Should you order the COMBO deal?

When you visit your crop insurance agent this winter, be prepared for a new lesson in lingo. USDA's Risk Management Agency has rolled several crop risk products into one overall policy, nicknamed "Combo" (for Common Crop Insurance Policy Basic Provisions). So, you'll need to learn to speak Combo-ese.

"The Combo role creates one insurance plan that replaces five similar plans, which greatly simplifies the insurance process for agents and promotes better understanding of options available for producers," said William J. Murphy, RMA administrator. "The Combo plan also reduces paperwork, since multiple, similar plans are rolled up into one insurance plan."

With Combo, you make choices within one of three versions of a single basic policy instead of taking out several different policies."Other than the language, though, not much has changed with the actual coverage," said Bryan Human, Gibson Insurance, Tipton, Mo. "Growers will find that the Combo policy offers the same yield and revenue protections as former products."

Premiums stay essentially the same for equivalent levels of risk protection, as does the USDA premium subsidy rate. Most of the premium goes to pay for yield protection.

The Combo package went into effect with the 2010 wheat crop, and there are some changes here. For one, the projected price for revenue protection options is the Chicago Board of Trade (CBOT) settlement for the month of September, rather than July. (Note: the projected price under Combo—for all crops—is the average CBOT settlement price, which has been the basis for crop revenue insurance for the past 10 years or longer.)

Insurance enrollment for 2011 spring-planted crops runs through March 15, 2011. Art Barnaby, Kansas State University ag economist, checks off the coverage changes and terminology shifts under the Combo plan.

Combo Yield Protection replaces actual production history (APH, alias Multi-Peril coverage). However, Combo still uses historical yields to set guarantees, and needs at least four years of history, up to an average of 10 years. There's one major change: The Combo yield protection contract uses the same price election as revenue protection contracts. Yield protection is the same for all three Combo options.

Combo Price Protection (with harvest price exclusion) replaces Revenue Assurance (RA) with no harvest price option and Income Protection (IP), at the same percentage levels as under the previous policies.

Combo Price Protection replaces Crop Revenue Coverage (CRC) and RA with the harvest price option. This choice uses the historical yield multiplied times either the base price or the harvest price, whichever is higher. Combo makes payments if revenue shortfall drops below the guarantee. However, RMA limits revenue policies to no more than twice the base price, should harvest price increase by more than that amount.

The harvest price endorsement, in effect, turns yield protection into yield replacement coverage. A grower who has forward-priced grain on forward contracts, hedges, put options, etc., will either be assured enough bushels or enough dollars to replace those guaranteed bushels at current market value, and therefore offset his forward-marketing position.

County yield-based group insurance, including GRP and GRIP, will still be available with no changes. The Combo rule does not replace or change these group-risk plans.

If you own an active crop insurance policy (or policies) and do not change or cancel your coverage by March 15, your 2010 coverage will automatically be rolled to a similar Combo product, as detailed above.
So, forget APH, CRC and Multi-Peril; they no longer exist. Combo is the new game in town where crop insurance is concerned.