New Insurance Yield Option Attractive

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A new yield election option available on crop insurance for the 2012 crop year should be attractive to most Midwestern corn and soybean 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 (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.

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