2024 Crop Insurance Payments Likely In The Upper Midwest

It is likely that a significant number of corn and soybean producers in many areas of the Upper Midwest may qualify for crop insurance indemnity payments in 2024. Several portions of the region dealt with excessive rainfall during June that caused flooded fields, considerable drown-out damage to crops, and generally poor growing conditions for corn and soybeans early in the growing season. There were also numerous severe storms in some locations throughout the summer months that also resulted in some crop damage later in the growing season. These weather issues will likely result in yield reductions on numerous farms across the region, which together with the price declines from the crop insurance base prices on March 1, increases the likelihood of 2024 crop insurance indemnity payments for many producers.
 
With Federal Crop Insurance, every year is different, and with the multiple options available to producers, there are many variable results from crop insurance coverage at harvest time. The 2024 crop year will be no different, with some producers choosing Yield Protection (YP) policies (yield only) versus Revenue Protection (RP) policies (yield and price), and producers having different levels of coverage on various crops. Producers also vary on having “optional units” versus “enterprise units” for their crop insurance coverage. In addition, some producers also have enhanced insurance coverage through private insurance companies, or through the “Supplemental Crop Option” (SCO) and Enhanced Coverage Option (ECO) policies that were available in 2024.
 
In the Midwest, most corn and soybean producers in recent years have tended to secure some level of revenue (RP) crop insurance coverage, rather than standard yield-only (YP) policies. Farm operators like the flexibility of the RP policies that provide insurance coverage for reduced yields, as well as in instances where the harvest price drops below initial base price. In 2024, crop insurance loss calculations for corn and soybeans with RP policies will likely function similarly due to the Chicago Board of Trade (CBOT) harvest price for corn and soybeans being below the 2024 crop insurance base prices, which were finalized on March 1.
 
The established base prices for 2024 YP and RP crop insurance policies were $4.66 per bushel for corn and $11.55 per bushel for soybeans. These base prices will be the payment rate for 2024 YP policies for corn and soybeans. These base prices will also likely serve as the final price to calculate revenue guarantees for determining potential RP crop insurance indemnity payments for corn and soybeans.
 
The final harvest price for RP policies with harvest price protection is based on the average CBOT December corn futures and CBOT November soybean futures during the month of October, with prices finalized on November 1, 2024. If the final harvest CBOT price for December corn futures or November soybean futures is higher than the established base prices, the harvest price would then be used to determine the RP insurance guarantees, which is not likely for either corn or soybeans in 2024. The harvest price is also used to calculate the value of the actual harvested bushels for all RP insurance policies. As of September 6, the crop insurance CBOT harvest price estimates were just over $4.00 per bushel for corn and just over $10.00 per bushel for soybeans.
 
Corn and soybean producers had the option of selecting crop insurance policies ranging from 60% to 85% coverage levels. The level of insurance coverage can result in some producers receiving crop insurance indemnity payments, while other producers receive no indemnity payments, even though both producers had the same adjusted APH yield and the same final yield. For example, at an adjusted APH corn yield of 200 bushels per acre, a producer with 85% RP coverage would have a yield guarantee of 170 bushel per acre, and a revenue guarantee of $792 per acre, while a producer with 75% coverage would have a yield guarantee of 150 bushels per acre, and a guarantee of $699 per acre. If the actual 2024 yield was 170 bushels per acre, with a $4.00 per bushel harvest price, the producer with 85% coverage would receive a gross indemnity payment of $112 per acre, while the producer with 75% coverage would receive an indemnity payment $19 per acre.
 
The likelihood of a lower crop insurance harvest price, based on the average CBOT December corn futures price during October, greatly increases the likelihood of crop insurance indemnity payments for Upper Midwest corn producers that have 80% and 85% RP insurance policies for 2024. Based on the current CBOT December corn price projection (near $4.00/bu.), indemnity payments for corn could begin at final yields that are very near the 2024 APH yields for farmers with 85% RP insurance policies. For example, with an 85% RP policy on corn with a 200 bushel per acre APH yield and a $4.00 per bushel harvest price, 2024 crop insurance indemnity payments would begin at a yield below 198 bushels per acre (very near the APH yield). If the harvest price increases to $4.30 per bushel, the payments would begin at a yield below 184 bushels per acre (92 percent of APH yield).
 
The situation for soybeans will likely be very similar to corn at current CBOT November soybean price estimates, with indemnity payments being initiated very close to APH yields with 85% RP insurance coverage. Based on current soybean harvest price estimate (near $10.00/bu.) and an APH yield of 60 bushels per acre, crop insurance indemnity payments would begin at just below 59 bushels per acre. However, there has been some strength in the soybean price in the past few weeks. If the average November futures price in October increases to $10.75 per bushel, the payments would begin at 55 bushels per acre (92% of APH yield).
 
A majority of Midwest corn and soybean producers utilize “enterprise units” for their crop insurance coverage, which combines all acres of a crop in a given county into one crop insurance unit. By comparison, “optional units” allow producers to insure crops separately in each township section. Premium rates are somewhat higher with optional units. Enterprise units work quite well with RP policies to protect against price drops during the growing season, and when a producer has most of their land in the same general area. Optional units are preferable when a producer has a variety of land that is spread across a wide area in a county, or when producers have individual farms that are highly susceptible to natural disasters, such as flooding, drought, etc.
 
For example …… assume that producers A and B both have 5 separate farms in the same county with an APH corn yield of 200 bushels per acre, and that the overall average 2024 corn yield on all farms was 186 bushels per acre. However, two of the farms were 210 bushels per acre each, and the other three farms were 170 bushels per acre each. Also assume a final corn harvest price of $4.30 per bushel. Producer A has an 85% RP policy with optional units and producer B has an 85% RP policy with enterprise units. Producer A, with the optional units, would receive no insurance payment on the two farms with the higher yield; however, he would receive an indemnity payment of $61 per acre on the three farms with the lower yield. Producer B, with the enterprise units, would receive no insurance payments on any farms, since that would be based on the overall average yield.
 
Producers that have crop revenue losses in 2024, which could result in potential crop insurance indemnity payments, should properly document the yield losses, regardless of their type or level of insurance coverage. A reputable crop insurance agent is the best source of information to make estimates for potential 2024 crop insurance indemnity payments, and to find out about documentation requirements for crop insurance losses. It is important for producers who are facing crop losses in 2024 to understand their crop insurance coverage and the calculations used to determine crop insurance indemnity payments.
 
Kent Thiesse has prepared an Information Sheet titled “2024 Crop Insurance Payment Potential”, which is available by contacting: [email protected].  The University of Illinois FarmDoc web site also contains some good crop insurance information and spreadsheets to estimate crop insurance payments. The FarmDoc web site is located at:  https://farmdoc.illinois.edu/crop-insurance
 
Note - For additional information contact Kent Thiesse, Farm Management Analyst, Green Solutions
Phone - (507) 381-7960; E-mail - [email protected]
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