After reviewing your balance sheet and estimating input costs, your crop insurance plan should focus on risk.
“The difference between your total cost of inputs and your guarantee depends on how much risk you and your team feel is best,” said Chris Coffey, Assistant Vice President – Crop Insurance, Farm Credit Mid-America. “Communication with your crop insurance team is crucial. By providing accurate information on your operation and your plans, your team can develop more accurate estimates for spring guarantees. For example, since your coverage is based on a 10-year production history, it’s likely your guarantees will increase due to this season’s higher-than-average yields.”
With crop input costs and cash rents, having a defined safety net helps you prioritize input investments and identify potential increases in ROI. When it comes to crop selections, modeling scenarios with your crop insurance specialist will help you take advantage of grain prices by determining which crops should generate the greatest revenues. For grain marketing, knowing the base level of production you need to meet and the guarantee you will set allows you to contract grain at prices you find favorable.
“It’s important to partner with a team of experts to make sure you’re well informed during this process and we suggest enlisting a diverse group that includes a loan officer, a crop insurance specialist, and outside experts such as a grain marketer and insurance provider,” Coffey said. “The added visibility from such a team is crucial in attaining operational profitability.”
AUDIO: The Ohio Ag Net’s Ty Higgins visits with Farm Credit Mid America’s Chris Coffey about focusing on risk in a crop insurance plan.
For more financial tips, insights and perspectives from Farm Credit Mid-America visit e-farmcredit.com/insights