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THE LAND, OCTOBER 14, 2011
4 B
Drop in CBOT prices may mean favorable RP prices PROGRAMS, from pg. 3B However, in situations when most crop losses were from severe storms and heavy rains that damaged some farms and not others, or damaged parts of farms, optional units are far superior to enterprise units, as far as potential for crop insurance indemnity payments. Producers with enterprise units who purchased supplemental hail insurance coverage as part of their overall risk management plan in 2011 may have qualified for some indemnity payments on farms with crop losses from hail storms during the growing season. Producers should contact their crop insurance agent to better understand insurance coverage with enterprise units, as compared to optional units, for the 2012 crop year. Calculating potential 2011 crop insurance payments Some farmers in Minnesota and surrounding states will be facing reduced yields on some farm units in 2011, due to heavy rains and severe storms. Many growers purchased upgraded levels of YP or RP crop insurance for the 2011 growing season. The recent drop in CBOT prices should lead to more favorable RP harvest prices, which could result in more producers qualifying for 2011 crop insurance indemnity payments.
Following is an analysis of potential 2011 crop loss scenarios that could result in likely crop insurance indemnity payments with RP policies. RP insurance policies An initial “price guarantee” is established for each crop prior to the crop insurance enrollment deadline on March 15 each year. The final price guarantee is determined at harvest time in the fall. The price guarantees are based off of CBOT grain futures prices. Following is how RP price guarantees are calculated. Corn Base price is the average settlement price for December CBOT corn futures in February. Harvest price for RP policies is the average settlement price for December CBOT corn futures in October during the year of harvest. Soybeans Base price is the average settlement price for November soybean futures in February. Harvest price for RP policies is the average settlement price for November CBOT soybean futures in October during the year of harvest. 2011 RP base prices were: Corn: $6.01/bu. Soybeans: $13.49/bu. 2011 RP harvest price estimates as of
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Calculating Estimated RP crop insurance payments Corn Sample Actual 180.0 _____ 0.80 _____ 144.0 _____ $6.01/bu. $865.44 _____ $5.99/bu._____ $862.56 _____ $865.44 _____
A. 2011 APH yield B. RP policy percent coverage C. Coverage yield (AxB) D. RP base price E. Guaranteed insurance coverage/acre (CxD) F. RP harvest price (Est.) G. Harvest guarantee/acre (CxF) Final guarantee/acre (Higher of E or G) I. Actual harvested yield/acre 135 _____ 43 _____ J. RP harvest price (Est. on Oct. 10) $5.99/bu._____ $11.65/bu._____ K. Crop value/acre (IxJ) $808.65 _____ $500.95 _____ L. Gross insurance payment/acre (H-K) $56.79 _____ $49.44 _____ M. CRC/RA-HP premium/acre $20 _____ $21 _____ Net insurance indemnity payment per acre (L-M) $36.79 _____ $28.44 _____ Notes: Harvest prices for RP policies is based on the average price during October for December CBOT corn futures, and for November CBOT soybean futures. Harvest prices are final as of Oct. 31. Premium estimates are for enterprise units in southern Minnesota. Prepared by Kent Thiesse, government farm program analyst
Oct. 10 were: Corn RP Harvest Price (Est.): $5.99/bu. (The corn RP harvest price will be finalized after Oct. 31.) Soybean RP harvest price (Est.): $11.65/bu. (The soybean RP harvest price will be finalized after Oct. 31.) The higher of the base price or the harvest price is used to calculate revenue guarantee per acre used to determine crop
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Soybeans Sample Actual 48.0 _____ 0.85 _____ 40.8 _____ $13.49/bu. $550.39 _____ $11.65/bu._____ $475.32 _____ $550.39 _____
indemnity payments with RP policies, which will likely be the base price in 2011 for soybeans, and potentially for corn. The harvest price is always used to determine the value of the harvested crop. RP crop loss example table Please refer to the table above for crop loss examples for corn and soybeans with an 80 percent coverage RP crop insurance policy, with either See PROGRAMS, pg. 5B