New crop insurance price election for sorghum

Grain farmers can now make planting decisions based on the potential of a crop to perform well under certain conditions instead of which one rates the best insurance coverage.

That’s good news for sorghum, according to a report from the National Sorghum Producers (NSP) in Lubbock, Texas.

“New price elections from the Risk Management Agency (RMA) allow farmers to choose the best crop and the best insurance product for an operation,” said Gerald Simonsen, NSP chairman of the board, in response to RMA’s new methodology that sets sorghum insurance price elections at 97.8 percent of corn. That’s up from 88 percent in previous years and could mean between $20 to $50 per acre in increased insurance coverage for sorghum producers, depending on individual yields and coverage levels.

The new crop insurance price election will be in effect for the 2010 crop year.

Simonsen said the old formula used to set insurance rates for sorghum was based on 20-year averages and did not reflect new technology and production practices that have raised sorghum yields significantly. The old formula considered the price of corn, an average from the Board of Trade, and then figured in 20 years of data to come up with a number for sorghum.

“That formula did not consider the changes in production that make sorghum yield potential equal to or, in some cases, better than corn,” he said. “The new formula considers 10 years of data. That means 50 cents a bushel for grain sorghum will be my minimum guarantee. That’s a big improvement,” said Simonsen, who farms in southern Nebraska.

He said in the past some farmers would have preferred to plant sorghum and could show a better yield potential on some fields than they could expect from corn or another crop. In some cases, Simonsen said, bankers would look at the figures, then look at the insurance coverage and tell farmers to plant corn instead of grain sorghum.

He said the new formula allows growers to make decisions based on agronomic and other production factors instead of insurance availability.

“Planting based on available insurance coverage is like planning for failure,” he said.

He said NSP has had the attention of RMA for several years and have worked diligently to get the changes made. “But the wheels of government turn slowly,” he said. “Sometimes it’s hard to change from what they are used to.”

He said the cautious process may have been a good thing in the long run. “They didn’t fix one thing and screw up something else,” he said.

He credits Kansas Rep. Jerry Moran, a member of the House Agriculture Committee, for taking a lead in pushing the change through.

“We still have other issues,” Simonsen said. “Yield allowances in some areas don’t reflect the current situation. We’ve made a lot of improvements in sorghum, not as much as in other crops, but yields are much better.”

He said no-till production and better rotation practices, for instance, have increased potential for sorghum. “I never plant crops on a field two years in a row,” he said.

The new formula will be consistent across all crop insurance products. He said the change allows farmers the flexibility they need to make sound planting decisions and he likes to keep sorghum in the mix. “I’ve never lost a sorghum crop (in nearly 30 years farming on his own). I’ve made a few short crops, but I’ve never lost one.”

He says the new methodology “is by far one of the best things that could have happened for sorghum producers this year, and this is going to help sorghum producers manage risk."

NSP worked with Moran and others during the 2008 farm bill debate to develop a new insurance methodology for sorghum and then with RMA to refine the methodology.

“Our goal all these years was to get accurate numbers to work from and to provide sorghum growers with coverage just like any other producer would have for (other) crops,” said Chris Cogburn, NSP strategic business director. “We have devoted much time to this issue and it is great that the price elections are finally reflecting that effort.”

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TAGS: Corn
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