January 2021 Letter

Greetings for the new year! As we hopefully start to leave COVID and the chaos of 2020 behind, I am reminded of another divisive period that Donna and I grew up in. With Vietnam, the riots or protests following Martin Luther King Jr.’s murder in 1968, Kent State and then Watergate, opinions were very divided. May we once again find ways to communicate effectively with our friends, family, and neighbors to find common ground for moving ahead into a better future for all of us.

As we start to think about the future of risk management for 2021, it can be helpful to review some of the issues, both environmental and financial, that will likely affect our choices. Here are just a few:

  1. It is 165 years since an amateur scientist named Eunice Foote in an experiment on her kitchen table looked at how changes in the amount of water vapor and carbon dioxide in the atmosphere could cause changes in climate. With the record number of hurricanes and wildfires that we experienced in 2020, society is demanding that we address climate change. The agricultural community needs to be part of this discussion with our huge potential impact on carbon cycling.
  2. We have seen a slow, steady but significant improvement in soil conservation and quality over the past 50 years. Although there are other factors, most of this is the result of reduced tillage or no-till. The primary reason for tillage is weed control and the increase of herbicide tolerant pigweeds puts this progress is in jeopardy. The controversy over the use of dicamba and the long-term viability of this herbicide is further complicating this issue.
  3. A year ago, we were looking at the prospect of a 4-billion-bushel corn carryover and corn prices in the mid-$2 range. With the rebound in hog production in China after ASF and the resulting feed shortage there, along with a La Niña induced drought in South America, we have a dramatically different situation today with prices pushing toward $5.
  4. Drought monitor maps show most of Nebraska in a moderate or severe drought. Last spring the soil profile was filled with water. Today the profile is probably the driest it’s been since late winter 2012.
  5. Last year the dollar was rallying and threatening to go higher. Today, with the huge federal deficits due to COVID and historically low interest rates, the dollar is much weaker and looking to drop even further. 

It looks like 2021 will be a relatively quiet year as far as changes in crop insurance is concerned. As I mentioned in our December letter, after several years of turmoil with hail and wind insurance rates, at this point 2021 appears to be much calmer. Hail and wind are the biggest environmental risks that Nebraska irrigation farmers face and these policy rates are often the deciding factor in their insurance program. It looks like we will be able to offer some of the lowest rates available for 2021.


Probably the biggest financial risk that Nebraska irrigation farmers face is price. Over the years, AIPs (Approved Insurance Providers) have offered different versions of band insurance that allow farmers to insure values up to 95% of their APH x spring price. Because these policies cover a high level of price and production, and are private products, they are very costly. Rates have been close to $.35 for every dollar of coverage. This year the RMA is offering ECO, which is their version of band insurance. Because this is a federal policy, rates should be much cheaper and will be worth taking a look at.

Here at Midplains Ag, we don’t just sell crop insurance. Our families have a long history of farming in Antelope County. As farmers and now as an insurance agency, we are aware that farmers need to have a working knowledge of their crop insurance policy. When we visit with our clients in the spring, we like to have a two-way discussion to ensure you understand your options and choose the policies that best fit your needs. We know that one of the responsibilities of a good crop insurance agency is to make sure that our clients understand the ins and outs of your policy. That said, some of the terms, abbreviations, and acronyms can get confusing and are difficult to remember from year to year.

Some of the more common optional codes that are typically included in our area with your policies are listed here:

