Crop insurance is an important tool for managing risk in agricultural production. The deadline (sales closing date) for obtaining crop insurance for peanut, corn, or cotton is February 28th. Contact your insurance agent before that deadline to apply. You can search for a crop insurance agent on the USDA-RMA insurance agent locator website.
Yield Protection vs. Revenue Protection
Several different types of multi-peril crop insurance plans are available. Two basic options are Yield Protection (YP) and Revenue Protection (RP) with coverage levels ranging from 50% to 85%. Yield Protection insures against yield losses caused by adverse weather conditions, failure of irrigation water supply, fire, insects, plant disease, and wildlife. YP guarantees a percentage of the producer’s actual-production-history (APH) yield, valued at a pre-season projected price. Revenue Protection insures against yield losses and declining commodity prices. RP guarantees a percentage of the producer’s projected crop revenue, which is the APH yield valued at either the pre-season projected price or the harvest price (whichever is higher). Producers choose the percentage coverage level (50% to 85% in 5% increments), but pay higher premiums for higher coverage levels. Contact your insurance agent for more details, or view the USDA fact sheets for peanuts, corn, and cotton.
Additional Hurricane Protection
Florida producers have the option to add a Hurricane Insurance Protection – Wind Index (HIP-WI) endorsement to their crop insurance plan. The endorsement pays a portion of the deductible on a crop insurance policy when the producer’s county or adjacent count experiences sustained hurricane-force winds. Tropical-storm-force winds also could trigger the payment, if the producer selects the Tropical Storm option for the HIP-WI endorsement.
Projected Prices and Insurance Premiums
The USDA Risk Management Agency (RMA) sets projected prices and insurance premiums in late February for peanuts, corn, and cotton. The projected prices for corn and cotton in Florida are based on daily average futures contract prices between January 15th and February 14th. For Florida insurance plans, the relevant futures contract month is September for corn and December for cotton. Projected prices for peanuts are determined by USDA-RMA using survey data. USDA sets the insurance premium costs each year and provides a producer subsidy, which reduces the producer’s premium below the full cost of the policy.
An Example
In 2024, the Florida projected price for grain corn was $4.67 per bushel. The Florida harvest price, estimated for insurance purposes, was $3.77. For an example APH yield of 220 bushels per acre, the producer’s premium cost for Revenue Protection insurance ranged from $3.18 per acre for 50% coverage to $45.82 per acre for 85% coverage. Selecting 85% coverage in this example guarantees producer revenue of 0.85 x 220 x $4.67 = $873.29 per acre. If the producer’s actual yield multiplied by the harvest price ($3.77) was less than $873.29, an insurance indemnity payment for the difference would be paid to the producer. In 2024, producers who selected 85% coverage would have received a payment even if their corn harvest achieved their APH yield, because the harvest price dropped below 85% of the projected price. In this example for 2024, if the actual harvest was 198 bushels per acre, a producer with an APH yield of 220 and RP insurance at 85% would have received an insurance payment of $126.83 per acre. This example shows how Revenue Protection crop insurance can help producers manage market (price) risk, as well as production (yield) risk.
Crop Insurance Calculator
A crop insurance calculator tool is available on the NFREC-SV Farm Enterprise Budgets website under Agronomic Crops. The spreadsheet tool allows you to enter an APH yield, projected price, harvest price, and insurance premiums for the different coverage levels. The spreadsheet will then calculate the indemnity payment and net insurance gain or loss under different actual yield scenarios. For information on insurance premiums, contact your crop insurance agent or visit the USDA-RMA Cost Estimator website.
Featured photo: corn during storm at NFREC-SV, Live Oak, FL. Photo credit: Carson Jones.
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