Managing Your 2017 Crop Insurance Decisions Feb 28 2017 · 2017-03-01 · Considerations for Your...

February28,2017©2017PurdueCenterforCommercialAgriculture

MakingYour2017CropInsuranceDecisions

MichaelLangemeier,Professor&AssociateDirector

JamesMintert,Professor&Director

PurdueCenterforCommercialAgriculture


$350$400$450$500$550$600$650$700$750$800$850

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

EstimatedRevenueandCosts/Acreona50/50Corn/SoybeanFarmonAverageQualityIndianaLand

Cost/Acre Revenue


DefinitionsØBasicUnits

vAllofonecropinacountyforaspecificshareofproduction.vAllownedandcashrentlandforonecropinonecountyisabasicunit.

vEachsharerentlandownerarrangementwouldbeaseparatebasicunit.

ØOptionalUnitsvDivisionsofbasicunitsbasedontownshipsection.

ØEnterpriseUnitsvAdditionofallbasicunitsinonecountyforasinglecrop.


PotentialProducts• YieldPolicies

§ AYP=areayieldprotection§ Insuresagainstcounty-wideproductionloss(basedoncountyyield)

§ Policyprotection=dollaramountofprotectionperacrexnetacres

§ 70to90%coveragelevels

§ YP=yieldprotection§ Insuresagainstproductionloss(basedonindividualfarmyield)

§ Yieldprotectionguarantee=APHapprovedyieldxcoveragelevelxprojectedprice



PotentialProducts• RevenuePolicies

§ ARP=arearevenueprotection§ Insuresagainstcounty-widerevenueloss(basedoncountyrevenue)

§ Policyprotection=countyyieldxcoveragelevelxgreaterofprojectedpriceorharvestprice


§ RP=revenueprotection§ Insuresagainstrevenuelossduetoincreaseordecreaseinprice,lowyield,orcombinationofthese(basedonindividualfarmrevenue)

§ Revenueprotectionguarantee=APHapprovedyieldxcoveragelevelxgreaterofprojectedpriceorharvestprice



ProjectedandHarvestPricesØProjectedPrice

vBasedonsettlementpricesforfuturescontractsduringFebruary

v2015:Corn=$4.15andSoybeans=$9.73



ØHarvestPricevBasedonsettlementpricesforfuturescontractsduringOctober




EstimatedPremiums:KnoxCounty,IndianaCornPrice=$3.95;Volatility=0.17

CoverageLevel YPEnterpriseUnits

RPEnterpriseUnits

ARP120%Protection

Factor65% 4.96 6.53 N/A

70% 6.10 8.05 4.22

75% 8.55 11.25 5.91

80% 14.79 19.27 9.01

85% 26.87 35.73 15.84

90% N/A N/A 27.57


EstimatedPremiums:WhiteCounty,IndianaCornPrice=$3.95;Volatility=0.17


RPEnterpriseUnits

ARP120%Protection

Factor65% 1.16 1.64 N/A

70% 1.55 2.48 5.62

75% 2.32 4.24 9.60

80% 4.12 7.97 15.46

85% 7.61 15.30 27.65

90% N/A N/A 46.83


447 477

608553 588

651

$0

$100

$200

$300

$400

$500

$600

$700

75%RP 80%RP 90%ARP 80%RP 85%RP 90%ARP

KnoxCounty WhiteCounty

2017RevenueGuaranteesperAcreforCornSelectedIndianaCounties


EstimatedPremiums:KnoxCounty,IndianaSoybeanPrice=$10.15;Volatility=0.12


RPEnterpriseUnits

ARP120%Protection

Factor65% 3.09 3.45 N/A

70% 4.16 4.84 1.59

75% 6.63 7.80 2.40

80% 11.71 13.72 3.57

85% 21.30 24.92 6.32

90% N/A N/A 11.64


EstimatedPremiums:WhiteCounty,IndianaSoybeanPrice=$10.15;Volatility=0.12


RPEnterpriseUnits

ARP120%Protection

Factor65% 0.81 1.02 N/A

70% 1.12 1.58 1.43

75% 1.77 2.68 2.48

80% 3.44 5.22 3.72

85% 6.82 10.42 7.27

90% N/A N/A 13.16


335 357

440 438 466 492

$0

$100

$200

$300

$400

$500

$600

75%RP 80%RP 90%ARP 80%RP 85%RP 90%ARP

KnoxCounty WhiteCounty

2017RevenueGuaranteesperAcreforSoybeansSelectedIndianaCounties


APHYieldExclusion

• TheAPHYEallowsfortheexclusionofanactualyieldforacropyearwhenRMAdeterminesthecountyperplantedacreyieldforacropyearwasatleast50%belowthesimpleaverageoftheperplantedacreyieldforthecropinthecountyfortheprevious10consecutivecropyears.

• Ifyieldexclusionisavailableinacounty,itisgenerallybeneficialtousethisoptionsincetheassociatedpremiumincreaseissmallcomparedtotheincreaseintherevenueguarantee.


UsetheU.ofIllinoisfarmdoc CropInsuranceTool

•http://farmdoc.illinois.edu/fasttools/


ConsiderationsforYour2017CropInsurance

1. Ifyou’rethinkingaboutusingtheOptionalUnits,thinktwice

2. EnterpriseunitsareagoodalternativeformanyCornBeltfarms

3. 2017isnotagoodyeartoreducecoveragelevels

4. CompareRPtoARPinyourcounty…ARPisattractiveinsomelocations


JoinusforournextwebinaronApril3,2017

“2017CropOutlook”

Thank You

Purdue.edu/commercialag

Purdue.edu/agbarometer

Managing Your 2017 Crop Insurance Decisions Feb 28 2017 · 2017-03-01 · Considerations for Your...

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