Farmers who decided last spring to buy the Revenue Protection, or RP, type of crop insurance for 2012 and who chose to take the harvest price option will receive $7.50 per bushel for corn and $15.39 per bushel for soybeans. On November 1 USDA's Risk Management Agency released these final harvest prices. These prices are the average December corn futures price during the month of October and the average for the November soybean futures price during October.
Farmers who elected to buy the less expensive, non-harvest price coverage with their RP policy (the less expensive version is called Revenue Protection with Harvest Price Exclusion, or RP-HPE) may not receive any indemnity payments. "That is because with the RP-HPE policy their guaranteed revenue is based on the average February futures prices times their APH yield times the level of guarantee selected," explains William Edwards, Iowa State University Extension ag economist. The February price is called the "spring projected price" for crop insurance purposes. The APH yield is the actual production history yield.
Takes a fairly large bushel loss to trigger indemnity payment with RP-HPE type of crop insurance policy
For farmers with the RP-HPE type of crop insurance policy, the "actual" revenue (for crop insurance purposes) is their actual yield times the average October futures price. Edwards says since prices increased from February to October, it would take an actual corn yield at least 25% below the APH yield times the guarantee elected by the farmer, and an actual soybean yield at least 19% below the APH yield times the guarantee selected, to trigger an indemnity payment.
The indemnity payments under a RP-HPE policy will depend on the actual gross revenue or harvest price times actual yield. So it takes a fairly large bushel loss to trigger a payment under the RP-HPE type of policy, notes Edwards.