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Farmers raise crop insurance coverage levels as Midwest still gripped by drought

In this Sept. 19 file photo, corn plants weakened by the drought lie on the ground after being knocked over by rain in Bennington, Neb. With most of the Upper Midwest still gripped by drought, farmers this year are protecting themselves by purchasing greater levels of crop insurance coverage. (AP Photo/Nati Harnik, File)

GRAND FORKS, N.D. — Upper Midwest crop insurance agents are breathing a little easier.

By Jonathan Knutson

Forum News Service

GRAND FORKS, N.D. — Upper Midwest crop insurance agents are breathing a little easier.

Many area farmers, for their part, are paying a little more for crop insurance than they did in 2012, while other producers are paying a little less.

March 15 was the deadline for purchasing or modifying crop insurance for most spring-planted crops. In the two weeks leading up to the deadline, crop insurance agents put in long hours helping clients finalize their insurance plans for the upcoming growing season.

With most of the Upper Midwest gripped by drought, “farmers definitely are interested in protecting themselves,” says Michael Kozojed, an agent with Ihry Insurance in Hillsboro, N.D.

The possibility that commodity prices could decline sharply also affected farmers’ desire for insurance, he says.

Given both yield and price risk, “I think everybody is taking the opportunity to buy as much risk protection as they can,” Kozojed says.

He and others say that farmers on balance increased their coverage level this year, often from 70 to 75 percent to 75 to 85 percent. Higher coverage levels give farmers more protection, but at a greater cost.

With federally subsidized crop insurance, a farmer growing an insurable crop selects a level of coverage and pays a portion of the premium; the payment increases as the level of coverage rises. The government pays the rest of the premium.

In 2012, the federal government paid, on average, 62 percent of the premium, according to information from the Congressional Research Service.

Crop insurance premiums are based on historical loss rates, says the U.S. Department of Agriculture’s Risk Management Agency, which administers federal crop insurance.

Here are the average statewide changes in yield protection premiums for the Upper Midwest, according to the Risk Management Agency. Keep in mind that the numbers are averages:

* Wheat — North Dakota, 8 percent increase; South Dakota, 10 percent increase; Minnesota, 10 percent decrease; Montana, 14 percent decrease.

* Corn — North Dakota, 11 percent increase; South Dakota, 15 percent increase; Minnesota, 3 percent decrease; Montana, 12 percent decrease.

* Soybeans — North Dakota, 2 percent increase; South Dakota, 2 percent increase; Minnesota, 4 percent decrease.

The increases in wheat and corn premiums reflect production problems in recent years, including widespread prevented planting in 2011, in the Dakotas.

Nationally in 2013, the average wheat premium rose 4 percent, with soybeans dropping 6 percent on average and the average corn premium staying about the same.

In 2011, the Risk Management Agency began what it calls a “phased-in” approach, which limits year-to-year changes in an effort to keep premiums relatively stable and farmers’ rates predictable. That approach limited the impact of widespread drought last year on 2013 premiums.

“The good news is the government doesn’t come and say to farmers, actuarially we need to increase your rates 50 percent next year,” said Dan Weber, a Casselton, N.D., crop insurance agent.

“The bad news is, it (premiums) might increase 2 percent to 8 percent every year,” he said.

Weber says many of his clients continue to pay more for land, fuel and other expenses, including crop insurance.

“It seems like they’re not getting further ahead,” despite high crop prices, he said.

Federal crop insurance is increasingly important, given the likelihood that budget problems will lead to less funding for other ag programs, Kozojed said.

Crop insurance has seen many changes through the year, but on balance has improved, he said.

“It’s a program they’ve tweaked for so many years. I think they’ve really found the sweet spot,” Kozojed said.

Weber, national director for the Professional Insurance Agents of North Dakota, said he and others in his organization will be in Washington, D.C., next month to discuss crop insurance and other industry issues with regulators and elected officials.

“It’ll be interesting to see the pulse in Washington, D.C., this year,” he said.

Forum News Service

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