New APH Option for 2012 Crop Insurance

 

Beginning with the 2012 crop year, producers purchasing federal crop insurance for corn [2] and soybeans [3] will have the option to use the trend-adjusted actual production history (TA-APH) yield endorsement on their crop insurance policies, rather than the standard APH. The TA-APH option is available on a county basis in 14 states – including Minnesota, Iowa, Wisconsin, North and South Dakota – including most major corn- and soybean-producing counties in the region. In total, approximately 820 counties are eligible for the TA-APH endorsement for corn, and 880 counties are eligible for the option with soybeans. The TA-APH will likely be quite attractive to many Midwest corn and soybean producers. The decision regarding the TA-APH endorsement must be made by the 2012 crop insurance enrollment deadline for corn and soybeans in the Upper Midwest, which is March 15, 2012.

The APH yields have been used for many years to determine crop insurance guarantees for both yield protection (YP) and revenue protection (RP) policies. The APH yield is determined by a minimum of four years, and up to a maximum of 10 years, of actual yield history on a crop insurance unit. If there are more than 10 years of yield history, the most recent 10 years are used to determine the APH. If there are less than four years of APH yields, then pre-set T-yields are used until there is a four-year history.

For many years, corn and soybean producers in high-production areas have felt that the 10-year average APH yields used for crop insurance guarantees were not reflective of current yield potential that exists due to enhanced seed genetics and improved production practices. Producers also felt there was sometimes a yield penalty on farm units with a longer yield history, due to more recent yield increases. The TA-APH being introduced by the Federal Crop Insurance Corporation (FCIC) should help improve these issues on corn and soybean crop insurance policies for the coming crop year.

The TA-APH yield adjustment factors are made on a county basis, based on historical annual increases in county-average corn and soybean yields, as calculated by the National Agricultural Statistics Service [4] (NASS). Most counties in south-central and southwestern Minnesota have a TA-APH yield adjustment factor of 2.2-2.5 bu./acre for corn, and 0.35-0.50 bu./acre for soybeans. Producers should check with their crop insurance agent for the TA-APH yield adjustment factors in their county. A producer’s actual APH yields (four to 10 years) for each year are then used with the county TA-APH adjustment factors to arrive at a final TA-APH yield.

The TA-APH yield adjustment factor is added for each year of production history, up to a maximum of 10 years. For example, if the yield adjustment factor for corn is 2.5 bu., then 2.5 bu. is added for the most recent year (2011), 5.0 bu. is added for the preceding year (2010), and 7.5 bushels per acre for the year before that (2009), etc. The maximum yield adjustment for year 10 (2002) would be 25 bu./acre (2.5 bu./acre x 10 years). The TA-APH yield does have a yearly maximum, or cap, for any given year during the four to 10 years that are used to calculate the final TA-APH. The yield cap for any year is the highest reported yearly yield during the four to 10 years plus the yield adjustment factor. For example, if the highest reported corn yield on a farm unit was 190 bu./acre, and the yield adjustment factor was 2.5 bu., the cap yield for any year, after adjustments, would be 192.5 bu./acre.

How to use TA-APH

The TA-APH yield endorsement is available for both YP and RP policies for corn and soybeans in 2012 at all coverage levels, except the catastrophic level (CAT) of 50%. Group crop insurance policies, such as GRIP or GRP, already use TA-APH yields for policy guarantees. The decision to use the TA-APH yield endorsement is crop specific, and is on a county basis, which means a producer could choose to use TA-APH for corn and not for soybeans, or they could use TA-APH in one county, but not in another.

A producer must have at least one actual reported yield for a crop from a farm unit in the past four years for that crop and farm unit to be eligible for the TA-APH endorsement, which must be an actual yield, and not a T-yield that was used. There must be a minimum of four reported annual yields in past 12 years for a crop insurance farm unit to be eligible for the full TA-APH yield adjustment; otherwise reduction factors will be used that reduce the TA-AHP yield adjustment.

For producers with four or more years of actual production history for corn and soybeans on a farm unit, which has shown increasing yields over that period, there should be a noticeable yield increase with the TA-APH yield endorsement. The yield improvement will vary depending on the actual yield history on the farm unit, the number of years of production history, and the County yield adjustment factor.

The TA-AHP yield endorsement looks to be an attractive option for many producers on their 2012 crop insurance policies. The combination of the TA-APH endorsement along with the reductions in crop insurance premiums at comparable coverage levels for most producers will allow many farmers to enhance their crop insurance revenue guarantees for corn and soybeans in 2012. This should allow crop producers to be more aggressive in forward pricing a higher percentage of their anticipated 2012 corn and soybean production during these times of highly volatile market prices. Farmers are encouraged to contact their crop insurance agent well ahead of the March 15 deadline for 2012 crop insurance enrollment to find out more details about the TA-APH yield endorsement.

 

Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at [email protected]