Frequently Asked Questions

Revenue Assurance

Jun 14, 2010

2011 update - This plan of insurance is no longer available beginning with the 2011 crop year. Refer to the 2011 Common Crop Insurance Policy for current applicable yield and revenue protection. The following questions apply to years prior to 2011.

Q: What is Revenue Assurance?
A: Revenue Assurance (RA) provides coverage to protect against loss of revenue caused by low prices or low yields or a combination of both.

Q: What crops are covered under RA?
A: RA is available in selected states and counties for feed barley, malt barley, canola/rapeseed, corn, cotton, rice, soybeans, sunflowers, and wheat.

Q: What is the projected harvest price?
A: The projected harvest price is the price used to determine the expected per-acre revenue and the per-acre revenue guarantee at the time of sale. The applicable crop provisions contain information that tells how to calculate the projected harvest price.

Q: When is the coverage level percentage selected?
A: The coverage level percentage must be selected by the sales closing date.

Q: What are the minimum and maximum coverage levels a producer may select?
A: The minimum coverage level is 65 percent and the maximum coverage level is 85 percent (in 5-percent increments only, e.g. 65 percent, 70 percent, 75 percent, 80 percent, 85 percent). For basic and optional units are allowed on all covered crops. The 80 and 85 RA coverage levels are only available where multi-peril crop insurance (MPCI) allows 80- to 85-percent coverage levels. For cotton, the 80- to 85-percent coverage levels are not allowed on basic and optional units.

Q: What unit structures are available for RA?
A: The unit structures available under RA are basic, optional, enterprise, and whole-farm. The definitions of basic and optional units are identical to those used with the standard MPCI program. An enterprise unit includes all insurable acres of a single RA crop in a county. A whole-farm unit includes all insurable acres of all RA spring crops in a county. Winter wheat cannot be included under a whole-farm unit. However, winter wheat can be included under an optional unit, basic unit or enterprise unit.

Q: Will the producer receive a premium adjustment if the producer enrolls all crop acreage in a county under enterprise units?
A: Yes. The size of the adjustment increases with the number of different sections in which the producer’s RA crop acreage is located, up to a maximum of 10 or more sections. (In geographic locations where Spanish, French, or military surveys exist and with farm section numbers, sections are defined as total insured acres divided by 640 acres.) The determination of the number of sections will be based on the producer’s acreage report.

Q: Will the producer receive a premium adjustment if the producer enrolls all RA crop acreage in a county under a whole-farm unit?
A: There is not a discount factor for whole farm units, however the effect of mixing multiple crops in a unit will result in some crops offsetting losses of others, so the per acre premium for a whole farm unit is generally lower than that of basic, optional or enterprise units.

Q: How are RA revenue guarantees established?
A: RA revenue guarantees are based on a farmer’s expected per-acre revenue, which depends on approved yields (established using standard APH rules), and projected harvest prices. The procedures used to calculate available revenue guarantees vary by the selected unit structure.

Q: How is a farmer’s expected per-acre revenue determined?
A: For basic and optional units, the expected per-acre revenue equals the approved APH yield times the projected harvest price. The expected per-acre revenue for an enterprise unit is the weighted average of expected per acre revenues for each of the optional or basic units in a county. The weighted average depends on the number of acres in each basic or optional unit, adjusted for share.

The expected per-acre revenue for a whole-farm unit is the weighted average of the expected per-acre revenue for each optional or basic unit for all insured crops in the county. The weighted average depends on the number of acres in each basic or optional unit, adjusted for share.

Q: How are unit revenue guarantees calculated?
A: The unit revenue guarantee for a basic or optional unit equals the per-acre revenue guarantee, multiplied by acres on the unit, multiplied by share. The unit revenue guarantee on an enterprise unit or a whole-farm unit equals the per-acre revenue guarantee times the total number of acres adjusted for share.

Q: What is the new price change limit between the projected harvest price and the fall harvest price?
A: A Special Provisions of Insurance (SPOI) statement was recently included in the 2009 crop year actuarial filing for all counties and all crops for RA. This statement sets a 200-percent price change limit between the projected harvest price and the fall harvest price. There is no downward price change limit for RA.

For RA, establishing the price change limit for upside price movement will have negligible impact, as upside price movement has not, as of the 2007 crop year, exceeded 200 percent in the previous program’s experience.

Q: How does the volatility of price affect the premium?
A: Volatility is required to calculate RA premiums and is a factor that measures the implicit volatility of prices. A preliminary estimate of this value is used in the premium quote software. Therefore, the final premium may vary from the quote based on the final estimate of the volatility value.

