Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define...

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Crop Insurance and the 2018 Farm Bill Keith Coble [email protected] @DrKeithHCoble All pictures from Mississippi State Extension Service

Transcript of Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define...

Page 1: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

Crop Insurance and

the 2018 Farm Bill

Keith Coble

[email protected] @DrKeithHCoble

All pictures from Mississippi

State Extension Service

Page 2: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

Context - Increasing Partisanship

Page 3: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

AGRICULTURAL IMPROVEMENT

ACT OF 2018 BIPARTISAN VOTES

- HOUSE 369-47

- SENATE 87-13

The Farm Group –

Nutrition

bipartisan

coalition endures!

Page 4: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

CROP INSURANCE

BACKGROUND

Page 5: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

A Time Line of U.S. Recent

Crop Insurance Policy

• 1990 Began flex acres

• 1994 Linked crop insurance

participation to Title I

• 1996 fixed payments and

revenue insurance

• ARPA really define modern

crop insurance

• 2014 risk was the justification

in vogue

• 2018 ditto

Page 6: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

U.S. Adult Preferred

USDA Allocation

(Gould, Collart, Coble)

Program USDA budget ALL Respondents

Actual % Desired % Change

Farm programs 18 19 6%

Conservation 7 22 214%

Nutrition 69 40 -42%

Other 6 18 200%

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Crop Insurance Program Growth

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350.0

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20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

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1989-2017 Subsidy Percentage & Net Acres Insured for U.S. Crop Insurance

Subsidy % Acres

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Crop Insurance, ARC and PLC

Projected Payments

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2017 2019 2021 2023 2025 2027

Mill

ion

s

April 2018 CBO Baseline

Price Loss Coverage ARC County Coverage Crop Insurance

Page 9: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

Insurance Plan Premium Shares

STAXSCO1%

WFRP1%

YP5%

RP77%

RPHPE0%

RAINF3%

All other11%

All Area2%

Revenue Protection

is the dominate form

of crop insurance

Page 10: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected
Page 11: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected
Page 12: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

Corn

Page 13: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

Soybeans

Page 14: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

Corn

Page 15: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

Soybeans

Page 16: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

Differing Risk Levels

Page 17: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected
Page 18: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

Crop Insurance Subsidy Levels

Coverage

Level

Basic &

Optional

Subsidy %

Enterprise Unit

Subsidy %

SCO

Subsidy

50% 67% 80% 65%

55% 64% 80% 65%

60% 64% 80% 65%

65% 59% 80% 65%

70% 59% 80% 65%

75% 55% 77% 65%

80% 48% 68% 65%

85% 38% 53% 65%

Page 19: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

0

0.5

1

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Lo

ss R

atio

Year

RMA Aggregate Loss Ratio 1980-2017

Loss Ratio 80-95 AVG 96-17 AVG Expon. (Loss Ratio)

1980-1995 Avg. =1.48

1996-2017 Avg. = 0.83

Why good loss experience? Good weather, risk pool,

production systems, or better crop insurance program

Page 20: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

2018 FARM BILL AND

CROP INSURANCE

Page 21: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

Big Changes for Crop Insurance in

the Farm Bill

1.

2.

3.

4.

Page 22: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

What did not happen to crop

insurance?

•Capping subsidy at $40,000

• Applying AGI limits

•Removing or unsubsidizing

Harvest Price Option (HPO)

•Reducing subsidy percentages

Page 23: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

What the Media is Talking

About

• Industrial hemp mentioned in the Bill and conference report 114 times

• Including hemp insurance

– “You can barbecue it, boil it, broil it, bake it, sauté it. There's uh, hemp-kabobs, hemp creole, hemp gumbo. Pan fried, deep fried, stir-fried. There's pineapple hemp, lemon hemp, coconut hemp, pepper hemp, hemp soup, hemp stew, hemp salad, hemp and potatoes, hemp burger, hemp sandwich. That- that's about it.“

Paraphrase of Pvt. Benjamin Buford 'Bubba' Blue in the Movie “Forrest Gump”

Page 24: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

• LIMITED IRRIGATION

PRACTICES FOR

RICE

• GREENHOUSE

CROPS

• BATTURE LAND

• LOCAL FOOD

PRODUCERS

• QUALITY LOSS

• TROPICAL STORM

OR HURRICANE

• CITRUS

• HOPS INSURANCE

• SUBSURFACE

IRRIGATION

PRACTICE

• IRRIGATED GRAIN

SORGHUM

Research Projects Mandated

Page 25: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

2019 Crop Insurance Price

Guarantees and Volatility

Commodity

Name

Projected

Price

Price

Volatility

Rice $ 0.114 12%

Cotton $ 0.74 14%

Corn $ 4.00 15%

Soybeans $ 9.54 12%

Page 26: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

If ARC is great risk protection why overlap

it with crop insurance?

