How Revenue Protection Works
RP is available for: Barley, Canola, Corn, Cotton, Dry Beans, Dry Peas, Grain Sorghum, Peanuts, Popcorn, Rice, Soybeans, Sunflowers, and Wheat.
Revenue Protection policies insure producers against yield losses due to natural causes and also insures the producer against loss in value due to decline in price or a combination of both.
RP uses a Projected Price, also known as Base Price, and Harvest Price to determine if a price loss has occurred during the growing season. At no time is the price the grower received for the crop considered. The Projected and Harvest Prices are determined by averaging a futures contract price from a board of trade over a given period of time known as the “Discovery Period”. There is a limit on upward movement of the Harvest Price – it cannot exceed 2 times the Projected Price – but there is no limit on downward movement. The parameters outlining the futures contract price, board of trade and discovery period can be found in the Commodity Exchange Price Provisions (CEPP).
The RP policy guarantee is based upon the higher of the Projected or Harvest Price and the guarantee will increase in a year in which the Harvest Price is higher than the Projected. There is no additional premium charged when this occurs.
Both the Revenue Guarantee and the Revenue to Count are based upon 100% of the Approved APH and 100% of the production harvested. The producer’s share of the crop is not taken into account until the total indemnity has been calculated.
The grower elects to insure a percentage of their historical average known as the Approved APH. Coverage levels available range from: 50% to 75% (80% & 85% levels are available for some crops) in 5% increments. Some crops allow for separate coverage levels by type or by irrigation practice.
The RP policy only provides for a 100% Price Election.
Prevented Planting and Replant
The policy provides for coverage for Prevented Planting and Replant Coverage, however, the Crop or Special Provisions may modify or eliminate the coverage.
Indemnities are calculated on each unit as elected by the grower. Unit structures available under the RP policy are:
- Optional Units (OU)
- Basic Units (BU), and
- Enterprise Units (EU – not available for all crops)
Production Loss – No Change In Price
Production Loss – Harvest Price Decline
Production Loss – Harvest Price Increase