Beginning with the 2012 crop year, farmers purchasing crop insurance for corn and soybeans in 14 Midwestern states will have the option to use the Trend-Adjusted Actual Production History (TA-APH) Yield Endorsement. The TA-APH yield endorsement allows farmers to increase yields used in calculating crop insurance guarantees. The product concept submission to RMA was sponsored by the Illinois Corn Marketing Board, and developed in conjunction with faculty from the University of Illinois.

Rationale

Actual production history (APH) yields are used in the calculation of yield and revenue guarantees in the COMBO product. In the simplest case, the APH yield is based on a history of yields from the insured unit. To be based totally on historical yields, at least four years of yields must be provided. Up to 10 years of yields are used in the APH yield. When more than 10 yields exist from a farm, the most recent 10 are used in calculating the APH yield.

In crops with increasing yields over time, the APH yield lags the true “expected,” or most likely yield, for the coming insurance year. For example, consider a trend increase of 2 bu./year for corn, which has been the general rate increase of corn yields over much of Illinois. In other words, corn yields are increasing by a rate of 2 bu./year on average. If a farm has 10 years of continuous yields, the average of those 10 years will lag the expected yield by 11 bu. ((10 years of continuous yields / 2 + 0.5) x 2-bu. trend).

Because APH yields lag expected yields, guarantees will also lag. The TA-APH endorsement corrects this issue by allowing a trend adjustment to be added to the APH yield. The resulting TA-APH yield then is used in calculating guarantees.