CHANGES IN CROP AND LIVESTOCK INSURANCE 2021

Over the last several weeks there have been some significant changes to crop insurance that affect most areas in agriculture. All the changes are beneficial to producers.
The first change is the addition of the Quality Loss Option (QL). Quality Loss adjustment applies when grain quality is low. In the past, crop insurance used your quality adjusted yield in your APH. Now, with the QL option, the actual harvested bushels will be entered into your APH, in turn not lowering your APH due to a quality loss.
When would it be beneficial?
An example would be 2015: Many producers had high wheat yields, but the test weights were very low with high Don levels. This option will now allow you to use the harvested yield in your APH instead of the yield adjusted for quality issues, in turn helping raise your APH.
This option does not only go forward into the future but is goes back a few years to correct yields affected by a quality adjustment. This option works the same for all row crops that are grown in this area.
What does it cost?
There is no charge for adding this option to your crop insurance policy. The only increase in price would come from having a higher guarantee per acre. In all the quotes that we have ran, this cost is insignificant, running only cents per acre higher when a producer used the option. If the option is on the policy and the farmer never has had quality issues in the recent past the cost is nothing. We strongly suggest that every producer signup for this option.
All producers should add this option. There is no downside!
To add this option will take some action on the producer’s part. Since it is a change to the policy, the producer will need to sign a policy change form with the QL added to his/her policy before a particular crop’s sales closing date. Fall seeded crops are due now and spring seeded crops will be due in early spring (March 15 or February 28 depending on your state).
Enhance Coverage Option
The second change deals with another new product that will be released in November. The product will be called the Enhanced Coverage Option (ECO). This will allow a producer to insure county production to 95%. There are few details out on this program at this time, but we expect more in the next few weeks.
Livestock Risk Protection
Several changes have been made to the LRP program this year which benefit producers.
This program was designed to protect producers against falling prices. With the Covid issues this year this product provided superior protection during the food chain disruption and packing house slowdowns.
In the past when a producer wanted to establish a price floor with LRP the premium had to be paid in advance. This year premiums are now due at the end of your coverage. This change allows producers to purchase coverage without having to ante up the premium first. If there is a loss, premiums will be deducted out loss payment first and any remaining balance will be paid to the producer.
The second change this year is that the premium subsidies have increased dramatically making the product an even better value. The subsidies have increased to 35% to 55%, depending on coverage level. This significant increase will encourage more producers to use these products rather than using put options.
Liberalization of the rules were also made in the ownership requirement. Previously, a producer was required to keep the livestock until 30 days prior to the end of the contract. Today this has been expanded to 60 days. This change offers increased marketing flexibility to producers who choose to use this risk management tool.
For larger producers, another change was made to increase the number of head each producer can insure in a crop year. Currently, producers can insure up to 12,000 head of cattle per year.
These above changes should be of great interest to most producers in the central part of the country. Each change seems to have been well thought out and of benefit to producers at this critical time.

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