I’ve been writing about crop insurance selection lately, thanks to a recent infatuation with the RMA Summary of Business dataset. This post extends that analysis, which covered both coverage selection and premiums per dollar of liability for Montana and Illinois counties, to U.S. states. I’ve also added crops other than wheat, to include corn and soybeans. The result that Montana farmers generally select lower coverage levels continues to hold when comparing not only to most midwestern states, but also to surrounding states in the northern great plains and pacific northwest.
The map above shows state averages of RP coverage levels and over all three crops, and just for the year 2020. In general, the upper Midwest chooses the highest levels of coverage. Click on the map to see the legend. (Or, darker = higher coverage levels.)
In last month’s post, I looked at one reason that might be the case—the relative prices of insurance, after taking into account what that insurance protects—in other words, the premium paid by producers per 100$ of liability. I use the producer-paid-premium, which takes into account government subsidies; it shows what producers actually pay in the end. Over the three crops, Montana does pay more per insured dollar than states to the west, but slightly less than other surrounding states. The upper Midwest states pay some of the lowest rates, on average, per liability dollar. In general, states to the south pay more.
Breaking this down by crops, the results are largely similar for wheat and corn. Montana pays similarly to more compared to states to the west and less than other surrounding states. Soybeans are rare enough for Montana that the state-level averages do not make much sense to report. In general, midwestern states, but especially I-states and Ohio paid less than others.
As discussed previously, much of this may be because of the relative risk that shows up in the RMA’s lengthy dataset. Is it simply riskier to grow wheat in Montana than it is in the Midwest? That relative risk is likely at least playing something of a role. Montana has a number of severe droughts in its history and has relatively less irrigation.
Below, you’ll find average producer paid (incorporating subsidies) premiums per $100 of liabilities for wheat, corn, and soybeans.