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Transcript of Crop Insurance Update - SRMEC Insurance Performance - 1890 Farm Bill Training... Crop Insurance...

  • Crop Insurance Performance

    Dr. Laurence M. Crane

    2019 Atlanta Farm Bill Conference Implications for Socially Disadvantaged Farmers and Ranchers

    National Crop Insurance Services Embassy Suites by Hilton Atlanta, Georgia

    June 11, 2019

  • Organization of Presentation

    • NCIS Backgrounder

    • Industry Overview

    • Year in Review

    • 2018 Recap

    – State Regulated (Crop-Hail)

    – Federally Regulated (MPCI)

    • Other Considerations

    – Specialty Crops

    – Some Farm Bill Stuff

    – Dairy Revenue Protection

    – Whole Farm Revenue

    • Application Process

    © 2019 NCIS 2

    2019 Atlanta Farm Bill Conference -- Implications for Socially Disadvantaged Farmers and Ranchers

  • BACKGROUNDER

    © 2019 NCIS 3

    2019 Atlanta Farm Bill Conference -- Implications for Socially Disadvantaged Farmers and Ranchers

  • NCIS Functions

    • Crop Insurance Program Development and Analysis – Policy Analysis, Loss Adjustment Procedures, Legal Analysis, Agronomic Research

    • Economic and Actuarial Analysis

    • Education and Training – Loss Adjuster Schools – 17 (1,180 attendees)

    – National Conferences – 5 (1,154 attendees)

    – Annual Regional/State Meetings – 19 (504 attendees)

    • Crop-Hail Advisory Organization and Statistical Agent – Licensed by Individual State Insurance Departments

    • Public Relations and Industry Outreach

    © 2019 NCIS 4

    2019 Atlanta Farm Bill Conference -- Implications for Socially Disadvantaged Farmers and Ranchers

  • Number of Insurance Providers by Year

    © 2019 NCIS 5

    2019 Atlanta Farm Bill Conference -- Implications for Socially Disadvantaged Farmers and Ranchers

  • FCIC’s role is to establish provisions, rules, regulations, and rates.

    RMA oversees the crop insurance program, administers premium and subsidies, and provides support and outreach. •Agent• Insured

    •AIP•RMA/FCIC

    Working Together

    To Provide

    Effective Crop

    Coverage

    For the Ag

    Producer

    Working Together

    2019 Atlanta Farm Bill Conference -- Implications for Socially Disadvantaged Farmers and Ranchers

  • •Agent• Insured

    •AIP•RMA/FCIC

    Working Together

    To Provide

    Effective Crop

    Coverage

    For the Ag

    Producer

    Approved Insurance Providers

    (AIPs) contract with licensed

    agents to market crop insurance

    and the agent receives

    commission.

    Working Together

    2019 Atlanta Farm Bill Conference -- Implications for Socially Disadvantaged Farmers and Ranchers

  • •Agent• Insured

    •AIP•RMA/FCIC

    Working Together

    To Provide

    Effective Crop

    Coverage

    For the Ag

    Producer

     The agent

     Provides product and premium

    information to the insured.

     Collects required information

    including:

     Application

     Production

     Acreage

     Builds relationships with customers

     Must stay current with crop insurance

    programs.

    Working Together

    2019 Atlanta Farm Bill Conference -- Implications for Socially Disadvantaged Farmers and Ranchers

  • •Agent• Insured

    •AIP•RMA/FCIC

    Working Together

    To Provide

    Effective Crop

    Coverage

    For the Ag

    Producer

     The Insured

     Has ownership in a crop and enters into contract to insure it

     Must report required information

     Pays applicable premiums and fees

     Must follow appropriate farming practices

     Must notify the AIP in the event of a loss

     Will receive an indemnity payment when an insurable loss occurs if guarantee not met

    Working Together

    2019 Atlanta Farm Bill Conference -- Implications for Socially Disadvantaged Farmers and Ranchers

  • 2018 YEAR IN REVIEW

    © 2019 NCIS 10

    2019 Atlanta Farm Bill Conference -- Implications for Socially Disadvantaged Farmers and Ranchers

  • Source: USDA, NASS, Quick Stats https://quickstats.nass.usda.gov

    Figure 9. U.S. Farm Prices Paid and Received for Crops & Animals (2000 to 2018)

    0

    20

    40

    60

    80

    100

    120

    140

    160

    180

    2 0

    1 1

    = 1

    0 0

    Livestock Paid Livestock Prices Received

    0

    20

    40

    60

    80

    100

    120

    Crops Prices Paid Crops Prices Received

    © 2019 NCIS 11

    2019 Atlanta Farm Bill Conference -- Implications for Socially Disadvantaged Farmers and Ranchers

    https://quickstats.nass.usda.gov/

  • Figure 12. Weekly Corn Futures Prices December Contract, 2012-2018

    3.00

    4.00

    5.00

    6.00

    7.00

    8.00

    9.00

    1 5 9 13 17 21 25 29 33 37 41 45 49

    2012

    2013

    2014

    2015

    2016

    2017

    2018

    Week

    $/Bu.

