Insuring corn in South Dakota

Farm Forum

Crop insurance is an important component when managing production and yield risks. Corn, as the largest cash crop in South Dakota, is commonly covered by insurance. South Dakota producers insured a record 5.8 million acres of corn in 2012. The pre-harvest statewide level of liability coverage in 2012 was $3.1 billion on corn. That averages out to about $525 per insured acre in liability protection. Producers paid about $21.00 per acre in premiums for the coverage.

There are relatively small program changes for the coming year. The addition of specialty corn coverage (high amylase type and blue type) is new. There will also be higher premium rates on corn in South Dakota, presumably on the full cost. The effect will likely be mixed in with price level and volatility level changes. There is still some uncertainty at the national level on the insurance subsidy level. These changes, however, are not likely to affect the routine choices that corn producer must make related to choices of insurance policy type and coverage levels.

Available coverage

Information about crop insurance is commonly obtained from a crop insurance agent or the USDA- Risk Management Agency (RMA). Corn coverage details as discussed here are outlined in the “Common Crop Insurance Policy,” the “Coarse Grains Crop Provisions,” and the “Commodity Exchange Price Provisions,” or CEPP. Copies are available from crop insurance agents and on the RMA website ( The RMA also has a factsheet on corn for states in the Billings, MT regional office.

Standard coverage for corn for grain is available in eastern South Dakota counties. In other counties, coverage is only available for irrigated acres or for silage.

Several dates are critical to assure the proper coverage is chosen and in place when needed. For corn, the insurance must be purchased or changed by March 15 and the earliest planting date is April 10. The final planting dates, necessary for full coverage, vary slightly. For silage the final date is May 31 regardless of the county or irrigation practice. Corn for grain has a final planting date on irrigated and non-irrigated ground of May 25; except for counties in the southeast where it is May 31 (Fig. 1). After the final planting date, there is a 25-day late planting period with reduced coverage levels. In the event of a loss, producers typically have 72 hours to notify their insurance agent of a potential claim. The latest the coverage lasts is December 10.

There is substantial variability in how much coverage is available across counties. Specific to corn for grain counties the highest transition or “T” yield is in Moody County at 156 bushels per acre. The “T” yields generally decline out to Campbell County at 81 bushels per acre and to Todd County at 35 bushels per acre.

Policy dates match up fairly well with South Dakota cropping and marketing patterns as reported by the National Agricultural Statistics Service (NASS). The range of common planting dates for corn is from April 30 through June 20. The range of common harvest dates is from September 30 through November 20. Historically, the percentage of corn marketed peaks after harvest, commonly in November. Additional higher monthly marketings are also common in January.

Policy types and coverage levels

The main policy types are: Revenue Protection (RP), Yield Protection (YP), Revenue Protection with the Harvest Price Exclusion (RP-HPE), and Catastrophic Risk Protection (CAT). Revenue insurance products have dominated the coverage type choice for corn in recent years. Statewide, 92% of insured corn acres in 2012 were covered by RP. Another 5% of acres were covered by YP. The remaining acres were covered by RP-HPE and CAT.

Some details are presented here and additional details can be found in Diersen (2012). With RP, there is a fixed guarantee level and either lower yields and/or lower prices may trigger an indemnity payment. RP is designed to cover price increases and is ideal when producers forward price. With YP, a producer receives an indemnity payment at the fixed per bushel price if the resulting yield falls below the yield coverage level. RP-HPE is limited to downside revenue protection at a slightly higher cost than YP. RP-HPE costs less than RP and may be preferred if little forward pricing is expected.

Once a policy type has been selected, the coverage levels need to be chosen. With RP and RP-HPE there is no price election option; one must use 100% of the projected price. For YP, a producer can select less than 100% of the projected price. To minimize the insurance premium, a producer could use a price election that closely aligns the insured price with the expected cash price. For example, if expected basis implies a cash price below an RMA projected price, a price election of less than 100% may match well and reduce the cost