Multi-Peril March Madness?
Tuesday, February 15, 2005
filed under: Marketing/Risk Management
March madness might not refer just to college hoops this year, it might be the best description of crop insurance for sunflower in 2005, unless changes in multi-peril price elections urged by the National Sunflower Association are put in place by the March 15 signup deadline.
The USDA’s Risk Management Agency announced that the price election will be $9.30/cwt for oil-type sunflower in 2005, and $11.10 for confections. This price election for oil sunflower would be a decrease of $3.30/cwt from last year’s level, and well short of the market price for old and new crop. The non-oil price election represents a decrease of $3.75/cwt from last year, and would be far short of confection market prices in the high teens.
Why such multi-peril price madness? According to John Sandbakken of the NSA, it is economists with the USDA’s Economic Research Service who establish price elections on crop insurance policies administered by the Risk Management Agency. Since there is no sunflower futures market, USDA economists use soybean oil values in calculating price elections for sunflower.
However, sunflower market prices have increasingly moved away from soy oil values in recent years. There is no longer a parallel price relationship, now that sunflower has turned from being mostly an export-dependent market to a domestic market. One need only look at the markets for evidence of this paradigm price shift. While soybean prices have been flat, sunflower prices have been booming. The fundamental shift in the independence of sunflower pricing from soybean oil is well documented in a recent publication by North Dakota State University economist George Flaskerud in the publication “Managing Sunflower Price Risk,” which can be found online at
http://www.ag.ndsu.nodak.edu/aginfo/cropmkt/cropmkt.htm
The NSA has been working within RMA and is working with Congressional lawmakers from sunflower-producing states to change sunflower price elections to better reflect actual market conditions. There is precedence for such a change: the RMA adjusted the price election for confection sunflower in February, 2000, after industry pressure about a price election for non-oil sunflower that was unrealistically low.
No one can predict whether political channels will prompt another price-election adjustment. Sandbakken advises sunflower growers to work with their crop insurance agents to stay on top of any changes, or to help analyze their best crop insurance options in the event sunflower price elections remain unchanged. The decision-making process for many will likely extend well into March, as growers and agents alike compare the coverage potential of multi-peril policies to that of Revenue Assurance.
RA coverage for sunflower was available in Colorado, Kansas, Minnesota, Montana, and the Dakotas last year. Previously, it was only available in North Dakota.
Unlike APH policy, RA coverage offers additional protection for price fluctuations during the crop year. RA provides dollar-denominated coverage by the producer selecting a dollar amount of target revenue, defined by a selected percentage within a certain range of expected revenue. The price guarantee is based on the average October futures soybean oil price traded at the Chicago Board of Trade during the month of February. This price won’t be known until March. But it is very unlikely that RA will work this year for sunflower producers. Again the formula for RA is based on a soybean oil priced formula. That will need to be changed as well for future years.
See more basic details on RA coverage online at www.sunflowernsa.com. Click on the “Sunflower Magazine” link, followed by “View Archives” then “Marketing/Risk Management.” See Jan 04 article “Insuring Sunflower in 2004.”
Sandbakken says RMA has updated T-yields in a number of sunflower-producing counties. The RMA uses the T (transitional) yield – the average county yield, established by the National Agricultural Statistics Service where data is available – as a check figure against farmers’ reported yields, and to help determine a production guarantee for land that doesn’t have production history. The T-yield can affect the rating of an insured, and can mean lower or higher premiums, depending on the insured’s actual production history (APH).
The NSA has been working with RMA on expanding eligible counties for crop insurance coverage, and has requested RMA to relax requirements for written agreements with farmers in non-eligible counties. These requests are pending at RMA, and producers interested in growing sunflower in a county where the crop is currently considered non-insurable should check with their local Farm Service Agency (FSA) office to see if they are eligible for assistance under the Non-insured Crop Disaster Assistance Program.
NAP covers the amount of loss greater than 50% of expected production, based on the approved yield and reported acreage. NAP does not offer the same type of coverage as multi-peril crop insurance, but does give producers some risk coverage at a reasonable cost in counties where coverage is not available. More details on NAP can be found online: http://disaster.fsa.usda.gov/nap.htm
Sunflower can follow soybeans
Keep in mind that beginning last year, federal crop insurance rules changed (in North Dakota, South Dakota, Minnesota, Kansas, Colorado, Nebraska, Montana, Missouri and Wyoming) to allow sunflower to be grown on fields planted to soybeans, dry peas and lentils the previous year. Thus, acreage planted to soybeans, dry peas and lentils in 2004 can be planted to sunflower in 2005 without affecting federal crop insurance coverage.
Rotation restrictions remain when the previous year’s crop is canola, crambe, dry beans, mustard, rapeseed or safflower. Sunflower planted on acreage where any of these crops were planted the previous year will not be eligible for federal crop insurance coverage.
Sandbakken reminds growers that Sclerotinia head rot is caused primarily by windborne ascospores. The biggest risk of Sclerotinia head rot in sunflower is when weather is conducive for the development and spread of these ascospores, which may be blown in and infect sunflower regardless of crop rotation.
According to the North Dakota State University Extension Service bulletin on Sclerotinia head rot in sunflower (posted online at http://www.ext.nodak.edu/extpubs/plntdise.htm – scroll down to ‘Sclerotinia Head Rot of Sunflower’) “Rotation is not as big a factor for reducing head rot as for reducing stalk rot. Spores that blow in from some distance can cause head rot on sunflower, even though it may be planted in a field with no broadleaf crop history at all. Rotation will not prevent head rot in sunflower but will be beneficial for other reasons.” NDSU still recommends a minimal crop rotation interval of three or four years from highly susceptible crops such as crambe, canola, and dry beans.
In the absence of weather conditions favorable for disease, there is no risk in sunflower yield or quality planted on the previous year’s soybean ground, says NDSU extension agronomist Duane Berglund. In fact, there may be an agronomic benefit. Weed pressure, including Canada thistle, should be greatly reduced following Roundup-Ready soybeans (or Roundup-Ready corn, for that matter). As well, Berglund says sunflower would also take advantage of a 40-lb/ac nitrogen credit following soybeans, peas, or lentils.
Quality coverage for Sclerotinia is again available for confection sunflower. Sclerotinia levels at 1.1% or higher in confection sunflower are eligible for quality adjustment. – Tracy Sayler