Q: How are unit indemnities calculated?
A: Production to count for each unit is valued at the fall harvest price for each crop. The method of calculating fall harvest price can be found in the applicable Crop Provisions. The revenue gain or loss is calculated for each line and then all lines are summed to the unit level to determine if there is an indemnity due.

Q: When is the final unit revenue guarantee computed for the insured?
A: Because the expected per-acre revenue for enterprise and whole-farm units depends on insured acres rather than estimated acres, the final unit revenue guarantee can only be computed after the insured's acreage report is completed because the weighted average depends on the number of acres in each basic or optional unit within the enterprise or whole-farm unit. The preliminary unit revenue guarantee and premium, based on estimated acreage at the sales closing date, can vary from the final unit revenue guarantee and premium based on the completed acreage report data.

Q: If the fall harvest price option is selected, will the revenue guarantee increase if the fall harvest price is greater than the projected harvest price?
A: Yes. If the producer purchases the RA fall harvest price option, the final revenue guarantee will be based on the fall harvest price if the fall harvest price is higher than the projected harvest price. Producers must choose the fall harvest price option by the sales closing date. The option is continuous unless canceled by the crop sales closing date. No additional premium is collected when the revenue guarantee is increased.

Q: What are the benefits of the fall harvest price option?
A: The fall harvest price option allows the producer to use the greater of the fall harvest price or the projected harvest price to determine the producer’s revenue guarantee. For basic, optional and enterprise units, this option applies to all insurable acres of a crop in the county. For the whole farm unit, this option will apply to all insurable acres of the crops insurable under RA in the county.

The RA fall harvest price option is designed to provide additional assurance to those producers who market their crop before harvest. These producers take on the additional risk that harvested bushels will not be sufficient to meet their contractual obligation. Such a production shortfall can have severe consequences if fall harvest prices are greater than projected harvest prices, because the producer will be forced to purchase bushels to meet his obligations at the higher price. The RA harvest price option provides additional coverage when the fall harvest price is greater than the projected harvest price, allowing the producer to fulfill contractual obligations from RA indemnities.

Q: Are RA premiums eligible for a government premium subsidy?
A: Yes. Producer premium subsidy factors are shown in the actuarial documents.

Q: When is the premium due?
A: Premium billing dates are contained in the crop special provisions.

Q: Are written agreements allowed under RA?
A: Yes, for land risks only, not practice and types of crops.

Q: Will RA be offered for high-risk land?
A: Yes, high-risk land can be insured under the RA policy. It is insurable using the high-risk map area factors shown in the actuarial documents. If the producer chooses a high-risk land exclusion option endorsement, the producer may insure the high-risk land under an MPCI policy with the Catastrophic Risk Protection Endorsement (CAT) from the same company. If the producer chooses both an RA and a CAT policy for a crop, the acres insured under each policy will be considered as a separate crop policy. The administrative fee for each policy is applicable. The application for this endorsement must be completed by the sales closing date and submitted to the company not later than twenty (20) days after the sales closing date.

Q: Is corn silage an insurable crop under RA?
A: RA policy provisions provide coverage for grain varieties of insured corn acres. Any acreage that is planted to a silage variety is not insurable under the RA policy. If the producer decides later to harvest a grain variety as silage, the crop insurance provider must be notified of the decision before harvest begins.

Q: How is production to count determined?
A: Production to count is the measurement (crop unit measurement such as bushels for corn) of the crop harvested and/or unharvested appraised production from the acreage in the unit.

Q: When does RA make indemnity payments for a loss of revenue?
A: If an indemnity payment is due under a Revenue Assurance policy, there are two different scenarios that are to be taken into consideration, if the fall harvest option was chosen or if the fall harvest option was not chosen:

1. Without the fall harvest option: Indemnity payments will be paid after the production to count has been determined and the Fall Harvest Price has been released. Preliminary indemnity payments may not be made for partial crop losses because the valuation of the production to count could lead to an overpayment situation. The only exception would be a total crop loss (no production to count).
2. With the fall harvest option: If the fall harvest price is not known at the time a loss is determined, then RA may pay adjusted losses in the following two segments:
1. An initial indemnity payment may be made based upon the projected harvest price.
2. Once the fall harvest price is known and if it is greater than the projected harvest price, any additional indemnity payment due will be paid. If the fall harvest price is known at the time a loss is determined, then RA will pay the loss based upon the greater of the projected harvest price or the fall harvest price.

Q: Does RA require the insured to have different responsibilities than other products in the event of a loss?
A: Farmers' responsibilities are the same as under standard MPCI coverage with one exception. If the insured's production to count multiplied by the crop fall harvest price is less than the unit revenue guarantee, the insured must give the company notice of an expected loss of revenue not later than 45 days after the date the crop fall harvest price is released.

