2016CropInsuranceDecisionsWebinarMarch1,2016
2016CropInsuranceDecisionsWebinar,March1,2016
Defini&onsØ BasicUnits
v Allownedandcashrentlandforonecropinonecountyisabasicunitv Eachsharerentlandownerarrangementisaseparatebasicunit
Ø Op&onalUnitsv Dividesbasicunitsbasedontownships
Ø EnterpriseUnitsv Combineallbasicunitsinonecountyforasinglecrop
2016CropInsuranceDecisionsWebinar,March1,2016
Poten&alProductsYieldPolicies
§ AYP=areayieldprotecFon§ Insuresagainstcounty-wideproducFonloss(basedoncountyyield)§ PolicyprotecFon=dollaramountofprotecFonperacrexnetacres
§ 70to90%coveragelevels
§ YP=yieldprotecFon§ InsuresagainstproducFonloss(basedonindividualfarmyield)
§ YieldprotecFonguarantee=APHapprovedyieldxcoveragelevelxprojectedprice
§ 50to85%coveragelevels
2016CropInsuranceDecisionsWebinar,March1,2016
Poten&alProductsRevenuePolicies
§ ARP=AreaRevenueProtecFon§ Insuresagainstcounty-widerevenueloss(basedoncountyrevenue)§ PolicyprotecFon=countyyieldxcoveragelevelxgreaterofprojectedpriceorharvestprice
§ 70to90%coveragelevels§ ARPwithHPE=AreaRevenuewithHarvestPriceExclusion
§ SameasARP,butdoesnotprotectagainstriseinpricelevel
2016CropInsuranceDecisionsWebinar,March1,2016
Poten&alProductsRevenuePolicies• RP=RevenueProtecFon• Insuresagainstrevenuelossduetoincreaseordecreaseinprice,low
yield,orcombinaFonofthese(basedonindividualfarmrevenue)
• RevenueprotecFonguarantee=APHapprovedyieldxcoveragelevelxgreaterofprojectedpriceorharvestprice
§ 50to85%coveragelevels
• RP-HPE=RevenueProtecFonwithHarvestPriceExclusion
– sameasRP,butdoesnotprotectagainstriseinpricelevel
2016CropInsuranceDecisionsWebinar,March1,2016
DeterminingYieldforCropInsurance
• Trend-AdjustedYieldEndorsement(TA)– Allowsfarmerstoaddaspecifiedtrendfactortotheactualyield
• YieldAdjustment(YA)– Allows65%ofT-Yieldtoreplacetheactualyield
• YieldExclusion(YE)– AllowseligibleyearstobeexcludedfromAPHyieldcalculaFon
2016CropInsuranceDecisionsWebinar,March1,2016
YieldExclusion
• TheAPHYieldExclusionallowsyoutoexcludelowyieldsinexcepFonallybadyearsfromyourproducFonhistory
• Eligiblewhenaverageyieldforthecountywasatleast50%belowthesimpleaveragefortheprevious10consecuFvecropyears
• ImpactcanbesignificantinlocaFonswhereoneyear(suchas2012)wasverylow
2016CropInsuranceDecisionsWebinar,March1,2016
DeterminingYieldforCropInsurance
• Ifsufficientyielddataexists,thefollowingchoicesusuallyresultinthehighestAPH:
1. UseofTrendAdjustment(TA)
2. IfYieldExclusion(YE)isavailable,APHwithYEwilloXenincrease
3. UseofYieldAdjustment(YA)whenactualyieldisbelowthesubsFtuteyieldandYEisnotavailableinyourcounty
2016CropInsuranceDecisionsWebinar,March1,2016
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
2016CropInsuranceDecisionsWebinar,March1,2016
CropInsuranceExampleWhiteCounty,IN
2016CropInsuranceDecisionsWebinar,March1,2016
UniversityofIllinoisWebSite
• FASTTools–farmdoc
– www.farmdoc.illinois.edu/fas[ools
2016CropInsuranceDecisionsWebinar,March1,2016
$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
2016CropInsuranceDecisionsWebinar,March1,2016
$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
2016CropInsuranceDecisionsWebinar,March1,2016
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%
2016CropInsuranceDecisionsWebinar,March1,2016
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
2016CropInsuranceDecisionsWebinar,March1,2016
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
2016CropInsuranceDecisionsWebinar,March1,2016
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
2016CropInsuranceDecisionsWebinar,March1,2016
401
756
551
$0
$100
$200
$300
$400
$500
$600
$700
$800
VariableCostperAcre TotalCostperAcre RevenueGuarantee
ComparisonofProjectedRevenueandVariableandTotalCostperacreforCorninWhiteCo.IN,2016
2016CropInsuranceDecisionsWebinar,March1,2016
Conclusions• Costsin2016couldexceedrevenuesevenwithARC-COand
cropinsurance
• Thisisnotayearinwhichcropinsurancecanbeusedtoassureaprofit
• Butcropinsurancein2016canbeusedtolimitlossestomoremanageablelevels