DES MOINES, IA. August 24, 2012 - Drought-stricken growers who lost most of their crops may decide not to harvest this year, but those who have crop insurance and still want to salvage whatever they can need to follow strict rules and understand their options.
The payoff for harvesting a poor crop, instead of having it appraised, may not just be the bushels recovered, points out Steve Griffin, a crop insurance consultant and principal at CVision Corporation.
By USDA Risk Management Agency loss procedures, crop insurance covers (indemnifies) harvested production differently than appraised (unharvested) production, says Griffin. As of August 20, 2012, the Federal Crop Insurance Corporation (FCIC) has paid $1,056,444,791 in indemnities with almost half of that being paid to wheat growers ($465,410,613).
“The crop insurance payout for a 10 bushel per acre (production to count) appraisal may be significantly different than the "final production to count" for a harvested crop that yields 10 bushels per acre. The harvested production that might appraise at 10 bushels per acre could be reduced to as much as zero due to quality and marketability issues that appraised production is not eligible to receive,” Griffin explains.
For example, harvesting a low yielding field of poor quality corn, due to uneven kernel size, unrecoverable cobs, mold/fungus, etc. may be discouraging, but the alternative 10 bushel appraisal may be cut in half with quality adjustment. At a $8 harvest price for corn, a 50 percent reduction in production to count is an extra $40 an acre (5 bu. x $80) in indemnity on the harvested entire unit. However, if an appraisal produces a zero or near zero production to count then the advantage of further quality adjustment is limited.
Griffin says, “the good news is a farmer can have his fields appraised by a crop insurance adjuster and, after reviewing the appraisal, decide whether to accept the appraisal or go to harvest. But no matter what you decide, notify your crop insurance agent and get permission in writing.
“If you want to convert or destroy the crop, your crop insurance company will direct you to leave a representative sample area (RSA), an untouched strip at least 10 feet wide, running the entire length of the field at least 20 feet from the edge of the field. For each 40 acres above the first ten acres, another RSA is required. Destroying the insured crop without notice and supervision can result in a denial of a payable loss. Leaving a few rows on the edge or in the corner of a field will not suffice and create a problem in providing an expected indemnity.”
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