Q: What price is used to calculate the replanting payment?
A: If replanting is authorized and the policy provisions have been met, the crop projected harvest price will be used in calculating the replant payment.

Q: How does RA handle prevented planting?
A: The rules governing prevented planting are based on MPCI rules with one exception. Prevented planting payments under MPCI are based on a guaranteed yield level whereas RA payments are based on a per-acre revenue guarantee. The applicable RA price used to compute the per-acre revenue guarantee is used to determine the prevented planting payment. If the Fall Harvest Price Option is chosen, and preliminary prevented planting payments are made before the Fall Harvest Price is released, payments may need to be recalculated following release of the Fall Harvest Price. RA provides on certain crops, a 60-percent prevented planting guarantee with an option to purchase 65 percent or 70 percent.

Q: Does prevented planting coverage work under RA if a producer selects a whole farm unit?
A: An example will best illustrate how prevented planting coverage works under a whole-farm unit. Suppose a producer has two 500-acre basic units. One of the units is to be planted to corn and one to soybeans and the producer purchases a whole-farm unit for the 1000 acres. Now suppose a producer is prevented from planting corn by the final planting date. The producer may proceed in several ways depending upon weather conditions, availability of seed, etc.

Option 1) The producer may plant corn after the final planting date and take a reduction in the per-acre revenue guarantee of 1 percent per day up to, but not exceeding 25 days for a 25-percent reduction to the per-acre revenue guarantee. A prevented planting payment would not be allowed.

Option 2) The producer may plant soybeans on the intended corn acres but there would be no prevented planting payment. If soybeans are planted in all of the 1000 crop acres the producer would not receive the whole-farm unit discount but may qualify for an enterprise unit discount if the acres are located in additional sections (in geographic locations where Spanish, French, or military surveys exist, sections are defined as total insured acres divided by 640 acres).

Option 3) The producer may choose not to plant any corn:

1. If the producer chooses the prevented planting payment that is included in the policy the producer would receive 60 percent of the per-acre revenue guarantee as a prevented planting payment on the 500 acres that was prevented from being planted to corn.
2. If the producer chooses a buy-up prevented planting payment option of 65 percent or 70 percent of the per-acre revenue guarantee, the producer would receive a prevented planting payment based on the selected buy-up.
3. To receive any prevented planting payment, the ground must remain black or planted to an approved cover crop.
4. To qualify for a prevented planting payment the producer must meet the qualifications as outlined in the RA policy provisions. Once the qualifications have been met payment will be made regardless of what any planted acreage produces.

Q: Is an RA application required for each county?
A: Yes. An application must be submitted for each county or all counties may be insured on one application if so designated.

Q: Does RA require an acreage report?
A: Yes. An acreage report similar to that required for MPCI is required for the premium and per-acre revenue guarantee to be determined.

Q: Is RA a continuous policy?
A: Yes. The RA policy is a continuous policy and provides coverage for succeeding years unless canceled by the insured or the insurance provider at a time specified in the crop provisions.

Q: Is durum wheat insured under RA?
A: Yes. However, the price per bushel guarantee for durum is the same as the price per bushel guarantee for hard red spring wheat.

Q: Is malting barley insured under RA?
A: A malting barley price and quality endorsement is available in some states. If the endorsement is available, an option for malt barley can be found on the actuarial documents. This endorsement multiplies the additional malt barley price or the malt barley additional price calculated using the producer’s malt contract, if applicable, by the approved yield of malting barley varieties and allows producers to buy additional coverage to protect against yield and quality losses. The endorsement does not provide coverage against declines in the market price of malting barley.

Q: Can malting barley qualify for an enterprise unit discount?
A: No. The RA malting barley endorsement treats all acreage in a county planted to approved malting barley varieties as one basic unit. However, the insured may qualify for an enterprise unit discount on the premium charged for the underlying RA spring feed barley policy if enterprise unit coverage is selected.

Q: Can I include malting barley in a whole-farm unit?
A: No. However, spring-planted feed barley can be included in a whole-farm unit if whole-farm coverage is selected.

Q: Can winter wheat be included in a whole-farm unit?
A: No. Only spring crops can be enrolled in a whole-farm unit.

Q: Can the producer put more production in a storage structure than is harvested from the unit without notifying the insurance provider?
A: The producer should notify the insurance provider of a potential loss and get a release prior to adding production from another unit to the storage structure because after the fall harvest price is released there may be a revenue loss even though there is not a production loss. The Basic Provisions state the insurance provider must be able to verify production from each optional unit until loss adjustment is completed.

Contact Information

For more information, please contact Leiann Nelson.