CRI Trumps APH
Crop insurance has been available to farmers for many years. Until recent years most of this insurance was based upon Actual Production History (APH). Insurance products based upon Crop Revenue Insurance (CRI) have been introduced to enhance and/or replace APH.
Marcia Taylor of DTN/Progressive farmer had a good blog on how one farmer in Ohio is utilizing Crop Revenue Insurance as part of his risk management strategy. One interesting paragraph stated that on a nationwide basis, CRI is now insuring about $33 billion of potential corn losses versus $4.3 billion for APH. If total corn production is 12 billion bushels at an average of $3.50 per bushel, approximately 89% of the total US corn production is covered by crop insurance.
There are many reasons for this. I think the primary reason is that CRI allows the farmer to lock in a guaranteed revenue level per acre on a much more consistent and predicable basis than APH. The Iowa State University has several Ag Decision Maker articles on how all of these programs work.
I think that all farmers should carefully review these available crop insurance options and work with your financial advisor, banker and insurance agent to determine which is best for you. At a minimum , you should make sure to lock in your input costs . Also, most bankers are going to require this to obtain an operating loan or renew one.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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