by Patina Thompson
The month of May is a busy and dusty time across the Arizona countryside with farmers planting and irrigating cotton rows and corn fields. For those of you who elected the Enterprise Unit (EU) Structure available on cotton crops under the CRC Plan of insurance for the 2010 crop year, this is a reminder of the rules and fine print to ensure compliance.
As it pertains to crop insurance, a “unit” is the insured acreage of the crop in the county. Each crop policy guideline will define if a particular unit structuring is available for a crop plan. All unit structure types must be elected by the Sales Closing Date (SCD) for each crop, Arizona cotton’s SCD was 2/28/2010. There are four types of units: basic, optional, enterprise and whole-farm.
Basic units are determined first by crop, then by the insured’s share in the crop – taking into account any crop-share agreements present.
Optional units are a further division of basic units and separates the acreage of the insured crop that is located in separate, legally identifiable sections or separated by practice – irrigated, non-irrigated or organic.
Whole-farm units are only available for the RA plan of insurance and can apply to two or more insured crops planted in a county.
Enterprise units are in the spotlight for this discussion. Essentially, an EU is a single unit consisting of all the insured’s insurable crop acreage in the county – regardless of share, location, Farm Service Agency number or practice.
Most importantly, the EU must contain 50 or more acres and have two or more sections. At least two of the planted sections must each have planted acreage that constitutes the lesser of 20 acres or 20 percent of the total insured crop acreage.
The acreage that comprises the enterprise unit must also qualify for: 1) two or more basic units of the same insured crop in two or more separate sections OR 2) two or more optional units of the same insured crop established by separate sections.
So what are the benefits of the EU structuring you might ask? A reduced premium of up to 50%! A premium discount is offered because combining all the acreage of the crop into a single unit reduces the probability of a loss.
However, there is a hitch. If, at acreage reporting time, it’s determined your planting did not comply with the 50 acre minimum and two or more sections with lesser of 20 acres or 20 percent of total acre requirements, your structuring will revert to the Basic unit and your premium will change as well.
So be sure to read through the fine print of your crop policies during your afternoon “downtime” and follow the rules to reap the benefits of a profitable crop and a substantially lowered premium.
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