and 80% are much more common with CRC or RA-HP insurance policies, due to more affordable premium costs. The level of insurance coverage can result in some producers receiving crop insurance indemnity payments, while other producers receive no indemnity payments, even though both producers had the same guarantee and the same final yield. For example, at a proven corn yield of 180 bu./acre, a producer with 85% coverage would have a 153-bu./acre guarantee, while a producer with 75% coverage would have a yield guarantee of 135 bu.
Enterprise Units or Optional Units
In 2009, the USDA  Risk Management Agency  (RMA) increased the federal subsidy for purchasing APH, CRC or RA insurance coverage under enterprise units, which combines all acres of a crop in a given county into one crop insurance unit. As a result, 2009 and 2010 crop insurance premium levels for policies with enterprise units were much more favorable than for policies utilizing optional units. Prior to 2009, most producers used optional units, which allows producers to insure corn or soybeans separately in each township section.
Producers who have 2010 crop losses on individual farms, and have crop insurance coverage with optional units, may be able to collect crop insurance indemnity payments on their 2010 corn or soybean crop on some farm units, while not on others. Meanwhile, producers with crop insurance policies with enterprise units in 2010, are much less likely to qualify for 2010 crop insurance indemnity payments, due to the crop loss threshold being required on all crop acres in a county.
Many producers saw some significant savings in crop insurance premium costs for 2010 by switching to enterprise units, which work quite well when a producer incurs general yield reductions due to drought or poor growing conditions, or when the harvest price drops lower than the initial base price. However, in situations such as 2010 – when most crop losses were from severe storms and heavy rains that damaged some farms and not others, or damaged parts of farms – optional units are far superior to enterprise units, as far as potential for crop insurance indemnity payments.
Producers with enterprise unitswho purchased supplemental hail insurance coverage as part of their overall risk-management plan in 2010 may have qualified for some indemnity payments on farms with crop losses from hail storms during the growing season. Producers should contact their crop insurance agent to better understand insurance coverage with enterprise units for the 2011 crop year.
Insurance Coverage for Grain-Quality Problems
The Minnesota Department of Agriculture has issued a warning to producers regarding the harvest, sale and potential contamination of corn or soybeans that were in standing water for several days following the heavy rains across southern Minnesota in late September. There have also been reports of grain being rejected by grain warehouses due to grain-quality issues.
These types of grain-quality losses could potentially be a covered loss for crop insurance policies, provided that the grain-quality losses can be properly documented. Producers who have had grain rejected, or have field conditions that could possibly lead to grain rejection, should contact their crop insurance agent to find out details on insurance coverage, and the needed documentation requirements.
Calculating Potential Crop Insurance Payments
Producers who have crop losses in 2010 with potential crop insurance indemnity payments should properly document yield losses for either optional units or enterprise units. Producers who had corn or soybeans that were in standing water for an extended period of time – causing grain-quality problems – or potential rejections when the grain is sold should contact their crop insurance agent to report a potential crop loss.
A reputable crop insurance agent is the best source of information to make estimates for potential 2010 crop insurance indemnity payments, and to find out about documentation requirements for crop insurance losses. It is important for producers who are facing crop losses in 2010 to understand their crop insurance coverage, and the calculations used to determine crop insurance indemnity payments. The University of Illinois Farm Management website  has some good crop insurance information and an online “What-If” crop insurance payment calculator.
Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at [email protected]