2016 crop insurance decisions webinar march 1, 2016 · 2016 crop insurance decisions webinar, march...

2016CropInsuranceDecisionsWebinarMarch1,2016

2016CropInsuranceDecisionsWebinar,March1,2016

Defini&onsØ BasicUnits

v Allownedandcashrentlandforonecropinonecountyisabasicunitv Eachsharerentlandownerarrangementisaseparatebasicunit

Ø Op&onalUnitsv Dividesbasicunitsbasedontownships

Ø EnterpriseUnitsv Combineallbasicunitsinonecountyforasinglecrop


Poten&alProductsYieldPolicies

§  AYP=areayieldprotecFon§  Insuresagainstcounty-wideproducFonloss(basedoncountyyield)§  PolicyprotecFon=dollaramountofprotecFonperacrexnetacres

§  70to90%coveragelevels

§  YP=yieldprotecFon§  InsuresagainstproducFonloss(basedonindividualfarmyield)

§  YieldprotecFonguarantee=APHapprovedyieldxcoveragelevelxprojectedprice



Poten&alProductsRevenuePolicies

§  ARP=AreaRevenueProtecFon§  Insuresagainstcounty-widerevenueloss(basedoncountyrevenue)§  PolicyprotecFon=countyyieldxcoveragelevelxgreaterofprojectedpriceorharvestprice

§  70to90%coveragelevels§  ARPwithHPE=AreaRevenuewithHarvestPriceExclusion

§  SameasARP,butdoesnotprotectagainstriseinpricelevel


Poten&alProductsRevenuePolicies•  RP=RevenueProtecFon•  Insuresagainstrevenuelossduetoincreaseordecreaseinprice,low

yield,orcombinaFonofthese(basedonindividualfarmrevenue)

•  RevenueprotecFonguarantee=APHapprovedyieldxcoveragelevelxgreaterofprojectedpriceorharvestprice


•  RP-HPE=RevenueProtecFonwithHarvestPriceExclusion

–  sameasRP,butdoesnotprotectagainstriseinpricelevel


DeterminingYieldforCropInsurance

•  Trend-AdjustedYieldEndorsement(TA)–  Allowsfarmerstoaddaspecifiedtrendfactortotheactualyield

•  YieldAdjustment(YA)–  Allows65%ofT-Yieldtoreplacetheactualyield

•  YieldExclusion(YE)–  AllowseligibleyearstobeexcludedfromAPHyieldcalculaFon


YieldExclusion

•  TheAPHYieldExclusionallowsyoutoexcludelowyieldsinexcepFonallybadyearsfromyourproducFonhistory

•  Eligiblewhenaverageyieldforthecountywasatleast50%belowthesimpleaveragefortheprevious10consecuFvecropyears

•  ImpactcanbesignificantinlocaFonswhereoneyear(suchas2012)wasverylow


DeterminingYieldforCropInsurance

•  Ifsufficientyielddataexists,thefollowingchoicesusuallyresultinthehighestAPH:

1.  UseofTrendAdjustment(TA)

2.  IfYieldExclusion(YE)isavailable,APHwithYEwilloXenincrease

3.  UseofYieldAdjustment(YA)whenactualyieldisbelowthesubsFtuteyieldandYEisnotavailableinyourcounty


ProjectedandHarvestPricesØ ProjectedPrice

v Basedonse[lementpricesforfuturescontractsduringFebruary

v 2014:Corn=$4.62andSoybeans=$11.36v 2015:Corn=$4.15andSoybeans=$9.73v 2016:Corn=$3.86(down7%)andSoybeans=$8.85(down9%)

Ø HarvestPricev Basedonse[lementpricesforfuturescontractsduringOctober

v 2014:Corn=$3.49andSoybeans=$9.65v 2015:Corn=$3.83andSoybeans=$8.91


CropInsuranceExampleWhiteCounty,IN


UniversityofIllinoisWebSite

•  FASTTools–farmdoc

– www.farmdoc.illinois.edu/fas[ools


$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

06 07 08 09 10 11 12 13 14 15 16

ProjectedandHarvestCornPrices,RevenueProtec&onProducts

ProjectedPrice HarvestPrice


$0$100$200$300$400$500$600$700$800$900

$1,000$1,100

06 07 08 09 10 11 12 13 14 15 16

RevenueProtec&onGuarantees,80%CoverageCorninWhiteCounty

RP-HPE RP


716

586

526491

764

625

561523

812

664

596556

$400

$500

$600

$700

$800

$900

13 14 15 16

RevenueProtec&onGuarantees,CorninWhiteCounty

RP-75% RP-80% RP-85%


8.28

13.81 14.89

4.176.77 7.64

40.45

18.45

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

RP-E RP-B RP-O YP-E YP-B YP-O ARP-90% AYP-90%

2016CropInsurancePremiums,VariousProductsCorninWhiteCounty

RPandYPProducts-80%CoverageLevel


0.83 1.38 2.314.02

5.78

8.58

13.81

21.43

$0

$5

$10

$15

$20

$25

$30

50% 55% 60% 65% 70% 75% 80% 85%

2016CropInsurancePremiums,RevenueProtec&onCoverageLevelsBasicUnits,CorninWhiteCounty


2016ExampleComputa&onsforWhiteCo.,IN

•  Thenextcoupleofslidesillustratecroprevenueandindemnitypaymentsforyieldlossesof15%,30%,and45%.Trendadjustedyieldis178bushelsperacre

•  Trendadjustedyieldswerebelow:§  151bu.peracre(15%yieldreducFon):10%oftheFme§  125bu.peracre(30%yieldreducFon):4%oftheFme

§  97bu.peracre(45%yieldreducFon):0%oftheFme


401

756

551

$0

$100

$200

$300

$400

$500

$600

$700

$800

VariableCostperAcre TotalCostperAcre RevenueGuarantee

ComparisonofProjectedRevenueandVariableandTotalCostperacreforCorninWhiteCo.IN,2016


Conclusions•  Costsin2016couldexceedrevenuesevenwithARC-COand

cropinsurance

•  Thisisnotayearinwhichcropinsurancecanbeusedtoassureaprofit

•  Butcropinsurancein2016canbeusedtolimitlossestomoremanageablelevels

2016 crop insurance decisions webinar march 1, 2016 · 2016 crop insurance decisions webinar, march...

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