PINE BLUFF, Ark. — Feb. 28 is the last day to apply for 2004 crop insurance as well as the last day to cancel a current policy for the next year. This includes most row crops such as cotton, soybeans, rice, corn and grain sorghum.
“This year more may be at stake for row crop producers who didn’t have crop insurance but received disaster payments in 2003,” says Henry English, director of the Small Farm Program at the University of Arkansas at Pine Bluff (UAPB).
Producers who received disaster payments but didn’t have crop insurance for losses in 2001 or 2002 under the Crop Disaster Program (CDP) must purchase crop insurance, says English. This crop insurance must be purchased on crops for which disaster payments were collected. And, the insurance must be in force for the next two years or the producer will face a large penalty.
“The penalty is the most significant change from previous linkage requirements,” says English.
If a cross-check two years from now shows a failure to purchase the required crop insurance, producers will have to repay the full amount of their disaster payments with interest, says English. And, buying the basic catastrophic (CAT) level of insurance is not enough to comply with the new regulations, warns English.
Producers must purchase crop insurance; either multiple peril or one of the revenue types will satisfy the requirement.
Basically, there are two types of crop insurance — one that guarantees yields and one that guarantees revenue.
Multiple Peril Crop Insurance (MPCI) is the most common type of yield guarantee crop insurance. The yields guarantees are based on a producer’s Actual Production History (APH). Producers can choose to insure their crops at 50, 55, 60, 65, 70 or 75 percent of their APH at a price ranging from 60 to 100 percent of an insurable market price set by Risk Management Agency each year.
Crop Revenue Coverage (CRC) is the most common type of revenue insurance. It protects against low yields, low prices, or a combination of low yields and prices. CRC provides revenue protection based on price and yield expectation by paying for losses below the guaranteed at the higher of an early season base price or harvest price. Base and harvest prices are determined by using the Chicago Board of Trade (CBOT) futures contracts. Yields are based on the producers APH, just like MPCI and coverage level can be between 50 and 75 percent of expected gross revenue.
Carol Sanders is a writer/editor for the School of Agriculture, Fisheries and Human Sciences at the University of Arkansas-Pine Bluff (870–575–7238 or [email protected]).