Do crop insurance premiums overcharge U.S. corn growers? National Corn Growers Association leaders meeting at Commodity Classic this week will be making that case. Some compelling new research by University of Illinois economists Gary Schnitkey and Bruce Sherrick finds that corn growers deserve a major readjustment in premiums based on the crop's miniscule yield losses over the last decade. With some corn growers paying $60 to $70 per acre for gold-plated insurance policies last year, rate relief and affordable crop insurance coverage is one of NCGA's top policy priorities.

Only once in the last 19 years--the Great Flood of 1993--has corn experienced a higher loss ratio than all other crops covered under the federal crop insurance program, the University of Illinois research found. And the advent of biotech traits, improved hybrid genetics, fungicide treatments and other agronomic advances in corn over the last decade has only magnified this difference. To experience the same losses as corn did in 1988's drought would lower corn yields nationwide to about 110 bu. per acre. "That's just not going to happen," Schitkney says.

Crop insurance's official goal is to breakeven over time--paying out as much in indemnities as it collects in premiums. With corn picking up the tab, that's been the easy: For example, the loss ratio from 1990 through 1999 averaged 0.91 for corn and 1.15 for all other crops. From 2000 through 2009, the loss ratio slipped to 0.67 for corn and 0.99 for other crops. So for each $1 in total premiums, corn growers received 67 cents in indemnities.

Better crop technology--including biotech traits, underlying genetics and other cropping practices--has made corn far more stress-proof than other crops, NCGA argues. Some even contend that the recent use of Biotech Yield Endorsement discounts probably doesn't fully reflect the profits crop insurance is reaping from corn.

In 2009, corn farmers purchased farm-level RA or CRC insurance on 68 million acres or 78 percent of the planted acres (and that doesn't include those who bought county based insurance like GRIP or GRP.) Back in 1988, less than 13 percent of the nation's corn acres were insured, and they tended to be higher risk, more drought prone properties, Schnitkey says. Because crop insurance uses a 10-year actual production history as a basis for yield guarantees, there's a long lag time in reflecting yield gains from new technology.

How much are rates inflated? By one estimate corn growers paid out $244 million a year in premiums from 2005-2008, but received only $141 million back. That's about $100 million a year--enough to be "troubling evidence" that the system isn't in synch.

So why is corn calling attention to inequities now? RMA plans to simplify crop insurance options by merging RA and CRC policies starting in 2011. According to Schnitkey, they are likely to use RA's higher premium levels on this new combo product, and that's likely to worsen the insurance load on corn growers in the process. "For people in Illinois and Iowa, it could be bad news," he says.

Have last-minute questions about 2010 crop insurance coverage? Join a panel of three crop insurance experts--Risk Management Agency's Deputy Administrator Tim Witt, University of Illinois economist Gary Schnitkey and Illinois farmer-crop insurance agent Steve Pigg--for a free DTN Webinar March 11. Register for the live event or rebroadcast at http://about.dtnpf.com/…

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