The 2012 Crop Insurance program for corn and soybeans will include a Trend Adjusted Yield Endorsement that will affect Actual Production History. Extension Farm Management Specialist Gary Schnitkey says University of Illinois agricultural economists, at the request of the Illinois Corn Marketing Board and USDA’s Risk Management Agency, developed the endorsement as way to deal with yield lag.
"Corn and soybeans in the Midwest are interested in this because they have high trends or the yields have been increasing over time, Schnitkey said. "This trend adjustment takes that into consideration and adds to the APH yield, which is usually used to calculate guarantees and trend adjustments so that APH yield is higher more accurately reflecting the actual yields that we're likely to experience in the coming year."
Schnitkey says an example of how this would work is that corn yields in Illinois have been increasing about two bushels per year. This proposal would add for each year from the present two bushels to the yield; so the 2011 yield would have two bushels added, the 2010 would have four bushels added and so on. He says that it works out that if the two bushels is right, over 10 years of yield history it will add about 11 bushels to the APH.
The trend adjustment is made by county. It's a pilot for corn and soybeans only, although it is a big pilot made available in 14 states. If the actuarial data works, Schnitkey says it will be expanded to other states and other crops. He says there is no additional premium costs for those choosing to use it.
"What will happen is that premiums will be the same with or without the Trend Endorsement for the same guarantee level," Schnitkey said. "So if a guarantee level was $800 without the trend adjustment and $800 with the trend adjustment, those two products would have the same premium, so there really isn't any additional costs."
Schnitkey says he has a hard time seeing how a farmer in Illinois would not choose to use the Trend Adjusted Yield endorsement.