Sometimes everything turns out just fine when the spring starts with limited soil moisture. Other times, growing season precipitation doesn’t bridge the gap.
If, like me, you’re worried about the latter scenario, here are suggestions for your crop insurance coverage.
Of course, it goes without saying that you’ll want to maximize coverage. In a potential loss year, you don’t want to be caught with 60 or 70 percent yield guarantees when you could have 80 percent.
Sure, the premium is lower, but the lower coverage can cost you dearly in a loss year.
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It’s interesting to analyze the coverage provided by different crops. Don’t just look at how many dollars per acre you’re guaranteed for canola versus durum. You’re better off subtracting your variable expenses for each crop to come up with a crop insurance contribution margin.
In my case, crop insurance will cover variable expenses on all the crops I’ve been considering, but some make a bigger contribution to covering fixed expenses. Kabuli chickpeas have a contribution margin of $68 an acre, whereas durum is only at $14.
Whether or not you alter cropping plans because of crop insurance considerations, it’s good to know the numbers from a disaster planning perspective.
There are also ways to enhance coverage. I’m more familiar with Saskatchewan Crop Insurance, but there are also options to consider in Alberta and Manitoba.
One of the Saskatchewan options is contract pricing. As explained in the program information, “flax, lentils (large green, red, other), alfalfa seed, canaryseed, mustard (yellow, brown, oriental), and identity preserved canola may be insured based on the price at which you have contracted the crop.”
This won’t help much on some of the crops because new crop contract prices aren’t much higher than crop insurance prices.
However, it might be a help if you’ve locked in a favourable new crop price on some of your canola or if you’re growing an identity preserved canola.
In my case, I’m planning to grow Nexera. The contract provides for a “health premium” of $45 a tonne over the price of regular canola on all that I can produce.
By providing this information to the crop insurance folks, I’m able to boost the price coverage. For 2012, regular canola has a crop insurance base price of $11.11 per bushel. IP canola is pegged at $11.57, which is the price I would have received without using the contract price option.
Adding $45 a tonne ($1.02 per bushel) to the base price for regular canola brings the coverage up to $12.13 per bu., which is better protection in the event of a crop failure.
I’m also planning to grow Brassica carinata (Ethiopian mustard), which doesn’t qualify for crop insurance coverage because it is a new crop. However, protection is available under the diversification option.
By asking to invoke this option before the March 31 deadline, I can grow carinata and it will have coverage based on an average of all my other crops. The premium will be an average of all my other acres and any payouts will be an average of all the other acres.
In addition to drought, there are also threats from frost and hail. I hope it’s a good year with no need to rely on crop insurance, but I also want to hedge my bets.
