Revenue Protection crop insurance policies could pay indemnity for corn
Fall corn price for Revenue Protection (RP) insurance policies came in much lower than the spring price established in March, 2013, said Darrell Mark, Adjunct Professor of Economics for South Dakota State University.
“The spring price guarantee for RP insurance was $5.65 per bushel and the average price during October for December, 2013 corn futures was $4.39 per bushel—which is $1.26 per bushel less than the spring price,” Mark said. “The fall price is used to determine the fall guarantee for RP insurance policies and to calculate actual revenue.”
With the RP insurance policy, the final guarantee is the higher of the spring or fall guarantee. Therefore, Mark explained that for corn in 2013, the final guarantee is the spring guarantee. Indemnities are paid when actual revenue falls below the final guarantee.
Actual revenue is calculated by multiplying the fall price by the actual yield harvested in 2013.
Mark said that even at average yields, it may be possible for corn growers to receive an indemnity in 2013 due to the large drop from the spring price to the fall price.
“While harvest is ongoing and actual yields aren’t all known yet, anecdotal yield reports would suggest average to above average yields in much of eastern South Dakota, but still within the range that some fields could trigger an indemnity under RP insurance policies,” he said. “USDA’s November Crop Production report estimates the state’s average corn yield at 145 bushels per acre.”
Mark added that the likelihood of an indemnity payout is higher for higher insurance coverage levels and lower actual yields. He also said that whether optional, basic or enterprise insurance units were elected for the insurance coverage could affect whether an indemnity is received for an individual field that is lower yielding.
Will there be an RP insurance indemnity for soybeans too? Mark said only if actual yields fall below insured yield levels (Actual Production History times the coverage level).
“That’s because the fall price of $12.87 per bushel was exactly the same as the spring price. Thus, the fall guarantee and spring guarantee are identical,” he said.
Producers who think they could receive a crop insurance indemnity for 2013 corn and soybeans should keep careful yield production records for each field during harvest and then discuss a possible claim with their crop insurance agent. — WLJ