RMA Crop Production and Revenue Insurance Products

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RMA Crop Production and Revenue Insurance Products. Lesson Overview In this lesson, we will learn about: Wyoming acres of annually-planted crops, and acres insured Multiple Peril Crop Insurance Catastrophic Risk Protection (CAT) Crop Revenue Insurance (CRC) Group Risk Plan (GRP) - PowerPoint PPT Presentation

Transcript of RMA Crop Production and Revenue Insurance Products

  • RMA Crop Production and Revenue Insurance ProductsLesson OverviewIn this lesson, we will learn about:Wyoming acres of annually-planted crops, and acres insuredMultiple Peril Crop InsuranceCatastrophic Risk Protection (CAT)Crop Revenue Insurance (CRC)Group Risk Plan (GRP)Group Risk Income Protection (GRIP)Forage InsuranceSeed and Specialty Crop Insurance Alfalfa Seed Protection InsuranceNursery Crop InsuranceAdjusted Gross Revenue-Lite (AGR-Lite)

  • RMA Crop Production and Revenue Insurance ProductsCrops Covered Under MPCI:

    BarleyCorn (for grain)Corn (for silage)Dry beansProso milletOatsPotatoesSugarbeetsSunflowersWheatMalting barley

  • RMA Crop Production and Revenue Insurance ProductsMalting Barley- a slightly different approachFirst, purchase a feed barley policyMake decisions regarding:1. units2. coverage level3. price electionDecide if you want to purchase a malting barley price and quality endorsement1. Option A is for non-contracted and contracted production combinations2. Option B is for all contracted production

  • RMA Crop Production and Revenue Insurance ProductsMalting Barley- a slightly different approach (Cont)

    The endorsement applies to all bushels contracted for delivery, regardless of feed barley unitsAn indemnity is paid for any malt barley production that does not meet malting standards specified in the price and quality endorsementOption B indemnities are valued as the difference between the malting barley contract price and the MPCI feed barley price

  • RMA Crop Production and Revenue Insurance ProductsMPCI Example Malting Barley: Option B

  • RMA Crop Production and Revenue Insurance ProductsNick actually harvest 50 bushels of barley per acre. The barley harvested meets the malting barley standards. What is the value of his indemnity for the yield loss?First, he receives an indemnity for the difference in bushelsNext, the value based on the feed barley price election is calculatedThen the total indemnity is calculatedNick is only able to deliver 5,000 bushels of malting barley (50) bushels per acre x 100 acres). The malting barley indemnity is based on his coverage level which is 70% of 10,000 bushels

  • RMA Crop Production and Revenue Insurance ProductsMalting Barley- Exercise 1 (Cont)

    5. Bushels to be indemnified are valued as the difference between the malting barley contract price and the maximum price election for feed barley

  • RMA Crop Production and Revenue Insurance ProductsMalting Barley- Exercise 2Question 1If Nicks barley harvest yields 100 bushels per acre but is not of malting barley quality, will he receive an indemnity for the feed barley? Yes or no?

  • RMA Crop Production and Revenue Insurance ProductsMalting Barley- Exercise 2 (Cont)Question 2What is Nicks malt barley indemnity? Recall that Nicks malting barley is insured for 7,000 bushels- 70% of his 10,000 bushel harvest.

  • RMA Crop Production and Revenue Insurance ProductsTopic Summary

    Lets summarize what you have learned in this topic:How multiple peril crop insurance applies to many of the different crops grown in the stateCalculations for covering coverage levels, indemnities for yield losses, and gross levels

    Speaker Notes:Now lets discuss Wyoming acres of annually-planted crops, and acres insured, Multiple Peril Crop Insurance, and Catastrophic Risk Protection (CAT).Speaker Notes: Annually planted crops in Wyoming that are covered under Multiple Peril Crop Insurance include barley, corn for grain and silage, dry beans, proso millet, oats, potatoes, sugarbeets, sunflowers and wheat. We will look at each one separately by reviewing which counties the crop is planted and the counties in which MPCI is available.Speaker Notes: Malting barley is usually raised under contract for sale in breweries or maltsters for making beer products. If the barley quality does not meet standards set by the contracting company, the malting barley becomes feed barley.

