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Corn+Soybean Digest

Revenue Insurance Basics

Revenue insurance plans were developed to provide coverage against reduced gross income as a result of a reduction in yield or price. These policies have only been around for a few years, but their popularity has grown rapidly, and policies now number in the hundreds of thousands.

Types of revenue insurance include: Crop Revenue Coverage (CRC). CRC was introduced in Iowa and Nebraska in 1996 for corn and soybeans. In 2001, it will be available in 47 states and cover corn, cotton, grain sorghum, rice, soybeans and wheat. In 2000, there were approximately 334,000 CRC policies earning premium.

Revenue Assurance (RA). This type of coverage was introduced in Iowa in 1997 for corn and soybeans. This year, it will be in 15 states for corn, soybeans and wheat. It also will be available in two states for canola/rapeseed and feed barley, and one state for sunflowers. There were approximately 20,000 RA policies earning premium last year.

Income Protection (IP). Introduced in 1996, IP will be in selected counties in 22 states this year, covering barley, corn, cotton, grain sorghum, soybeans and wheat. Last year there were approximately 11,000 IP policies earning premium.

Group Risk Income Protection (GRIP). GRIP was introduced in 1999 for corn and soybeans in three states. In 2000, there were approximately 1,200 GRIP policies earning premium.

Adjusted Gross Revenue (AGR). Introduced in '99, AGR now is available in selected counties in 19 states. Last year, there were fewer than 100 AGR policies earning premium.

What, according to the Risk Management Agency (RMA), is the key difference in revenue insurance plans compared to multiperil crop insurance (MPCI and sometimes called APH)? Revenue plans protect against loss of revenue caused by low prices, low yields or a combination of both. APH or MPCI policies provide protection only for loss of production.

With MPCI plans, the price for the covered yield is set at a specific rate by RMA. This figure is a projected marketing season average price based on many agronomic and economic factors. It is determined from 12 to 18 months before the crop marketing year.

In revenue insurance policies, prices are determined from the commodity exchange futures market. Each price is determined by a formula within the policy that defines the price discovery period (either early in the year, at harvest, or both) for specified futures contract months so the early price is established by each crop's sales closing date.

Federal crop insurance programs have come a long way, but the limit on coverage is still no more than 85% of a farm's actual production history (APH). However, a new program offered by Agricultural Revenue Management, a subsidiary of The J.C. Robinson Seed Co., promises to boost coverage to 90% of APH through a production agreement.

The program, called DollarGard, isn't insurance, the company says, but it works in conjunction with federal crop insurance policies and is available only through Golden Harvest dealers. The fee for the service is determined on a farmer-by-farmer basis using historical production averages and generally ranges from $12 to $23/acre depending on the yield level protected.

Producers with yields consistently above the county average or with irrigated fields generally will have lower service fees, company officials say.

To qualify, a producer buys and signs an agreement to grow corn or soybeans following specific agronomic recommendations and delivers 100% of the crop to a participating elevator. In return, Ag Revenue Management agrees to pay a bushel adjustment if the actual yield is less than 90% of the producer's historical production.

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