The spring crop is quickly approaching on March 16. Today let’s focus on new crop insurance options provided in the 2014 Farm Bill. One new option is Yield Exclusion (YE). YE allows for producers to exclude specific yields from eligible years from their actual production histories (APH). This exclusion can have an impact on producers’ APHs and crop insurance premiums.
Eligible Counties in Maryland
To be eligible, the county average planted acreage yield must be 50 percent below the simple average for the previous 10 consecutive crop years. When a county is determined eligible for YE for a crop year, a contiguous county will also be eligible for YE. USDA’s Risk Management Agency (RMA) will make a separate determination, available in the actuarial documents, for both irrigated acreage and non-irrigated acreage.
A review of information from RMA shows that Maryland had no eligible counties for irrigated corn or soybeans. Maryland does have eligible counties with eligible crop years for non-irrigated corn and soybeans, and all Maryland counties have at least one eligible crop year for non-irrigated corn. Table 1 (bottom of post) lists the Maryland counties with eligible years for non-irrigated corn since 1997. With non-irrigated soybeans, all Maryland counties but Baltimore, Cecil, Garrett, Harford, and Kent have at least one eligible crop year. Table 2 (bottom of post) lists the Maryland counties with eligible crop years for non-irrigated soybeans since 1995. For a complete listing of eligible counties and crop years, see USDA-RMA’s 2014 Farm Bill page.
Eligible Crops and Insurance Plans
YE is available on spring crops for the 2015 crop year, but will be available for fall crops beginning in the 2016 crop year. We will post information when RMA releases the eligible counties and crop years for Maryland winter crops later this year. YE will be available on the following insurance options:
1. Yield Protection;
2. Revenue Protection;
3. Revenue Protection with Harvest Price Exclusion; and
4. Crops with a contract change date on or after Nov. 30, 2014, which includes corn, soybeans, cotton, grain sorghum, spring wheat, spring barley, spring canola, rice, sunflowers, peanuts, and popcorn.
Finally, producers are eligible for YE with either Catastrophic Risk Protection (CAT) or buy-up insurance policies.
Impacts of YE on APH and Premiums
Exclusion of yields from eligible crop years will potentially result in a higher approved yield, which will increase the insurance guarantee, and increase an indemnity payment, which will increase the producer’s premiums. No substitute yield will replace the excluded yield unless the exclusion results in fewer than 4 years to calculate the APH. If the exclusion results in fewer than 4 years to calculate the APH, then the applicable transitional yield will be substituted for the excluded crop years to reach a minimum of 4 years.
Producers may select both trend-adjustment (TA) option and the YE option but only one of these options in a given crop year. For example, if you pick YE in an eligible crop year then you would be ineligible in that crop year for the TA option (see Table 3). Table 3 demonstrates the potential impact the YE option and TA option could have on a producer’s APH. For example, from Table 3 a producer with non-irrigated corn in Queen Anne’s County with yield histories from 2005 to 2014 would have an APH of 143.5 bushels/acre. With the TA option and no YE, the same producer would see his/her yield increase to 149 bushels/acre (Table 3).
For more information on TA-APH crop insurance, see (http://drum.lib.umd.edu/handle/1903/16317) and (http://www.aglaw.umd.edu/blog/2015-corn-and-soybeans-trend-adjustments-released-for-trend-adjusted-aph-crop-insurance-revenue-and-yield-policies).
This example shows the potential advantage or producers of utilizing both TA and YE. Producers considering utilizing both options will need to remember that this increase in APH will increase the premium costs.
Wrap-Up
The new YE exclusion option is worth considering for producers in eligible counties in Maryland. Talk with your crop insurance agent to determine the true impact YE can have on your APH and premium costs. If you do not have a crop insurance agent, see (http://www.rma.usda.gov/tools/agent.html). Keep in mind, RMA will announce the eligible crop years for fall crops for the 2016 crop year later this year. We will provide information about the impact to fall crops when that information is made available.
For additional information on available crop insurance publications, check out http://arec.umd.edu/extension/crop-insurance.
Reference
Coppess, J., B. Sherrick, and G. Schnitkey. “Evaluating the Actual Production History Yield Exclusion Provision of the 2014 Farm Bill.” farmdoc daily (4):170, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, September 5, 2014. Internet Site: http://farmdocdaily.illinois.edu/2014/09/actual-production-history-yield-exclusion-provision-2014-farm-bill.html
Schnitkey, G., B. Sherrick, and J. Coppess. “Yield Exclusion: Description and Guidance.” farmdoc daily (5):6, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, January 13, 2015. Internet site: http://farmdocdaily.illinois.edu/2015/01/yield-exclusion-description-and-guidance.html
USDA-Risk Management Agency. Actual Production History Yield Exclusion. Washington D.C.: Risk Management Agency Fact Sheet, Dec. 2014. Internet site: http://www.rma.usda.gov/pubs/rme/aphye.pd