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Crop Insurance - County Protection Plans

Overview | Individual Protection Plans | County Protection Plans

GRP – Group Risk Plan is another product that guarantees yield only. However, it has a whole different protection philosophy. That philosophy is that when other farmers in your county suffer a production loss, chances are you will too. This product has absolutely nothing to do with your personal production. It is solely based on county production. Rather than deriving a guarantee from your production history, GRP looks at a 30 year trend of yield data taken from the National Agricultural Statistics Service (NASS) for that county. A producer then selects a coverage level (70% - 90%) of that expected county yield, and a percent of the total coverage available per acre (price x exp. Yield x 150%) Months after harvest has taken place the NASS determines the actual county yield. If the actual yield is below the trigger yield (coverage level x expected yield), then the producer collects an indemnity.

Example:
Expected County Yield: 160 bu/acre
Coverage Level: 90% Trigger / 100% Price
Base Price: $2.35 (Set by RMA)
Trigger Yield: (160 bu x 90%) = 144 bu/acre
Total Protection: (160 bu x 2.35 x 150%) = $564/acre
*The notion that you are insuring $564/acre is theoretical. The only way you
Could collect the full amount is if the county produced 0 bu/acre.

Actual County Yield: 135

Indemnity:
144 Trigger – 135 Actual = 9 bu
9 bu / 144 bu Trigger = 6.25% Loss
6.25% x $564 = $35.35/ acre

GRIP – Group Risk Income Protection has the same wide-spread risk philosophy as GRP. Only with GRIP, you can protect from a loss in county revenue as well as yield. Instead of a trigger yield, you will have a trigger revenue. (Similar to CRC) This product has been getting a lot of attention because of some of the high payments it has generated in past years. However, county based products are not for every operation. We recommend that before you consider this product, you compare your production history with your county’s. For a safer investment, you want to ensure your yields track with the county. Meaning your good years should coincide with good years in the county, and your bad years should coincide with the bad years in the county.

Once again, the RMA is using 30 years of trended yield information from NASS to come up with an expected county yield. The producer selects a trigger level and a percent of the total coverage available. Similar to CRC and RA, the base price used for the guarantee is futures based. The spring price is figured using the February average of December futures. Also, like the other revenue products, you can select a Harvest Revenue Option (HRO) for GRIP. This gives the product upside price protection. Should commodity prices increase in the fall, so will your guarantee. This option comes at an added cost. The fall price is determined by taking the October average of December futures.

Example:
Expected County Yield: 165 bu/acre
Spring Price: $2.40/ bu
Coverage: 90% Trigger / 100% Price
Trigger Revenue: (165 x $2.40 x 90%) = $356.40/acre
Total Coverage: (165 x 2.40 x 150%) = $594 / acre

Actual County Yield: 130
Fall Price: $2.75
Fall Revenue = $357.50/acre

Indemnity Payment:

GRIP without HRO = $0 since Fall Revenue exceeds Trigger Revenue

GRIP with HRO = $85.08 / acre
(165 x 2.75 x 90%) = $408.38 (new trigger)
(165 x 2.75 x 150%) = $680.63 (new total coverage)

$408.38 (trigger) - $357.50 (fall rev.) = $50.88
50.88/408.38 = 12.5% Loss
12.5% x $680.63 = $85.08/ acre

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