Crop Insurance Updates for 2012

1. Crop Insurance Updates for 2012 First LeRoy Agency

2. Midwest Corn & Soybean Insurance Coverage by plan in 2011 Revenue Protection = 88.5% of Insured Acres Corn Soybeans Source: USDA isk Management Agency, September 2011

3. Level of Coverage Comparison - 2011 Acres 33.20% 32.93% 28.73% 27.50% 16.66% 15.23% 12.04% 11.09% 7.70% 7.28% 2.03% 2.12% 0.99% 0.86% 0.61% 0.60% 0.22% 0.21% Source: USDA Risk Management Agency, October 2011

4. Causes of Crop Insurance Losses 2001-2010 (Midwest)

5. APH (proven) yields can be adjusted for yield trends. • Acres emerging from CRP or being newly broken have new handling procedures. • Premiums may be lower. • Biotech Endorsement discount has been discontinued. • Reporting and billing dates have changed. • Some provisions for Prevented Planting have changed What’s New for 2012

6. APH Yield Trend Adjustment • Actual Production History (APH) yields have been a simple average of yields for the past 4 to 10 years. • Seed companies claim that yield potential will increase an average of 2 bushel per year due to improved genetics. • Farms with longer yield histories were at a disadvantage • The average yield potential exceeds the ability of a 10 year APH to provide a realistic bushel guarantee.

7. Average Yield TrendReported by Iowa State University

8. Trend Adjusted APH Yields • Beginning in 2012 a yield trend adjustment is available as an option to purchase more coverage at a premium rate determined by your APH. • Optional – must be elected by Sales Closing Date (March 15th) – elected on a crop/county basis • Continuous election that remain in effect cancelled • Available on all plans except CAT • Approved for most of Corn Belt, including all of our local counties

9. Trend Adjusted APH Yields For corn grain and conventional soybeans – no specialty types. Trend factor is established for each county, based on historical county yields from 35 years of data Separate factors for corn and soybeans The annual factor is added to producers’ actual yield history

10. Example • Farm has 10 years of yield history for corn • County trend adjustment factor is 2.0 bu/yr

12. APH Yield Trend Adjustment

13. Trend Adjustment Factors For Local Counties Fillmore Co. MN – 2.27 corn/ .57 sbeans Mower Co. MN – 2.31 corn/ .53 sbeans Mitchell Co. Iowa - 2.18 corn / .53 sbeans Howard Co Iowa - 2.31 corn / .58 sbeans

14. APH Yield Trend Adjustment • Must have reported production in 1 of the most recent 4 years for unit to be eligible. • Trend factor is reduced 25% for each year that fewer than 4 actual yields are available. (applied per unit) • Example: • 3 years, adjustment factor = 1.5 bu/year (75% of trend) • 2 years, adjustment factor = 1.0 bu/year (50% of trend) • 1 year, adjustment factor = 0.5 bu/year (25% of trend)

15. APH Yield Trend Adjustment • Maximum adjusted yield is the highest actual yield plus the adjustment factor. • Example: 197 bu/acre is highest yield submitted in the last 10 years • Maximum adjusted yield = 197 bu. + 2 bu. = 199 bu./ac (higher than 174, no effect) • Applies only when yield history has been very consistent over time

16. Implication: more bushels guaranteed • Before: • APH = 163 bu/acre • 80% guaranteed on 100 acres = 13,040 bu. • After: • APH = 174 bu/acre • 80% guarantee on 100 acres = 13,920 bu.

17. Acreage Emerging From CRP& New Breaking Acreage Separate procedures established for ground coming out of CRP and for newly broken ground Separate requirements for Initial Year, and Subsequent Years Written agreement may be needed Prevented Planting coverage NOT available

18. Acreage Emerging from CRP • Acreage emerging from CRP within the 2 most recent crop years is insurable under policy terms • Acreage not planted within 2 years of emergence from CRP requires written agreement for coverage

19. Acreage Emerging from CRPEstablishing an APH Database • Initial Year – • Can use APH history from years prior to CRP enrollment from acceptable production report, or • Producer uses county T-yield average in initial year of planting after emergence from CRP • Subsequent Years • Initial year APH combined with existing database (simple average) • If different crop planted, use producers simple average

20. New Breaking Acreage • Are any acres that have not been planted & harvested, or have not been insured, in at least one of the last 3 crop years. • Are any acres where the only crop harvested in one of the 3 previous crop years was a cover, hay or forage crop. • May require a written agreement • Must keep a separate APH database the first year it is planted to a crop. (unless new break is less than 5% of insured acres in the unit) • Simple average APH does not apply

21. Acreage Emerging From CRP& New Breaking Acreage Please contact us as soon as possible if: • You believe you may be adding any ground that is emerging from CRP • Are considering breaking any new ground • Are considering breaking prior forage ground

22. Premium Rates to be Lowered • Loss ratios in Midwest have rarely exceeded 100% in recent years • Improved technology, weather • Average rates will be reduced: • 7% for corn • 9% for soybeans • Will vary by county

23. Biotech Endorsement (BE) • Premium discount for planting selected hybrids with risk reducing traits. • Pilot project for 2008 through 2011. • Discontinued as of 2012. • Eligible hybrids are in wide use.

24. Dates Changed • Acreage reporting date: • From June 30 to July 15 • Premium billing date • From October 1 to August 15

25. Prevented Planting Changes • The ground must be physically available for planting. • A crop must have been grown on the acreage at least one of the previous 4 years. • Not available on initial year for newly broken ground or ground emerging from CRP

26. Key Points for 2012 • Yield trend adjustment is available. • Contact us if you have acres coming out of CRP or being newly broken.. • Premium rates may be lower. • Biotech endorsement is discontinued • Reporting and billing dates are changed. • Prevented Planting acres must be ‘physically available for planting’