The farming community in Michigan is starting the New Year feeling the long lasting effects of last year’s drought with very volatile commodity prices and uncertain conditions which may impact yields.

When developing a plan to manage the negative impacts of these risks, most farms will look to comprehensive crop insurance program to insure a reasonable level of farm income.

With the current high cost and high reward in today’s farming environment, farms need to evaluate just how much of a negative financial hit their farm can sustain. Farms now recognize that high input and land rental costs can put a farm into a serious cash flow crunch.

Not being able to have the cash to cover higher and higher land rental cost can push a farm out, resulting in the loss of production acres and impacting the farm’s cost of production. Fewer acres means higher fixed costs for the remaining production acres.

As a Michigan State University Extension farm management educator, I have worked with farms that are including crop insurance within their risk management plans. Many farms consider a good crop insurance program will provide them with the assurance to develop a commodity marketing plan. Taking advantage of pre-planting markets can provide the opportunity to lock in profitable commodity prices.

Spending some time with a good crop insurance professional can help you to understand the numerous options that the current crop insurance programs have to offer. Your farm’s production history and the record detail that you have kept can have a major impact on your farm’s total insurable value.

If you have participated in the past, your farm should have built a production record. Keeping good records of your farm’s production numbers can be very beneficial because your yields can be much higher than the county average yield which ends up being the default when there is a lack of production records history.

Crop production records by field can provide farms an opportunity to insure their crops by individual units, providing coverage more directly linked to the unit by unit production levels. Farms that use production units have a much higher record keeping requirements which could be a challenge for some farms. Having field by field records can often provide value. They give you the ability to protect multiple units if your farm has variable yields across its production base.

Farms may want to look to one of the online worksheets that are now available to evaluate how your farm production system would work with different crop insurance options.

The Crop Insurance Calculator for Corn and Soybeans allows you to enter your farm’s data and the program will generate projected values using historic values for Michigan and other Midwest states. This may not be the perfect system but can provide a farm with the ability to develop several what if scenarios using different insurance options and protection levels. Every farm has its own risk tolerance level but for the majority of farms, the use of some level of crop insurance is part of that plan.