BENEFITS OF CROP INSURANCE
RMA’s crop insurance program is designed to:
- help producers when they need it the most;
- provide a safety net compatible with international trade commitments;
- create products and services that are market driven;
- harness the strengths of both the public and private sectors;
- reflect the diversity of the farm sector in its outreach activities and programs;
- provide grower with peace of mind;
- allow producer to market more bushels;
- help producer secure loans;
- help producer with cash flow;
- help producer with financial planning;
- allow producer to plan for the next generation;
- provide a safety net for entire ag sector and our food supply;
- and many more…
People will ask sometimes why they need crop insurance. “I use puts and calls for my risk management.” Well, puts and calls and other futures and options strategies help on some of the various price risks, but do not protect against yield shortfalls. Many wrongly assume that if their yields are affected, so will the market prices. This is often true if the loss is widespread, however as we enter deeper into a complex global market our commodity prices become less and less predictable.
Lenders Preferred Source of Capital
For years many ag lenders have discovered that federal crop insurance provides an excellent source of collateral. This is true as long as the insured and lender understand the features of each unique product, and apply the product and coverage levels that are appropriate for your situation. We can explain the various features and comparisons of each plan that may be right for you.
Taking Advantage of Marketing Opportunities
I have spoken to producers who farm a large number of acres, and commit thousands of bushels each year through futures contracts or forward contracts at the elevator. If you are doing this and not buying crop insurance, you are actually increasing your risk should you have a production shortage. Several producers left a large amount of profit margin on the table as they either did not have crop insurance or did not understand how their crop insurance works for them. You do not have to be a “marketing expert” to lock in acceptable prices with a simple forward contract shored up with the right crop insurance policy.
Harness More Cash Flow
One thing for sure in farming is that the bills keep coming to your mailbox. What about the dollar bills? With increasing crop inputs, the financial risk is also increasing. Crop insurance can give you confidence that you are going to be able to pay your bills in a timely fashion should you suffer a production shortage.