  • CP – Contract Pricing
  • Allows certain crops that use contracts that establish a price (i.e. organic crops) to use the contract price instead of a spring price to set insurance guarantees.
  • PF – Prevent Plant +5%
  • An option that increases the percentage of the guaranteed indemnity used to pay prevent plant claims by 5%. For example, the prevent plant guarantee for corn would increase from 55% of the guarantee to 60% of the guarantee using the spring price. 
  • TA – Trend Adjustment
  • An option the insured can elect if it is available per the Actuarial documents. TA adjusts yields in APH databases to reflect increases in yields through time in the county. This option is available for eligible crops on a crop/county basis.
  • EU – Enterprise Units
  • Guarantees and losses are figured on a per crop and county basis. For example, all corn production in the county would be combined. If a farmer chooses and if requirements are met, production can be separated by irrigated and dryland. Production data should still be kept on the optional basis.
  • OU – Optional Units
  • Production guarantees and losses are figured on optional unit basis that in Nebraska is almost always a section. If a farmer chooses, they can be also separated by practice such as irrigated and dryland. Organic and conventional production will be combined.
  • MC – Multi-County
  • Contiguous (touching) counties can be combined for enterprise units if one county meets the requirements and one does not. 
  • RP – Revenue Protection
  • The insurance guarantee will be figured using the higher of the spring or fall price.
  • RP-HPE
  • The insurance guarantee will be figured using only the spring price.
  • YA – Yield Adjustment
  • Since production numbers are averaged within an APH (actual production history) database, a catastrophic year can bring down the overall averages. When an insured elects the YA option on an Application or Policy Change form by the sales closing date, a yield adjustment is allowed to reduce the effect of a catastrophic year. An insured can choose to substitute 60% of the T-yield, or his/her specific county’s average yield for years where he/she has low actual yields caused by drought, flood, or other natural disasters.
  • YC – Yield Cup
  • When an insured elects the YC option on an application or Policy Change form by the sales closing date, a yield cup helps reduce the effect of a catastrophic year on an approved actual production history (APH) yield by preventing a yield from decreasing the average yield by more than 10% compared to the prior year’s approved APH yield.
  • YE – Yield Exclusion
  • When an insured elects the YE option on an application or Policy Change form by the sales closing date, this option allows the insured to exclude eligible crop year actual yields. The crop year(s) available for this option are determined by RMA and are based on the county’s averages.

If you have any questions about your policy or the terminology found on it, please give us a call so we can help you fully understand your policy.

Last summer, Lordemann insurance bought Elgin Insurance from Kathy Volk. We have carried our P & C (property and casualty) insurance at Elgin Insurance for many years and have always been happy with the service. In discussions with Eric Lordemann, we have begun to look at ways we could work together. We are looking forward to a mutually beneficial working relationship.

 

Here are a few comments from Eric: Lordemann Insurance has been a Property & Casualty personal and commercial lines and Crop Insurance Agency since 1984. In 2020 we were able to grow our Agency with the purchase of Elgin Insurance Services. With this purchase we were able to expand to include Health Life, and Accident Insurance becoming a Full Lines agency. We reached out to Midplains Ag to see how we could work together to offer both of our client bases the best and most effective ways to cover all of your insurance needs. We look forward to bringing our years of experience in Ag and Ag Insurance to combine with the knowledge and experience of Midplains Ag.

As with many things, COVID is presenting a challenge in holding our annual February meeting. Like everyone else, we have had a lot of experience using Zoom to hold meetings with great success over the past few months. We are planning at this time to use Zoom for our annual meeting. Topics will be similar to previous years. 

Midplains Ag Annual Meeting

Date – February 10th

Topics

Trent Stremick – ARMtech - ECO and Band Insurance

Shawn Wattier – RCIS – Hail & Wind Insurance

Ben Buckner – AgResource – An overview of commodity markets

Dale Hebda – PinPoint Solutions – A Technical Look at the Commodity Markets

Eric Lordemann – P & C topics

  • Liability
  • Covering Entities – Corporations, LLC and Personal
  • ATVs
  • Drones
  • Umbrellas – Do you need one and how much do you need?
  • Employee Liability – Workers Comp & Accident Insurance


With the extended warm fall-like weather lasting through Christmas, we’ve been making good progress on Rachel’s geothermal greenhouse. The Lexan panels on the South and tin siding on the North are installed, and we are working on enclosing the end walls. 



The more recent wintry weather has allowed us some time to play in the snow.


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