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Trend-Adjusted APH Yield Option Continues for 2013

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Now is the time to start planning crop insurance strategies for the 2013 crop year, even though the crop insurance enrollment deadline for corn, soybeans, and spring wheat in the Upper Midwest is not until March 15, 2013. For the first time in 2013, wheat producers in most of west-central and northwest Minnesota, northeast South Dakota and most of North Dakota will be eligible for the Trend-Adjusted-APH endorsement. The TA-APH will likely be quite attractive to many Midwest corn and soybean farmers, as well as wheat producers in those selected areas. The coming crop year will likely feature a high level of price volatility, along with considerable drought risk in many areas of the Midwest.

The TA-APH yield endorsement for corn and soybeans was introduced for the 2012 crop year in several states, and will be continued for 2013, with wheat being added in selected areas of the region. Crop insurance premiums were adjusted downward for many Upper Midwest crop producers in 2012, and will again be adjusted downward for the 2013 crop year. The combination of the TA-APH yield endorsement, along with lower premium rates, allows producers the opportunity to enhance their insurance coverage for 2013, with only minimal extra premium investment. Farmers should contact their crop insurance agent early to find out all the crop insurance options that are available for 2013 before finalizing their risk management strategies.

The Actual Production History (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, soybean and wheat farmers 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. Farmers also felt that there was sometimes a yield penalty on farm units with a longer yield history, due to the more recent yield increases. The TA-APH was developed by the USDA Risk Management Agency (RMA) to help improve these issues on selected corn, soybean and wheat crop insurance policies.

The TA-APH yield adjustment factors are made on a county basis, based on historical annual increases in county-average corn, soybean and wheat yields, as calculated by the National Agricultural Statistics Service (NASS). Most counties in south-central and southwestern Minnesota had a TA-APH yield adjustment factor of 2.2-2.5 bu./acre for corn and 0.35-0.50 bu./acre for soybeans in 2012. Growers should check with their crop insurance agent for the TA-APH yield adjustment factors for 2013 in their county. A producer’s actual APH yields ( four to 10 years) 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 (2012), 5.0 bu. is added for the preceding year (2011) and 7.5 bu. for the year before that (2010), etc. The maximum yield adjustment for year 10 (2003) 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. This situation could affect 2013 TA-APH calculations for many corn and soybean farmers in parts of the Upper Midwest, due to 2012 yields being lower than 2010 and 2011 yields, as a result of the 2012 drought.

The TA-APH yield endorsement is available for both YP and RP policies for corn and soybeans in 2013 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 utilize the TA-APH yield endorsement is crop specific, and is on a county basis, which means a farmer 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.

The TA-AHP yield endorsement looks to be a preferred option for many farmers on their 2013 crop insurance policies. The combination of the TA-APH endorsement along with the reductions in crop insurance premiums at comparable coverage levels for most growers will allow many farmers to enhance their crop insurance revenue guarantees for corn, soybeans and wheat in 2013. This should allow crop producers to be more aggressive in forward pricing a higher percentage of their anticipated 2013 crop 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 2013 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 kent.thiesse@minnstarbank.com.

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