Introduction Video Transcript

Hello, my name is Erin Roche and I am the Crop Insurance Education Program Manager at the University of Maine Cooperative Extension.

And funding for this program is made possible through the USDA Risk Management Agency.

With the 2017 growing season rapidly approaching, it is a great time to discuss the possible crop insurance options available to Maine farmers and explain a bit about how these programs work.

So first why is crop insurance so important for farmers to consider?

Well, just this past year Maine experienced a fairly significant drought throughout some parts of the state.

And in the case of drought, crop insurance provides a financial safety net should crop yields or revenue be significantly reduced.

So deciding to enroll in crop insurance really comes down to making a business decision. Similar to other insurance, there is a cost or a premium the farmer must pay on a yearly basis for crop insurance.

But depending on your investment in your crops and the revenue you’re expected to earn, having this type of financial safety net in place can be a very smart business move because it is a way to protect your bottom line.

And the nice thing about most crop insurance is that it protects the farm from a multitude of weather-related issues that can negatively affect crop production. So not only is drought an insurable cause of loss, but excess moisture, hail, frost, freeze, etc. are also insurable causes of loss. As well in some instances disease outbreak, insect damage, and wildlife damage to the crop might also be covered.

So what are the options, where do you go for insurance and how does it work? Well for the most part, that answer largely depends on what crop or crops you’re growing and the type of insurance you want to purchase.

The crop insurance program is regulated by the USDA.

And individual policies exist for these crops as well as milk. There is also a new policy called the Whole Farm Revenue Protection. And this policy allows farmers to cover numerous crops, livestock, and nursery stock under this one policy.

And in addition to crop insurance, The Farm Service Agency offers a program called the non-insured crop disaster assistance program and as the name implies, it provides coverage for most non-insurable crops. Essentially if the crop isn’t listed in the left top column under crop insurance than it is eligible for coverage through NAP. So crops such as tomatoes, onions, pumpkins, etc. are eligible for coverage under NAP.

What are these programs actually protecting? Well it depends on the exact policy, but for the most part they either protect the crop yield or revenue from weather-related loss.

So how does a yield protect policy work exactly?

Yield protection policies are based on the farmer’s average crop yield for the crop they wish to insure.

To enroll in this program, the farmer is going to provide 4-10 years of their actual crop yield records. And the agent or FSA will take an average of those yields and that average is what the policy is based on.

So in this example, say the farmer is growing oats and their average yield after providing their historical records is 60 bushels per acre.

Now if the farmer didn’t have a 4-year yield history than the agent would plug in a percentage of the county average yield as a substitute. So essentially with less than 4 years of yield records you can still eligible for crop insurance or the NAP program.

So once that average is set, the farmer needs to decide what level of coverage works for them. With crop insurance farmers can insure between 50 and up to 85% of their average yield. Now farmers can never insure 100% of their crop yield or revenue, unlike say a homeowner’s insurance policy. So that’s important to understand.

And obviously the cost of the premium will increase the higher the level of coverage. The least expensive level of insurance is called CAT which stands for catastrophic and this costs the farmer $300 per crop per county, regardless of the number of acres planted to that crop.

In this example lets say the farmer selects the 85% coverage level, that means they’re protecting 85% of their average yield. So this 51 bushels per acre is known as the insurance trigger meaning that if during the growing season the farmer experiences a insurable cause of loss such as drought and produces less than that trigger, than they might be eligible for an indemnity or loss payment.

So lets say this happens and the farmer produces 40 bushels per acre, which is under that insurance trigger. Upon discovery of crop loss or damage the farmer must contact their agent or FSA office within 72 hours of discovery and an adjuster will come out to quantify the loss. Once the loss is quantified the indemnity may be issued, and this is essentially a loss payment. So the indemnity is going to be calculated by taking the difference between the insurance trigger and the actual yield which is 11 bushels per acre. The difference will be multiplied by what’s known as a price election.

And this is a dollar per unit value set by the USDA for each crop. So the yield difference times the price election is the indemnity payment the farmer would receive per acre. It’s important to understand the price election is pre-set by the USDA and is not the actual value of the crop to that farmer. In this case the indemnity payment would be just over $26 per acre.

So when deciding what coverage level to select, farmers should run some of these loss scenarios and calculate out what their indemnity payment might be. So the goal is to have adequate coverage so that if you experience a difficult growing season, then the insurance is there to provide financial back up so that you can still pay off bills, loan payments or whatever might otherwise have to go unpaid that year.

Ok, what about Whole Farm Revenue Protection, how does this work?

Well, Whole Farm Revenue Protection is a much more involved to enroll in than any of the yield protection programs and that’s simply because of the level of records involved with this program. Farmers need to provide 5 years of their Schedule F tax documents. These documents essentially show your profit and loss from farming. And farmers need to show these records because they are the way that they will prove their adjusted gross revenue. Once they provide 5 years of their Schedule F’s, their average revenue is what the policy is based on.

I’ll be conducting another webinar where I’ll be going through a bit more of the records for enrollment in a bit more detail. But for now let’s continue with this example.

So say the farmer selects the 85% coverage level, this means their protecting around $54,000 of their average revenue.

If their actual revenue falls below that insurance trigger, say it’s $40,000 due to a drought, then they would be eligible for an indemnity for the difference between their insurance trigger and their actual revenue. So in this case the indemnity would be around $14,000 for the whole farm.

So the nice aspect about Whole Farm Revenue Protection policy is that farmers are insuring their crops at their actual value, there are no price elections that are pre-set by the USDA.

So where do folks go to obtain crop insurance or NAP? To obtain crop insurance, a farmer needs to work with a private licensed crop insurance agent of which there are many that serve Maine. And on our website there is a link that allows you to find the agents closest to your farm.   I recommend speaking with fellow farmers to see who they work with.

And then for the FSA’s NAP program, farmers simply have to visit their FSA county office.

Lastly, there are deadlines to enroll in each of these policies. March 15 is the enrollment deadline for all spring seeded crops such as corn, small grains, tomatoes, onions as well as the Whole Farm Revenue Protection. Obviously this deadline is quickly approaching for 2017 coverage so if you’re interested don’t delay in getting the enrollment process underway.

For perennial crops such as apples or lowbush blueberries the enrollment deadline is in November so that deadline has passed for 2017 coverage on perennial crops but mark your calendars if you’re interested in coverage for the 2018 season for perennial crops.

For more information please visit our website From there you will find a link to our risk management and crop insurance homepage.

And you’ll also you’ll find my contact info on this page, please do not hesitate to contact me with questions.

Thank you for watching and please stay tuned for more webinars.