ARC

86%

76%

Crop

Insurance

coverage

level

15%

Co-Pay

$2.02 billion of 2016 corn &

soybean insurance liability

overlapping with ARC &

costing producers over 0.5

billion

85%

Page 27: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

Price

0.0 0.80 1.6 2.4 3.2 4.0 4.8 5.6 6.4 7.2 8.0

0 225.0 225.0 225.0 195.0 75.0 0.0 0.0 0.0 0.0 0.0 0.0

40 225.0 225.0 225.0 195.0 75.0 0.0 0.0 0.0 0.0 0.0 0.0

70 225.0 225.0 225.0 195.0 75.0 0.0 0.0 0.0 0.0 0.0 0.0

100 225.0 225.0 225.0 195.0 75.0 0.0 0.0 0.0 0.0 0.0 0.0

130 225.0 225.0 225.0 195.0 75.0 0.0 0.0 0.0 0.0 0.0 0.0

Yield 160 225.0 225.0 225.0 195.0 75.0 0.0 0.0 0.0 0.0 0.0 0.0

190 225.0 225.0 225.0 195.0 75.0 0.0 0.0 0.0 0.0 0.0 0.0

220 225.0 225.0 225.0 195.0 75.0 0.0 0.0 0.0 0.0 0.0 0.0

250 225.0 225.0 225.0 195.0 75.0 0.0 0.0 0.0 0.0 0.0 0.0

280 225.0 225.0 225.0 195.0 75.0 0.0 0.0 0.0 0.0 0.0 0.0

310 225.0 225.0 225.0 195.0 75.0 0.0 0.0 0.0 0.0 0.0 0.0

PLC Payments

Page 28: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

RP Price

0.0 0.80 1.6 2.4 3.2 4.0 4.8 5.6 6.4 7.2 8.0

0 480.0 480.0 480.0 480.0 480.0 480.0 576.0 672.0 768.0 864.0 960.0

40 480.0 448.0 416.0 384.0 352.0 320.0 384.0 448.0 512.0 576.0 640.0

70 480.0 424.0 368.0 312.0 256.0 200.0 240.0 280.0 320.0 360.0 400.0

100 480.0 400.0 320.0 240.0 160.0 80.0 96.0 112.0 128.0 144.0 160.0

130 480.0 376.0 272.0 168.0 64.0 0.0 0.0 0.0 0.0 0.0 0.0

Yield 160 480.0 352.0 224.0 96.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

190 480.0 328.0 176.0 24.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

220 480.0 304.0 128.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

250 480.0 280.0 80.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

280 480.0 256.0 32.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

310 480.0 232.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Revenue Protection Payments

Page 29: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

RP+

PLC+

Market Price

0.0 0.80 1.6 2.4 3.2 4.0 4.8 5.6 6.4 7.2 8.0

0 705.0 705.0 705.0 675.0 555.0 480.0 576.0 672.0 768.0 864.0 960.0

40 705.0 705.0 705.0 675.0 555.0 480.0 576.0 672.0 768.0 864.0 960.0

70 705.0 705.0 705.0 675.0 555.0 480.0 576.0 672.0 768.0 864.0 960.0

100 705.0 705.0 705.0 675.0 555.0 480.0 576.0 672.0 768.0 864.0 960.0

130 705.0 705.0 705.0 675.0 555.0 520.0 624.0 728.0 832.0 936.0 1040.0

Yield 160 705.0 705.0 705.0 675.0 587.0 640.0 768.0 896.0 1024.0 1152.0 1280.0

190 705.0 705.0 705.0 675.0 683.0 760.0 912.0 1064.0 1216.0 1368.0 1520.0

220 705.0 705.0 705.0 723.0 779.0 880.0 1056.0 1232.0 1408.0 1584.0 1760.0

250 705.0 705.0 705.0 795.0 875.0 1000.0 1200.0 1400.0 1600.0 1800.0 2000.0

280 705.0 705.0 705.0 867.0 971.0 1120.0 1344.0 1568.0 1792.0 2016.0 2240.0

310 705.0 705.0 721.0 939.0 1067.0 1240.0 1488.0 1736.0 1984.0 2232.0 2480.0

Market + PLC +RP

Page 30: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

The 4% Rule of Crop Insurance Demand

Page 31: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

Crop Insurance Rating

• Corn insurance (Revenue

Protection)

• 697 counties in Corn Belt

States

• Soil productivity: National

Commodity Crop

Productivity Index (NCCPI),

USDA/NRCS

• The future of crop

insurance rating will

utilize geo-spatial data

• especially soil mapping

Page 32: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

Are Larger Farms Less Risky?

2

2.5

3

3.5

4

4.5

100

700

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1900

2500

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4300

4900

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6100

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7900

8500

9100

9700

10300

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11500

12100

12700

13300

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14500

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16300

16900

17500

18100

18700

19300

19900

$ P

er

Acre

Total Policy Acres

Soybean Per Unit Average Yield Indemnity Per Acre

Roughly 25% Less Risky

Page 33: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

1. Financial Management

2. Cost control – managing expenses

3. Integrated crop insurance, farm program, and forward pricing

4. Data and Records for Assessment

$

$

$

$

Holistic Crop Risk Management

Page 34: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

1. What about enterprise units across county lines?

2. May I qualify for trend adjusted yields?

3. May I qualify for APH yield exclusions?

4. What is the premium for different coverage levels?

5. What about separate coverage levels by practice?

Five Questions for Your Crop

Insurance Agents

Page 35: Crop Insurance and the 2018 Farm Bill Bill Summit/Coble...revenue insurance • ARPA really define modern crop insurance • 2014 risk was the justification in vogue ... Name Projected

Final Thoughts

• Potential Flooding in

2019

• Ad hoc Disaster

Legislation