AgDM newsletter article, March 1998

Actual production history affects risk coverage

By: William Edwards, extension economist, 515/294-6161, wedwards@iastate.edu

One of the easiest but yet most critical actions you can take to improve your risk protection is to establish your own proven crop insurance yield. True risk protection must be based on the production potential of your own land.  Your Actual Production History (APH) is used to set the guarantees under all of the Federal Crop Insurance Corporation (FCIC) backed crop insurance plans except the Group Risk Plan.

Actual production history

Proving your APH yield requires records for a minimum of four years and a maximum of ten years for each land unit that is insured separately.  The yield records must be for continuous years, starting with the most recent year and continuing back in time.  Once a missing year is reached, no history prior to that date may be used.  For example, if you have nine years of production records spanning a ten-year period, only the years after the missing one are counted. 

You are not allowed to drop out a yield from one year because of poor production in that year.  The only exception is if the crop being insured was not planted in a certain year.  In that case a zero acreage report is submitted and you maintain continuous records even without data for that year.  This is important for growers who rotate crops.

Transition yields

If you do not have at least four successive years of records, you must use a transition or “T” yield for each missing year.  Each land unit has a different T yield.  It is equal to the Farm Service Agency (FSA) established yield for that unit times the county adjustment factor, which is usually a value between 90 to 100 percent.  Crops with no FSA yield, such as soybeans, use a default or “D” yield based on the historical county average yield. 

Growers with no records at all are assigned 65 percent of the T yield as their APH yield (see example).  Growers with a record for one year receive 80 percent of the T yield for the other three years.  With two records they receive 90 percent of the T yield, and with three records they receive 100 percent of the T yield for the one remaining year needed to calculate the APH.  The APH calculation is a simple average of each year’s yield and the adjusted T yields. 

If you are a new farmer or have never planted the crop to be insured you will receive 100 percent of the T yield for your APH.  If you continue to plant the crop for four years, the T yields will be replaced with your actual production each year.  New producers who have previously been  closely associated with farming a particular unit, such as children taking over a family farm, can use the previous operator’s records to establish an APH yield. 

Your production history will eventually build to ten years, after which your APH becomes a moving ten-year average yield.  As each new year of production history is added the oldest record is dropped out of the calculation.

Table 1.  Calculating an APH Yield (T yield of 120 bu.)

Years of Records

Four

Three

Two

One

None

Year

Yield

Year

Yield

Year

Yield

Year

Yield

Year

Yield

year 1

145

year 1

120 1/

year 1

108 2/

year 1

96 3/

year 1

 78 4/

year 2

98

year 2

98

year 2

108 2/

year 2

96 3/

year 2

 78 4/

year 3

117

year 3

117

year 3

117

year 3

96 3/

year 3

 78 4/

year 4

138

year 4

138

year 4

138

year 4

138

year 4

 78 4/

avg.

125

avg.

118

avg.

118

avg.

107

avg.

78


1/  120 bu. x

100%

=

120 bu.

2/  120 bu. x

90%

=

108 bu.

3/  120 bu. x

80%

=

96 bu.

4/  120 bu. x

65%

=

78 bu.

Cup, cap, and floor

When a new yield record is added to your APH history, the APH has a cup of ten percent, that is, your proven yield is not allowed to decline by more than ten percent in one year.  Likewise, when a bumper crop record is added, your APH cannot increase by more than a cap of 20 percent in one year.  A bumper crop yield will eventually work its way into the average because the following year the APH can again increase up to 20 percent.

The APH also has a floor equal to 70 percent of the T yield for growers with only a one-year record.  Growers with two to four years of yield records have a floor equal to 75 percent of the T yield.  For growers with five or more yield records, there is an 80 percent of T yield floor.  This prevents a year in which a producer has a severe crop failure from having a disproportionately large influence on the APH yield, especially when only a few years of yield records are available.

It is a good idea to establish or update your APH with a licensed crop insurance agent early.  The latest date that production records can be submitted for corn and soybeans in Iowa is April 29 each year.  Information used to prove crop yields can include sale receipts, farm or commercial storage records, and feed consumption records. Even if you only sign up for the minimum level of coverage, you will need to have an APH value for each of your farm units. Realistic proven yields will also allow you to evaluate higher levels of MPCI or coverage under one of the new revenue insurance contracts that have been recently introduced.

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