In August the Irish Farmers Journal attended the Pro Farmer Crop Tour in the US Midwest.

Each evening, farmers came to hear the estimated yield results in different states, where they could also meet with agricultural companies from building suppliers to plant nutrition and crop insurance.

RCIS (Rural Community Insurance Services) is one of the biggest providers of crop insurance in the US and was acquired by Zurich in 2016.

The company works across all 50 states and has 3,700 agents on the ground insuring 130 crops, ranging from corn, soybeans and wheat to oats, vegetables and cotton.

On the last stop of the Crop Tour in Rochester, Minnesota, we caught up with head of RCIS Dalynn Hoch to find out more about crop insurance and how it might fit into Irish tillage farms.

Dalynn has her own farm as well as heading up the insurance company and has taken part in the crop tour, sampling in the fields.

Public/private partnership

The first thing to note is that crop insurance is provided to farmers as part of a public private partnership with the government. Insurance is provided to crop farmers and ranchers across America.

“It’s an opportunity in the US created because of this private/public partnership with the government, where there is premium support for our farmers from the government, but it’s delivered through the private sector,” Dalynn explained.

Pricing

Pricing is decided by the government, so the private companies compete on service.

Farmers may decide to go with one company because they like the technology they use or the speed of reply, but the pricing is the same across companies for the government’s insurance.

“The pricing, because it’s a public-private partnership with the government, is set by the government and the premium support levels are set by the government, so we don’t compete on price. We compete on service to the end customer which is an excellent outcome for them.”

It should be noted that while not all farmers have crop insurance or have it at varying levels, almost all farmers need it.

Often, we picture crop insurance being used when huge hailstones hit crops or there are hurricanes or strong winds. Dalynn explained that crop insurance is not just important to have when a weather event hits.

Farmers have to have insurance in order to secure operating loans.

She added that farming is “capital intensive” from investing in crop inputs and machinery to land.

So, most farmers in the US have operating loans. The insurance protects incomes on family farms.

Each farm will have different levels of cover on their insurance so it is very hard to put a guide price on crop insurance. It could cost from $20/ac to $35/ac, but this comes with a huge warning of the variation between farms and policies.

Dalynn did note that crop insurance usually equates to about 2% of the cost of growing a crop. So, it is much lower than the cost of your seed, fertiliser or fungicides.

How does it work?

The first thing to say is that all farmers have to submit historical yield data and data at the start and end of the growing season on acreage and yields. You also need proof of yields like delivery dockets.

The first type of insurance is for yield. A farmer takes their five-year average yield and insures at that level. This average might be 150bu/ac from corn. If the yield comes in lower than this the crop insurance will cover the drop in yield.

Dalynn said this ensures a consistent level of incomes for farmers and their families.

However, the most popular type of insurance is a revenue and yield combination.

Farmers take the price in the springtime and can choose to recognise the price in the autumn. They can have a policy that allows them to take a higher price if the price increases or to maintain the spring price if the price has dropped. This gives growers the revenue per acre and the farmer can insure for it.

“It creates cover both for weather and economic conditions, which is quite unique and really important about the US programme,” Dalynn explained.

She added that farmers have risk here too. They have deductibles to take out of that income to pay for the insurance, so the higher you insure for the more it will cost.

Farmers can’t insure for yields that they won’t achieve either. The historical data submitted prevents this and government actuaries collect and use data to decide on yields and prices for every county in every state for the different crops.

You can insure your farm for 65-85% cover as part of the programme.

You can also take out private add-ons to insure for higher yields or for example you can insure just for hail damage or for replanting costs if needed. Dalynn said the add-ons are a small part of the business.

Would it work for Ireland?

Ireland has never had crop insurance of this type and definitely not in a public-private partnership. As weather and price become more volatile it could be an option to take extremes out of tillage farm incomes. When you look at the €30m being given in support to tillage, you’d wonder would something like this result in better use of that money. Weather extremes are less common in Ireland than in the US and in the US they get severe weather, compared to here. Would the insurance be worth it for the year that we need it? We are seeing more extremes in our weather. Examining crop insurance is one of the actions outlined for investigation in the Food Vision for Tillage Report.

You can listen to Dalynn on this week’s Tillage Podcast.