Do you feel comfortable marketing your crop prior to harvest knowing perils could lower your production, which would result in not having enough of the physical crop to deliver? Revenue Protection is available to help with the burden of pre-harvest marketing.
What is Revenue Protection?
Revenue Protection (RP) protects your crop and market fluctuations during the growing season. This happens by establishing a minimum revenue guarantee using a projected price established in February, and then comparing it to a harvest price established in October, allowing you to take advantage of the higher of the two. Knowing your minimum guarantee allows you to be more aggressive with marketing your crop and can provide a sense of security when taking advantage of higher market prices even before you have harvested your crop.
Determining Your Guarantee
The revenue guarantee is determined by taking your APH times your coverage level, times the Chicago futures average in February to give a minimum guarantee. Again during October, futures are averaged to determine a harvest price, which then determines your harvest guarantee. Although your guarantee can improve with a higher harvest price, your minimum guarantee cannot decrease if the harvest prices comes in lower.
Every year there are opportunities to market your crop prior to harvest, many times even prior to planting. The risk involved is that most contracts require delivery. If the crop can’t be delivered due to a production loss, the producer may have to buy grain, possibly at a higher price, to fill or buy out the contract. RP eliminates this risk by utilizing the new higher harvest price. This gives the producer the income needed to fill the contract, regardless if the physical crop can be delivered or not.
REMEMBER: RP does not guarantee a selling price for your crop and the guarantee is based off futures, not your local elevator price.
Determining your minimum guarantee can be crucial for your operation’s success while utilizing RP as a marketing tool for pre-harvest marketing. Please contact your AgCountry Insurance Specialist to discuss this more in-depth and applying it to your operation.