“Because all these minimum prices (under the program) were so high in ’08, almost regardless of yield there was a crop insurance claim on virtually every single farm in the northern half of the U. S.”
– MIKE KRUEGER
As Mike Krueger explained the Crop Revenue Insurance program to which farmers have access in the United States, older Canadian farmers in the audience likely thought it sounds a lot like GRIP (Gross Revenue Insurance Program), which Manitoba discontinued in 1995, partly because it didn’t fit with World Trade Organization rules.
The U. S. program guarantees farmers a gross return per acre based on their rolling five-year average yield, multiplied by a price assigned to the crop being covered. Farmers lock in coverage at 60, 70, 80 or 85 per cent of gross revenue per acre being insured.
The higher the coverage, the higher the premium the farmer pays, although Krueger said half to 70 per cent of the program’s cost is subsidized by government.
“So it’s a good deal for our producers, a really good deal, especially the last two years when we had high prices,” the North Dakota consultant told farmers attending the Manitoba Special Crops Symposium earlier this month in Winnipeg.
Prices for major spring crops in the U. S. program are based on the coming fall’s futures prices and set in February, but if prices are higher in the fall, farmers can select them for the coverage calculation.
And if the farmer can sell a crop for a price higher than guaranteed under the program, he or she keeps the difference in revenue.
“This payment has absolutely nothing to do with how I market my crop,” Krueger said.
“Because all these minimum prices (under the program) were so high in ’08, almost regardless of yield there was a crop insurance claim on virtually every single farm in the northern half of the U. S. They will be adjusting crops from now until next spring.”
The program does influence what farmers seed, Krueger said. A year ago the minimum insurance price for spring wheat was US$11.11 a bushel . Assuming an average yield of 40 bushels an acre and 70 per cent coverage, the farmer was guaranteed at least US$311.08 per acre.
GRIP, a federal-provincial program offered to Manitoba farmers starting in 1991, ended in 1995 partly because it was seen as influencing farmers’ seeding decisions and deemed “market-distorting.”
Though GRIP had its critics, many farmers welcomed a chance to lock in a guaranteed gross return.
“The predictability GRIP provides hasn’t been available at any price,” McAuleyarea farmer Owen McAuley said in an interview in 1991. “Farmers with GRIP slept a lot easier when the snow and frost hit parts of Manitoba in September.”
The potentially high cost to the provincial government was probably the biggest reason GRIP was canned, even though the Manitoba government was responsible for just 25 per cent of the funding, with the federal government contributing 35 per cent and farmers covering the remaining 40 per cent.
The fact that Ottawa cut farm support by $200 million at the same time was another nail in GRIP’s coffin. There was only enough federal money to sustain NISA (Net Income Stabilization Account) and crop insurance.
In 1996, not a year after GRIP’s demise, Les Jacobson, then the president of the Keystone Agricultural Producers, predicted “we’ll rue the day we lost GRIP.”