Developers of new biotech applications and users of those applications continue to look for ways to gain benefits from the products throughout the supply chain. In September of 2007 the Board of Directors of the Federal Crop Insurance Corporation of USDA approved a four-state pilot program for a Biotech Yield Endorsement (BYE) for crop insurance for corn. Monsanto Corporation and Western Agricultural Insurance Company developed the concepts for the program, but any approved insurance provider can offer the discounted premium rate to a corn producer meeting the eligibility criteria.

“”In early January 2008 the Risk Management Agency (RMA) of USDA released information and instructions to approved insurance providers for the 2008-2011 crop years. The BYE will be available in all counties in Illinois, Indiana, Iowa, and Minnesota where corn coverage is offered. According to estimates from the National Agricultural Statistics Service (NASS) of USDA, these four states had 41.1 million acres of corn for grain in 2007, 47.5 percent of the U.S. total, and produced 6.8 billion bushels of corn, 51.8 percent of the national total. The yield endorsement is only on non-irrigated corn which may explains why Nebraska, the number three state in corn acres and production and with substantial amounts of irrigated land, was not included in the pilot program.

For the 2008 crop the BYE will offer an insurance premium rate reduction for producers who plant corn for grain containing three specific biotech traits from Monsanto – YieldGard¨ Corn Borer, YieldGard¨ Rootworm and Roundup Ready¨ Corn 2, which are marketed under the trade names of ÒYieldGard¨ Plus with Roundup Ready¨ Corn 2Ó and ÒYieldGard VT Triple.Ó The RMA website reports that over 250 companies currently license MonsantoÕs triple-stack technology. Biotech varieties from other companies are expected to be added for the 2009 crop if the 2008 experience is positive. According to NASS estimates, corn producers in the four pilot states planted stack-gene varieties (double and tripled stack) from all suppliers on 14.9 million acres in 2007, more than double the 6.1 million acres planted in 2006. Early reports on seed corn sales for the 2008 crop indicate that plantings of triple-stack varieties will increase again.

To qualify for the BYE corn producers must purchase a crop insurance policy based on actual planting history, revenue assurance or crop revenue coverage at higher than the minimal level of insurance protection. At least 75 percent of the non-irrigated corn planted for grain in an insurance coverage unit must be planted with a qualifying corn hybrid. Corn producers must also meet the Environmental Protection Agency refuge acreage requirements. The insurance companies have not released the actual reductions in premiums for the BYE, but estimates by RMA last fall showed that coverage of 70-75 percent for an actual production history insurance plan (which only covers yield risk) would have a premium reduction of 20 percent. The average reduction in premiums across all qualifying corn plans in the four-state pilot is expected to be about 13 percent.

The BYE appears to be a product that fits well with the current marketplace. Plantings of stacked varieties of corn have increased rapidly over the past two years, and producers are expected to increase plantings again in 2008. Monsanto submitted three years of data to support the yield benefits of their triple-stack varieties. Anecdotal reports from corn farmers also indicate that yields are holding up well under pest and weather stresses. Seed companies are devoting more of their best varieties to the triple-stack technology. Corn producers can save money on crop insurance at a time when rapidly escalating production costs make risk management even more important over the next few years.

The story does not end there. The crop insurance cost reductions come with a compliance verification requirement. The RMA Pilot Biotech Yield Endorsement Insurance Standards Handbook 2008 and Succeeding Years includes a section on spot-checks to test plants for the presence of the required traits and to verify the BYE Seed Dealer Certification Statement, including that the amount of qualifying hybrid seed obtained is adequate to meet the planting requirements. Spot-check are required for:

  • All policies with loss claims in excess of $100,000;
  • 3 percent of all policies with a total liability for all insured corn under the policy of less than $500,000; and
  • 5 percent of all policies with a total liability for all insured corn under the policy of $500,000 or more.
  • The spot-check program includes a procedure for taking tissue samples and sending them to approved laboratories to test for the presence of the biotech genes. The corn producer is required to provide locations for all fields of biotech corn and a copy of the insuredÕs BYE Seed Dealer Certification Statement and associated seed purchase and return invoices.

    The BYE program is another step along the path to more integrated agricultural supply chains. Farmers are increasingly holding suppliers accountable and being held accountable by others in the chain. To encourage use of new technology the benefits need to flow up and down the supply chain to risk-taking decision makers. Other similar products may be developed. Drought-tolerant corn varieties that limit yield losses are in the pipelines at seed companies. Benefits beyond crop insurance savings may develop. Varieties of corn that require lower applications of commercial nitrogen fertilizer to achieve optimum yields are also being developed and may be helpful in meeting or avoiding future environmental regulations. Biotech crop varieties are improving producer returns beyond just higher yields and lower pesticide costs.