New Insurance Yield Option Attractive

 

A new yield election option available on crop insurance for the 2012 crop year should be attractive to most Midwestern corn [2] and soybean [3] producers, especially those with long production histories.

Starting in 2012, producers in 14 Midwestern states can opt to use a trend-adjusted actual production history (TA-APH) when they buy crop insurance as opposed to the traditional APH.

The TA-APH yield endorsement allows most producers to increase the yields used in calculating their crop insurance guarantees. That’s because for crops with a trend of rising yields over time, the APH yield will be lower than the actual expected (trend-line) yield for the next crop year. The lower yield results in a lower insurance guarantee. The TA-APH yield solves this problem by allowing for a trend adjustment to the APH yield.

The Risk Management Agency [4] (RMA) has assigned each county and crop a TA-APH trend rate based on National Agricultural Statistical Service county yields, with controls for weather and spatial considerations. Each insured farm unit in a given county will use the same TA-APH rate. The TA-APH endorsement will be made on a crop/county basis, so a producer could choose to use it for corn and not use it for soybeans.

To be eligible to use the TA-APH yield, a producer must be located in a county where the RMA offers the TA-APH endorsement and must have at least one actual yield in the last four years. An actual yield is based on yields from a farm, not simply transitional yield, which is an estimated value.

In order to receive the full trend adjustment, a producer must have four or more yields in the past 12 years. A producer with three yields in 12 years would receive 75% of the trend adjustment, while two yields in 12 years would result in a 50% adjustment and one yield in 12 years would mean a 25% adjustment.

Producers must decide to use the TA-APH endorsement by the sales closing date, which is March 15 across most of the Midwest.

 

 

Editor’s note: Richard Brock, Corn & Soybean Digest's marketing editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.