2012 drought may affect 2013 crop insurance

Review opportunities to adjust loss in yield history

If you carve through the center of a plump watermelon and there’s nothing there, you realize something is wrong. Iowa, Missouri and eastern Kansas were the center of the drought “watermelon” this past summer. And for corn and soybean producers in these areas, 2012 was no picnic.

Those regions were hardest hit but all of the Corn Belt suffered a reduction from expected yield trends. For many growers, the effects of the devastating drought will hang on into 2013.
“For one thing, the drought’s impact on this year’s yields will affect next year’s insurance,” said Ray Massey, University of Missouri agricultural economist. “Drought-shortened yields reduce your APH (actual production history) yields, which determine your level of protection.”

Low crop yields in 2012 will cut the 2013 APH yields on many farms, Massey explained.

“However, there are two factors that may reduce the size of the APH yield declines,” he added. “First, a producer can request to have any yield in his yield history replaced by 60 percent of the T-yield [transition yield]. The T-yield is specific to a given crop in a county.”

You can find information about the T-yield for your county from USDA’s Risk Management Agency.
“Some farms will have actual yields below 60 percent of the T-yield,” said Massey. “They should request to have their actual yield replaced by 60 percent of their T-yield.”

As an example, take a Saline County, Mo., farm where the T-yield for corn is 154 bushels per acre. If the farm has a yield below 92.4 bushels per acre (154 bu. T-yield times 60 percent), that producer could ask to have his actual yield replaced by 92.4 bushels per acre. This substitution will limit the yield decline.

Say that same Saline County farm has a 10-year yield history where historic yields exactly match the county averages in each year. The farm would have had a 2012 APH yield of 154 bushels per acre. But if this farm has a corn yield below 92.4 bushels per acre in 2012, a yield of 92.4 bushels per acre could be used in the 2013 APH yield calculation, resulting in an APH yield of 148 bushels per acre. Thus, the farm’s APH would drop by only 6 bushels from 2012 to 2013, whereas using a lower actual yield than 60 percent of the T-yield would result in a larger APH yield decrease.

“The second factor limiting APH yield declines is the provision that year-to-year declines in APH yield are limited to no more than 10 percent,” Massey pointed out. “Take that Saline County farm with a 2012 APH yield of 154 bushels per acre: The 2013 APH yield cannot be below 138.6 bushels per acre [154 bu. APH times 90 percent].”
While APH yields will decline on many drought-afflicted farms, especially farms with yields that were 50 percent or less of those expected for 2012, the “Trend-Adjustment Endorsement” is available for 2013. This endorsement will act to increase yields used in guarantee calculations in the recognition that average corn and soybean yields have increased over time.