    To obtain insurance coverage on malting barley, a producer must first purchase feed barley insurance coverage. Then decisions regarding the type of units to be insured, the coverage level, and the price election can be made. The producer may also elect to purchase a malting barley price and the quality endorsement after he has purchased the feed barley contract. Two options for malting barley coverage are available depending on whether all the acreage is under contract or only partially contracted. Option A is available for non-contracted and contracted for production. Option B is only for contracted production. Speaker Notes: The endorsement applies to all bushels, contracted for delivery as malting barley, regardless of feed barley units. An indemnity is paid for any malting barley production that does not meet specified malting standards in the price and quality endorsement. Option B indemnities are valued as the difference between the malting barley contract price and the MPCI feed barley price.Speaker Notes: Heres an example for malting barley that is produced under contract, Option B. Nick established the APH at 100 bushels per acre and he elected to participate at a coverage level of 70%. The yield guarantee is 70 bushels per acre. The multiple peril maximum price election is established for malting barley for the year by RMA. Nicks price election is set at 80% of the maximum price election per bushel. This portion of the chart is part of the feed barley contract.

    Nick then purchases a malting barley endorsement (Option B) on 10,000 bushels of his expected production. The malting barley is contracted at $3.50 per bushel. Speaker Notes: Nick actually harvests 50 bushels of barley per acre. He will receive an indemnity for the difference in bushels. It is valued at the feed barley price election per bushel. For his total 100 acres he receives the feed barley indemnity per acre times 100 acres. So far, this is all an indemnity for his feed barley yield loss.

    However, Nick is only able to deliver 5,000 bushels of malting barley that meet the malting barley standards based on 50 bushels per acre on 100 acres. The malting barley indemnity is based on his coverage level of 70% on the full 10,000 bushels that were expected. He will be indemnified on the difference of 70% of 10,000 or 7,000 bushels and the 5,000 bushels that were harvested, which is 2,000 bushels. Speaker Notes: The bushels to be indemnified are valued as the difference between the malting barley contract price of $3.50 per bushel and the maximum price election for feed barley. Nicks indemnity for the malting barley is the price differential, the malt barley contract price less the maximum price election for feed barley, multiplied by the bushels of malting barley that he was short- 2,000 bushels. Adding this to the indemnity for the feed barley, he will receive a combined indemnity for feed barley and malt barley. Remember, you cannot insure malting barley directly. It must first be insured as feed barley and then a malting barley endorsement must be added.Speaker Notes: Now suppose Nick actually harvests 100 bushels per acre that is all rejected for malting barley due to the quality of the grain. Will he qualify for a feed barley or malting barley indemnity? Once that is determined, then we can calculate the value of the indemnity due to him.

    Looking at the indemnity calculation for the feeding barley, since the producer harvested 100 bushels per acre, which is more than the 70 bushels in the yield guarantee, the answer is no. He is not entitled to a feed barley indemnity payment. Nick will receive an indemnity for the malting barley, as we can see by looking at the calculations. Speaker Notes: Lets continue with this example. Nicks insured malting barley is 7,000 bushels, which is 70% of his 10,000-bushel harvest. The value of the malting barley indemnity per bushel is the malt barley contract price less the maximum price election for feed barley. The per-bushel indemnity is then multiplied by the number of contracted bushels, that is, 7,000 bushels to obtain the total indemnity. Note that even though Nick was rejected on all 10,000 bushels, he was only covered on 7,000 bushels under the insurance parameters. Dividing the total indemnity by 1,000 acres gives the per acre indemnity. Speaker Notes: That brings us to the end of the topic on Multiple Peril Crop insurance. You learned how Multiple Peril Crop insurance applies to the many different crops grown in state and how to calculate coverage levels, indemnities for yield losses and gross premium levels.