Last week, the Risk Management Agency (RMA) announced harvest prices for corn and soybeans grown in the Midwest. The harvest price for corn is $6.32/bu., 31¢/bu. higher than the $6.01 projected price. The harvest price for soybeans is $12.14/bu., $1.35/bu. below the $13.49 projected price.

 

Insurance Payments

Table 1 shows corn yields, stated as a percentage of the actual production history (APH), below which insurance payments will occur under each of the three plans within the COMBO product. Under yield protection (YP) at an 85% coverage level, payments will occur when yield is below 85% of the APH yield (see Table 1).

Similar to YP, yield must be below 85% of APH yield under revenue protection (RP) at the 85% coverage level. Since the harvest price is above the projected price for corn, RPs guarantee increases, resulting in the need for a yield loss before an insurance payment is received. When the harvest price is above the projected price, both YP and RP require the same yield loss to trigger payments.

RP with exclusion (RPwExl) does not use the higher of projected or harvest price in its guarantee. As a result higher yield losses are required when the harvest price is above the projected price. At an 85% coverage level, RPwExl requires yields to be less than 81% of the APH yield, compared to 85% for YP and RP.

Soybean harvest price is below the projected price. As a result, revenue will be lower because of price declines, requiring less of a yield loss before insurance payments occur. At an 85% coverage level, RPwExl and RP require yields to be less than 94% of the APH yield (see Table 2). Both RPwExl and RP have the same guarantee when harvest price is below the projected price, resulting in both requiring the same yield loss before payments occur. As will always be the case no matter the harvest price relative to the projected price, YP with an 85% coverage levels requires that yields be lower than 85% of the APH yield.