1 / 15

Multiple Peril Crop Insurance (MPCI)

Multiple Peril Crop Insurance (MPCI). Actual Production History (APH)—Yield Insurance. APH yield is average of past 10 years. Can insure from 50% to 85% of APH USDA projects a market price each year, called the indemnity price .

alvin-bond
Download Presentation

Multiple Peril Crop Insurance (MPCI)

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Multiple Peril Crop Insurance (MPCI)

  2. Actual Production History (APH)—Yield Insurance • APH yield is average of past 10 years. • Can insure from 50% to 85% of APH • USDA projects a market price each year, called the indemnity price. • If actual yield is below the guarantee, farmer is paid for the lost bushels, at the indemnity price.

  3. APH Example--Corn • APH yield 148 bu/acre • Yield level chosen 75% • Yield guarantee 111 bu/acre • Indemnity price $2.50 • Actual yield 91 bu/acre • Yield loss 111 - 91 = 20 bu • Indemnity payment 20 x $2.50=$50

  4. Crop Revenue Insurance • Guarantees gross revenue per acre instead of bushels • Expected gross revenue = (APH yield x Feb. futures price) • Can insure 50% to 85% of this

  5. Revenue Insurance Example • APH yield 148 bu/acre • Feb. futures price $3.00 • Coverage level chosen 75% • Revenue guarantee 148 bu. x $3.00 x 75% = $333

  6. Revenue Insurance Example • Actual yield 150 bu/acre • Oct. futures price $2.00 • Actual revenue $2.00 x 150 = $300 • Indemnity payment $333 - 300 = $33 / acre

  7. Increasing Coverage Policies • Some revenue insurance policies increase the revenue guarantee if prices rise from February to October • Use the higher of the Feb. price or Oct. price

  8. Example • Initial guarantee 148 bu. x $3.00 x 75% = $333 • Oct. futures price $3.40 (goes up) • New guarantee: 148 bu. x $3.40 x 75% = $377 • Actual yield 91bu. • Actual revenue 91 bu x $3.40 = $309 • Indemnity payment $377 – 309 = $68 (20 bu. @ $3.40)

  9. Increasing Coverage Revenue Insurance • Good for farmers who want to forward price their crop • Protects against having to buy extra bushels to fill contract at a high price • Protects livestock feeders against having to buy extra feed • Pays farmers for “lost” bushels, but at the fall futures price

  10. Crop Insurance Iowa

  11. Level of Coverage • “Catastrophic” insurance has a guarantee based on 50% of the proven APH yield. $100 per crop. • Higher guarantees can be up to 85% of APH yield or revenue.

  12. Level of Guarantee (Iowa)

  13. Group Risk InsuranceBased on County Average Yields • Yields: Group Risk Protection (GRP) • Revenue: Group Risk Income Protection (GRIP) • If the county average yield is low, all farmers get paid, regardless of farm yields • More risky, but less expensive

  14. Hail Insurance • Added on to policy • Can insure up to 100% of expected yield • Indemnity payment based on appraised damage

  15. Other Production Risk Tools • Crop diversification • Pesticides • Resistant seeds • Irrigation • Crop share leases • Livestock health programs

More Related