    Data as of April 16, 2019

    Source: Barchart.com © 2019 NCIS 12

    2019 Atlanta Farm Bill Conference -- Implications for Socially Disadvantaged Farmers and Ranchers

  • 2018 STATE REGULATED BUSINESS “CROP-HAIL”

    © 2019 NCIS 13

    2019 Atlanta Farm Bill Conference -- Implications for Socially Disadvantaged Farmers and Ranchers

  • Crop-Hail Premium Totals State Regulated Business

    Prepared 04/25/2019NCIS Insured Crop Summary as of 04/25/2019

    Cropyear Premium Indemnity Loss Ratio

    2017 952,960,169 876,653,802 0.92

    2018 979,933,352 920,953,568 0.94

    2017-2018 Crop-Hail Industrywide Totals (U.S. only)

    RANK STATE PREMIUM LOSS LOSS RATIO

    1 Nebraska 205,869,248 269,649,341 1.31

    2 Iowa 107,233,782 97,472,145 0.91

    3 North Dakota 106,110,240 77,609,412 0.73

    4 Minnesota 101,267,419 74,879,269 0.74

    5 Illinois 83,298,336 59,720,723 0.72

    Top 5 States by Written Premium Volume for 2018

    © 2019 NCIS 14

    2019 Atlanta Farm Bill Conference -- Implications for Socially Disadvantaged Farmers and Ranchers

  • Figure 18. 2018 Crop-Hail Premium and

    Loss Ratios All Crop, Perils,

    Plans Combined

    Data as of April 24, 2019

    Source: National Crop Insurance Services Insured Crop Summary and NCIS6b

    © 2019 NCIS 15

    2019 Atlanta Farm Bill Conference -- Implications for Socially Disadvantaged Farmers and Ranchers

  • 2018 FEDERALLY REGULATED CROP INSURANCE “MPCI”

    © 2019 NCIS 16

    2019 Atlanta Farm Bill Conference -- Implications for Socially Disadvantaged Farmers and Ranchers

  • U.S. Acres in Crop Insurance, 1981-2017

    0

    50

    100

    150

    200

    250

    300

    350

    Insured acres

    Total US crop acres

    1994 Act

    310 mil

    Mil. acres

    Premium support, then 2000 Act

    318 mil 1981-2017: 327.65 mil

    Sources: U.S. crop

    acres are from the

    NASS databases.

    Insured acres are

    from the RMA’s

    Summary of

    Business. © 2019 NCIS 17

    2019 Atlanta Farm Bill Conference -- Implications for Socially Disadvantaged Farmers and Ranchers

  • Distribution by Crop Liability By Major Crop, 2018

    Total: $110 bil.

    NCIS Summary of Business as of 04/25/2019 Prepared 04/25/2019 © 2019 NCIS 18

  • Forthcoming in Crop Insurance Today Magazine Paggi and South.

    Table 2. Major Revenue Policy Base Prices 1/

    2012 2013 2014 2015 2016 2017 2018 2019

    % Change

    2017-

    18

    2018-

    19

    Wheat, Winter ($/bu) (KS) 8.62 8.78 7.02 6.30 5.20 4.59 4.87 5.74 6.1 17.9

    Wheat, Spring ($/bu) (ND) 7.84 8.44 6.51 5.85 5.13 5.65 6.31 5.77 11.7 -8.6

    Corn ($/bu) (IL) 5.68 5.65 4.62 4.15 3.86 3.96 3.96 4.00 0.0 1.0

    Soybeans ($/bu) (IL) 12.55 12.87 11.36 9.73 8.85 10.19 10.16 9.54 -0.3 -6.1

    Upland Cotton ($/lb) (MS) 0.94 0.81 0.78 0.63 0.62 0.73 0.75 0.74 2.7 -1.3

    Rice ($/cwt) 14.70 15.70 13.90 2/ 11.90 10.40 11.90 10.80 14.4 -9.2

    1/ Revenue Protection for 2012-19 as of April 16, 2019

    2/ Due to insufficient futures price data, revenue insurance was not available in 2015

    Source: RMA Actuarial Information Browser

    © 2019 NCIS 19

    2019 Atlanta Farm Bill Conference -- Implications for Socially Disadvantaged Farmers and Ranchers

  • Table 3. Volatility Factors

    Historical

    Price

    Volatility

    1/

    Volatility Factor 2/

    1968-2018 2012 2013 2014 2015 2016 2017 2018 2019 % Change

    2017-18 2018-19

    Wheat, Winter

    ($/bu) 0.19 0.26 0.24 0.19 0.17 0.22 0.18 0.16 0.19 -11.10% 18.80%

    Wheat, Spring

    ($/bu) 0.22 0.19 0.15 0.14 0.15 0.15 0.13 0.13 0.14 0.00% 7.70%

    Corn ($/bu) 0.2 0.22 0.2 0.19 0.21 0.17 0.19 0.15 0.15 -21.10% 0.00%

    Soybeans ($/bu) 0.18 0.18 0.17 0.13 0.16 0.12 0.16 0.14 0.12 -12.50% -14.30%

    Upland Cotton

    ($/lb) 0.23 0.19 0.17 0.15 0.16 0.14 0.15 0.14 0.14 -6.70% 0.00%

    Rice ($/cwt) 0.23 0.14