Title: The Impact of Asian Soybean Rust on the 2004 Crop Insurance Decision
1The Impact of Asian Soybean Rust on the 2004 Crop
Insurance Decision
- Ray Massey
- University of Missouri
- Commercial Ag Program
2RMA official statement on Rust and Insurance
Payments
- losses to soybean production due to soybean rust
disease is an insurable cause of loss provided
the insured can verify that the cause was natural
and available control measures were properly
applied. - It will be critical for RMA and insurance
providers to monitor when outbreaks are detected
in an area to determine if an insured could have
applied recommended fungicides in a timely manner
and did not.
3RMA official statement on Rust and Insurance
Payments
- Producers are responsible to keep informed of
soybean rust outbreaks in their area. RMA expects
producers to take recommended measures to control
or prevent the disease impact if an outbreak is
anticipated or already in the area. - Document all prevention and remediation attempts.
4Crop Insurance Alternatives Yield Insurance
- Actual Production History (APH)
- Also called Multiple Peril Crop Insurance (MPCI)
- Catastrophic (CAT)
- Buy-up
- Group Risk Plan (GRP)
5Crop Insurance Alternatives Revenue Insurance
- Group Risk Income Plan (GRIP)
- Revenue Assurance Base Price (RA-BP)
- Revenue Assurance Harvest Price
- Option (RA-HPO)
- Crop Revenue Coverage (CRC)
6Actual Production History (APH)
- Pays an indemnity when your yield is lower than
the insured yield level. - Farmer chooses
- percent of historical yield to insure,
- Percent of government price option that will be
paid if an indemnity is paid. - Catastrophic is 50 yield, 55 price election.
100 subsidized.
7Group Risk Plan (GRP)
- Pays an indemnity when your countys yield is
lower than the countys insured yield level. - Does not insure your individual production.
- Farmer chooses
- Yield election 70-90 of expected
- Protection level 60-90 of maximum.
- Does not equal commodity price
8Group Risk Income Plan (GRIP)
- Pays an indemnity when your countys revenue is
lower than the revenue guarantee. - Does not insure your individual production or
revenue. - Farmer chooses
- Coverage level 70-90 of expected revenue
- Protection level
9Revenue Assurance Base Price Option
- Pays an indemnity when your actual revenue is
less than your guaranteed revenue. - Actual revenue is your actual yield times the
harvest price. - Guaranteed revenue is percent of historical yield
insured times planting time price. - Farmer chooses revenue coverage level
- Based on historical yields
10Crop Revenue CoverageRevenue Assurance Harvest
Price Option
- Pays an indemnity when your actual revenue is
less than your guaranteed revenue. - Actual revenue is your actual yield times the
harvest time price. - Guaranteed revenue is percent of historical yield
insured times the higher of planting time price
or harvest time price. - Allows you to benefit from price increases during
the growing season. - Farmer chooses revenue coverage level
- Based on historical yields
11MO Soybeans Acres Planted in 2003
12MO Soybeans Acres Insured in 2003
13Farmer Loss Ratio
Farmer Loss Ratio Indemnity/(Premium-Subsidy) Da
ta from 1999-2003 RMA http//www3.rma.usda.gov/app
s/sob/stateCrop.cfm
14Crop Insurance Choices with Soybean Rust Risk
- What products will offer better protection in the
treat of Asian Soybean Rust?
15Actual Production History (APH)
- 2005 Premiums will not take into account the
increased risk associated with Rust. Cost/Unit of
protection is more affordable. - If you purchased APH in the past, it should be as
good or better of protection than it has been. - Discuss with your insurance professional
appropriate yield and price elections. Changes
may be appropriate.
16Group Risk Plan (GRP)
- GRP premiums are usually lower than other
insurance plans. - Historical loss ratio of GRP-buyup is above 1 in
MO. - Good investment potential.
- GRP-CAT has never paid
- If you believe that any Rust infestation is
likely to affect the whole county and its average
yield, GRP-buyup becomes more desirable.
17Group Risk Income Plan (GRIP)
- We have no experience with the usefulness of GRIP
in MO - IF
- you believe that any Rust infestation is likely
to affect the whole county and its average yield,
and - you believe that Rust will affect US prices for
soybeans, and - your farm yields track with county yields,
- THEN GRIP may be an appropriate crop insurance
tool.
18Revenue Insurance
- If you believe Rust will be severe enough to
raise US harvest time prices, CRC and RA-HPO
becomes more desirable - Note that CRC and RA-HPO use CBT prices rather
than local prices local price movements could
create problems. - RA-BP will not cover any price increases that
might occur from Rust reducing national supply.
19The Impact of Asian Soybean Rust on the 2004 Crop
Insurance Decision
- Ray Massey
- University of Missouri
- Commercial Ag Program