Jayson K' Harper

1
Adjusted Gross Revenue (AGR) Insurance
Jayson K. Harper Professor of agricultural
economics Department of Agricultural Economics
and Rural Sociology The Pennsylvania State
University Visit the PA Crop Insurance Education
Web Site http//cropins.aers.psu.edu Penn State
is committed to affirmative action,
equalopportunity, and the diversity of its
workforce
2
Adjusted Gross Revenue (AGR)

• Insures the revenue of the entire farm rather
  than an individual crop
• Guarantees a percentage of average gross farm
  revenue, including a small amount of livestock
  revenue.
• Uses information from a producer's Schedule F tax
  forms to calculate the policy revenue guarantee.
• Available in 18 states and 230 counties for 2003

3
Northeast/Mid-Atlantic AGR Program Participation
4
AGR Program Participation (cont.)
5
Pennsylvania AGR Counties

• Authorized in 2000
• Berks Co.
• Carbon Co.
• Lackawanna Co.
• Lehigh Co.
• Monroe Co.
• Northampton Co.

• To be added in 2003
• Crawford Co.
• Columbia Co.
• Erie Co.
• Fayette Co.
• Lancaster Co.
• Schuylkill Co.
• Westmoreland Co.
• York Co.

6
Information Needed from Farmer to Apply for AGR
Insurance

• Five years of Schedule F forms
• Annual Farm Report (FCI-821)
• Historic yearly enterprise revenue
• Estimated enterprise revenue
• Beginning Inventories

7
AGR Program Restrictions

• Not more than 50 of income from insurable crops
  and livestock (unless insurable crops
  insured)
• Not more than 35 from livestock
• Not more than 50 commodities purchased for resale

8
AGR Coverage levels

• Producer selects one amount
• (Coverage Level/Payment Rate)
• 65 / 75
• 65 / 90
• 75 / 75
• 75 / 90
• 80 / 75
• 80 / 90

9
Income Diversification required for higher
coverage levels

• 65 / 75 - Everyone Qualifies
• 65 / 90 , 75 / 75, 75 / 90 - Must Meet
  Two Crop Revenue Qualifier
• 80 / 75 80 / 90 - Must Meet Four Crop
  Revenue Qualifier

10
Loss Payments under AGR

• Notice of damage or Loss
• Cause of loss
• Insured year farm tax form
• Inventories (beginning and ending)
• Accounts receivable (beginning and ending)

11
AGR Insurance Cost

• Depends on number, type, and proportion of crops
• Purchase of MPCI insurance for program crops may
  be required
• Producer Subsidy
• 65 Coverage Level 59
• 75 Coverage Level 55
• 80 Coverage Level 48

12
Cost of AGR Insurance for a Farm with 250,000 of
Gross Revenue (20 from field corn)
13
Northeast AGR Case studiesAvailable on-line at
http//www.aec.msu.edu/agecon/blackj/AGR.htm

• Delaware (Don Tilmon, University of Delaware)
• Field crops and vegetables
• Poultry and field crops
• Poultry and vegetables
• Maryland (Wes Musser, University of Maryland)
• Wholesale vegetables

14
Northeast AGR Case studiesAvailable on-line
at http//www.aec.msu.edu/agecon/blackj/AGR.htm

• New York (Gerald White and Wen-Fei Uva, Cornell
  University)
• Diversified fruit
• Diversified vegetables with direct marketing (2)
• Diversified wholesale vegetable
• Onions
• New Hampshire/Massachusetts (Mike Sciabarrasi,
  Univ. of New Hampshire)
• Diversified farm with retail sales
• Wholesale vegetable and tobacco

15
Northeast AGR Case studiesAvailable on-line
at http//www.aec.msu.edu/agecon/blackj/AGR.htm

• New Jersey (Robin Brumfield and Edouard Mafoua,
  Rutgers University)
• Diversified vegetable and blueberries
• Nursery, native plants
• Wholesale greenhouse, (bedding plants, hanging
  baskets, poinsettias, and mums)
• Wholesale greenhouse, (bedding plants,
  perennials, hanging baskets, poinsettias, and
  mums

16
Northeast AGR Case studiesAvailable on-line at
http//www.aec.msu.edu/agecon/blackj/AGR.htm

• Pennsylvania (Jayson Harper, Pennsylvania State
  University)
• Retail vegetable
• Christmas trees and cash crops
• Wholesale vegetable and beef
• Retail/wholesale fruit
• Small fruit PYO
• Roadside stand and subscription vegetables

17
Why AGR case studies?

• AGR is complex (eg. value added from
  post-production activities, effects of
  diversification, indexed AGR, use of accrual
  accounting to determine income to count)
• Case studies help farmers (and educators!)
  understand data requirements
• Illustrate the role that AGR can have in reducing
  risk on different types of farms
• Show costs and benefits of AGR insurance

18
Contents of AGR Case Studies

• Farm description (farming history, prior use of
  crop insurance, current use of risk management
  practices)
• Application information and procedures (FCI-821
  and FCI-823 Forms)
• Revenue history (5-year allowable income and
  expense history)
• Calculation of adjusted gross revenue and
  allowable expenses
• Possible coverage elections (coverage levels and
  payment rates)
• Annual premium and administrative fees
• Indemnity examples