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A Farmer’s Guide to 2016 Crop Insurance Coverage Options


Risk management is important to the profitability—and sustainability—of farm operations. As you continue to make plans for your 2016 crop, use this guide, compiled with information provided by National Crop Insurance Services trade group, for a quick reference of major crop insurance plans. This resource, current as of Oct. 1, is an overview of available plans and corresponding terms and conditions, but it’s not all-inclusive. For example, see Jamie Wasemiller’s column about Whole-Farm Revenue Protection, one of the farm bill’s best-kept insurance secrets, in this issue. For complete descriptions of these plans and others, contact a local crop insurance company.

Yield Protection (YP)
YP provides protection against a loss in yield due to unavoidable, naturally-occurring events. For most crops, that includes adverse weather, fire, insects, plant disease, wildlife, earthquake and failure of the irrigation water supply due to a naturally-occurring event. Like the APH (Actual Production History) insurance plan, YP guarantees a production yield based on the insured’s actual production history. Unlike the APH insurance plan, a price for YP is established according to the crop’s applicable commodity board of trade/exchange as defined in the Commodity Exchange Price Provisions (CEPP). The projected price is used to determine the yield protection guarantee, premium, any replant payment or prevented planting payment and to value the production to count. The coverage and exclusions of YP are similar to those for the APH insurance plan. An indemnity is due when the value of the production to count is less than the yield protection guarantee. The main crops covered under this plan include barley, canola/rapeseed, corn, cotton, grain sorghum, rice, soybeans, sunflowers and wheat.

Revenue Protection (RP)
RP provides protection against a loss of revenue caused by price increase or decrease, low yields or a combination of both. (For corn silage and rapeseed, protection is only provided for production losses.) This coverage guarantees an amount based on the individual producer’s actual production history and the greater of the projected price or harvest price. The projected price and harvest price are established according to the crop’s applicable commodity board of trade/exchange as defined in the CEPP. While the revenue protection guarantee might increase, the premium will not. The projected price is used to calculate the premium and replant payment or prevented planting payment. An indemnity is due when the calculated revenue (production to count times harvest price) is less than the revenue protection guarantee for the crop acreage. Crops covered under this plan include barley, canola/rapeseed, corn, cotton, grain sorghum, rice, soybeans, sunflowers and wheat.

Revenue Protection with Harvest Price Exclusion (RPHPE)
RPHPE is similar to RP, but RPHPE coverage provides protection against loss of revenue caused by a price decrease, low yields or a combination of both. Unlike RP, the revenue protection guarantee for RPHPE is based on the projected price only, and it does not increase based on harvest price. Crops covered under this plan include barley, canola/rapeseed, corn, cotton, grain sorghum, rice, soybeans, sunflowers and wheat.

Area Yield Protection (AYP)
AYP coverage is based on county experience rather than individual farms. Maintaining the insured’s actual production history is now mandatory and might be used by USDA-Risk Management Agency (RMA) as a data source to establish and maintain the area programs. AYP indemnifies the insured in the event the final county yield falls below the insured’s trigger yield. The Federal Crop Insurance Corporation (FCIC) will issue the final county yield in the calendar year following the crop year insured. Since this plan is based on county yields, the insured might have a low yield on their farm and not receive payment under AYP.

Area Revenue Protection (ARP)
Like the other area plans, ARP is based on the experience of the county rather than individual farms. Coverage is provided against loss of revenue due to a county level production loss, a price decline or a combination of both. Upside harvest price protection is included, which increases the policy protection at the end of the insurance period if the harvest price is greater than the projected price and if there is a production loss. ARP will pay a loss when the final county revenue is less than the trigger revenue, which is calculated using the higher of the projected price or harvest price.

Area Revenue Protection with Harvest Price Exclusion (ARP-HPE)
Like AYP, ARP-HPE is based on the experience of the county rather than individual farms. Maintaining the insured’s actual production history is now mandatory and might be used by USDA-RMA as a data source to establish and maintain the area programs. An ARP-HPE policy provides protection against loss of revenue due to a county level production loss, price decline or a combination of both. This plan only uses the projected price and does not provide upside harvest price protection. An indemnity is due under ARP-HPE when the final county revenues published by FCIC are less than the trigger revenue. Since this plan is based on county revenue, the insured might have a loss in revenue on their farm and not receive payment under ARP-HPE.

Actual Production History (APH)
APH is the oldest insurance product listed in this comparison. The APH insurance plan provides protection against a loss in yield due to nearly all natural disasters. For most crops, that includes drought, excess moisture, cold and frost, wind, flood and unavoidable damage from insects and disease. Like YP, the APH plan guarantees a yield based on the individual producer’s actual production history. Unlike YP, the available price elections are established by USDA-RMA. An indemnity is due when the value of the production to count is less than the liability. Of the small grain crops, only oats, rye, flax and buckwheat are covered under the APH insurance plan for the 2015 crop year.

Click here to view the guide as a graphic.

Source: Farm Journal

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