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Trend-Adjusted APH Yield Option

Written by: Kent Thiesse

Now is the time to start planning crop insurance strategies for the 2013 crop year, even though the crop insurance enrollment deadline for corn, soybeans, and spring wheat in the Upper Midwest is not until March 15, 2013. For the first time in 2013, wheat producers in most of West Central and Northwest Minnesota, Northeast South Dakota, and most of North Dakota will be eligible for the TA-APH endorsement. The TA-APH will likely be quite attractive to many Midwest corn and soybean producers, as well as wheat producers in those selected areas. The coming crop year will likely feature a high level of price volatility, along with considerable drought risk in many areas of the Midwest.

 

The Trend-Adjusted Actual Production History (TA-APH) Yield Endorsement for corn and soybeans was introduced for the 2012 crop year in several States, and will be continued for 2013, with wheat being added in selected areas of the region. Crop insurance premiums were adjusted downward for many Upper Midwest crop producers in 2012, and will again be adjusted downward for the 2013 crop year. The combination of the TA-APH yield endorsement, along with lower premium rates, allows producers the opportunity to enhance their insurance coverage for 2013, with only minimal extra premium investment. Producers should contact their crop insurance agent early to find out all the crop insurance options that are available for 2013 before finalizing their risk management strategies.

 

The Actual Production History (APH) yields have been used for many years to determine crop insurance guarantees for both Yield Protection (YP) and Revenue Protection (RP) policies. The APH yield is determined by a minimum of 4 years, and up to a maximum of 10 years, of actual yield history on a crop insurance “unit”. If there are more than 10 years of yield history, the most recent 10 years are used to determine the APH. If there are less than 4 years of APH yields, then pre-set T-yields are used until there is a 4-year history.

 

For many years, corn, soybean, and wheat producers in high production areas have felt that the 10-year average APH yields used for crop insurance guarantees were not reflective of current yield potential that exists due to enhanced seed genetics and improved production practices. Producers also felt that there was sometimes a “yield penalty” on farm units with a longer yield history, due to the more recent yield increases. The TA-APH was developed by the USDA Risk Management Agency (RMA) to help improve these issues on selected corn, soybean, and wheat crop insurance policies.

 

The TA-APH yield adjustment factors are made on a County basis, based on historical annual increases in county-average corn, soybean, and wheat yields, as calculated by the National Agricultural Statistics Service (NASS). Most counties in South Central and Southwestern Minnesota had a TA-APH yield adjustment factor of 2.2-2.5 bushels per acre for corn, and 0.35-0.50 bushels per acre for soybeans in 2012. Producers should check with their crop insurance agent for the TA-APH yield adjustment factors for 2013 in their county. A producer’s actual APH yields (4-10 years) are then used with the county TA-APH adjustment factors to arrive at a final TA-APH yield.

 

The TA-APH yield adjustment factor is added for each year of production history, up to a maximum of 10 years. For example, if the yield adjustment factor for corn is 2.5 bushels per acre, then 2.5 bushels per acre is added for the most recent year (2012), 5.0 bushels per acre is added for the preceding year (2011), and 7.5 bushels per acre for the year before that (2010), etc. The maximum yield adjustment for year 10 (2003) would be 25 bushels per acre (2.5 Bu./A. x 10 years).

 

The TA-APH yield does have a yearly maximum or “cap” for any given year during the 4-10 years that are used to calculate the final TA-APH. The yield “cap” for any year is the highest reported yearly yield during the 4-10 years plus the yield adjustment factor. For example, if the highest reported corn yield on a farm unit was 190 bushels per acre, and the yield adjustment factor was 2.5 bushels per acre, the “cap” yield for any year, after adjustments, would be 192.5 bushels per acre. This situation could affect 2013 TA-APH calculations for many corn and soybean producers in parts of the upper Midwest, due to 2012 yields being lower than 2010 and 2011 yields, as a result of the 2012 drought.

 

The TA-APH yield endorsement is available for both Yield Protection (YP) and Revenue Protection (RP) policies for corn and soybeans in 2013 at all coverage levels, except the catastrophic level (CAT) of 50 %. Group crop insurance policies, such as GRIP or GRP, already utilize TA-APH yields for policy guarantees. The decision to utilize the TA-APH yield endorsement is crop specific, and is on a County basis, which means a producer could choose to use TA-APH for corn and not for soybeans, or they could use TA-APH in one County, but not in another County.

 

The TA-AHP yield endorsement looks to be a preferred option for many producers on their 2013 crop insurance policies. The combination of the TA-APH endorsement , along with the reductions in crop insurance premiums at comparable coverage levels for most producers, will allow many producers to enhance their crop insurance revenue guarantees for corn, soybeans, and wheat in 2013. This should allow crop producers to be more aggressive in forward pricing a higher percentage of their anticipated 2013 crop production during these times of highly volatile market prices. Producers are encouraged to contact their crop insurance agent well ahead of the March 15 deadline for 2013 crop insurance enrollment to find out more details about the TA-APH yield endorsement.