Producers farm differently when they have revenue insurance. Or at least they think about the expenditures differently.
For the last couple years I’ve enrolled in Global Ag Risk Solutions (GARS), a private gross revenue insurance plan.
In turn, I’ve taken less coverage under crop insurance.
It would be great in a bad year to maximize both, but it’s difficult to justify and afford suspenders along with a belt to keep your pants from falling down.
I haven’t received a dime from GARS and I hope I never do. I want to keep growing good crops at good prices that exceed the revenue guarantee.
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However, many of my crops are in rough shape this year. There was finally a little bit of rain, but it will have to keep raining to make much of a difference.
Previously when in this situation, I’ve found it difficult to keep spending money on a crop that may not amount to much.
If producers are in a crop insurance claim situation, it matters little if their crop yields seven bushels per acre or nine. Investing money to gain a bit more yield doesn’t make economic sense if the yield is going to be less than the guarantee.
The moral hazard was even stronger under the old Gross Revenue Insurance Plan, which used crop insurance yields and historical grain prices to provide guaranteed revenue per acre.
There was no use spending extra money on inputs when extra yield would just reduce the government payment.
GARS takes a different approach. It covers what producers spend on seed, fertilizer and chemicals as well as a chosen margin.
The plan is based on what farmers historically spent plus 40 percent. In my case, I can spend up to $163 an acre. If I want to spend more and still be covered, I can ask for approval.
The margin I’ve chosen this year is $100 an acre, which means my revenue guarantee is whatever I actually spend on seed, fertilizer and chemicals plus $100 per acre. The margin above expenses comes in $25 increments. Last year, I took $75 an acre. Of course, the higher the margin, the higher the premium.
GARS requires five years of accrued farm financial statements, and they won’t insure everyone.
My crops may be poor, but there are still weeds, so I applied the appropriate herbicides when the crop staging was right. Based on past experience, if I don’t control weeds when I should, I’ll regret it.
The herbicide may be a waste if the crop is terminated and written off. After all, the weeds will be controlled when the crop is sprayed out.
However, it’s best to assume the crop will be worth saving.
As well, because the main safety net is GARS rather than drop insurance, it really isn’t my money at risk. GARS covers chemical costs, so my at-risk investment is only time, diesel and equipment.
The brown mustard received insecticide, along with a wild oat herbicide because flea beetle pressure was high and the plants were growing slower than the beetles were chewing.
The chickpea-flax intercrop looks reasonably good given the tough conditions. Making the first important fungicide application on the chickpeas was easier with the chemical cost insured.
I’ve no idea how the year is going to turn out, but there’s a measure of satisfaction in knowing that I’ve made input investments to grow the best crop possible given the conditions. Without GARS, I might have turtled to save some input costs.
