Trend-Adjusted Yield Crop Insurance 2015

Pennsylvania farmers have the option to use trend adjusted (TA) yields to increase their actual production history (APH) yields for corn and soybean.
Trend-Adjusted Yield Crop Insurance 2015 - Articles

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A farmer's APH is based on between 4 and 10 years of a yield data (for more information on how APH yields are calculated, see the publication "Crop Insurance for Pennsylvania Field Crops"). In calculating an APH, producers with long yield histories can be penalized because their older yields lag behind their more recent ones. In this situation, producers with less yield history can actually have higher average yields. The TA factor was designed to overcome this problem. It adjusts eligible yields, in qualifying APH databases, to reflect long-term increases in county historical yields.

The TA factor is equal to the estimated annual increase in county yield, and is based on county average yields determined by the National Agricultural Statistics Service (NASS) each year. Each yield reported for the individual insurance unit's APH history is adjusted upward by the trend adjustment factor. This number is then multiplied by the number of years that have passed since the yield was recorded.

Eligibility.

The TA option is available for either yield protection or revenue protection policies, at all levels of guarantee. A corn or soybean producer who wishes to participate must farm in an eligible county. Currently, 63 Pennsylvania counties have a TA yield factor for corn and 34 counties have a TA yield factor for soybeans. The corn or soybean producer would also need to have a verifiable corn or soybean yield in at least one of the past four years. Producers need to choose the TA yield endorsement for their existing or new insurance policy by the March 15 sales closing date for field crops.

The TA option is not available on catastrophic (CAT) or area risk protection insurance (ARPI) policies. Corn silage and organic corn and soybeans are also not eligible.

Adjusting your APH using the TA Option.

To calculate the impact on your APH by using the TA yield adjustment factor, you need to determine the TA for each crop year. Each insured unit within the same county will use the same TA yield adjustment factor. The TA factors for corn and soybeans for eligible Pennsylvania counties can be found in the Appendix at the end of this publication. In Pennsylvania, corn TA yield factors range from 0.18 to 1.11 bushels per acre per year (state average: 0.52) and soybean TA factors range from 0.28 to 0.49 bushels per acre per year (state average: 0.44).

Examples are presented in Tables 1 and 2 to show how a hypothetical farmer's APH yield based on a 10-year yield history can be increased by using the TA option. The 130 bushel APH for corn and the 42 bushel APH for soybean were determined by averaging the yields from 2005-2014. When using TA, each individual yield in the corn or soybean APH is adjusted using the appropriate county TA factor (in these examples, state average TA factors are used) before calculating the 10-year average. To calculate the TA for each of the 10 years, you use the following formula:

County TA factor * (2015 - Year i) = TA for year number i

In the corn example in Table 1, the trend adjustment for 2005 would be calculated by multiplying the TA yield factor by 10:

0.52 * (2015 - 2005) = 0.52 * 10 = 5.20

Similarly, the TA for 2006 would equal:

0.52 * (2015 - 2006) = 0.52 * 9 = 4.68

In certain cases a maximum or cap may need to be substituted for the calculated TA APH yield of given year for your insurance unit. The cap is equal to the highest yield in your yield history plus the TA factor. In the corn example in Table 1, the highest average yield (155.3 bushels/A) was in 2014. The TA APH in this case would be capped at (155.3 + 0.52) = 155.82 and therefore does not apply in this example. In the soybean example in Table 2, the highest average yield (51.6 bushels/A) was in 2013. The TA APH for an individual year in this case would be capped at (51.6 + 0.44) = 52.04 and would be substituted for the trend adjusted yield calculated for 2013 (52.48 bu/A).

Table 1 reveals that this corn farmer could increase the APH yield by 3 bushels per acre by electing to use the TA option. The example in Table 2 shows that this soybean farmer would increase the APH yield by 2 bushels per acre when using the TA option.

Table 1. Example of a trend adjusted yield for corn

Crop YearCrop YieldAnnual Trend
Adjustment
Trend Adjusted
Yield
2014155.30.52155.82
2013144.61.04145.64
2012134.51.56136.06
201190.92.0892.68
2010124.42.60127.00
2009145.23.12148.32
2008133.63.64137.24
2007128.74.16132.86
2006115.14.68119.78
2005128.05.20133.20
Average130.0132.9

TA cap (2014 yield +0.52 bushels) = 155.82

Final TA APH corn yield - 133 bu/A

Table 2. Example of a trend adjusted yield for soybean

Crop YearSoybean YieldAnnual Trend
Adjustment
Trend Adjusted
Yield
201447.40.4447.84
201351.60.8852.48
201250.11.3251.42
201126.91.7628.66
201037.82.2040.00
200949.02.6451.64
200835.43.0838.48
200744.43.5247.92
200630.23.9634.16
200547.24.4051.60
Average42.044.4

TA cap (2013 yield + 0.44 bushels) = 52.04

Final TA APH soybean yield = 44 bu/A

Years of Yield History.

Your total trend adjustment depends on the number of years of yield history you have to calculate your APH. To receive 100 percent of the trend adjustment, you will need to have 4 or more years of a yield history in the last 12 years. Producers with yields for 3 years out of the last 12 years will receive 75 percent of the trend adjustment. Producers with a yield history for 2 years out of the last 12 years will only receive 50 percent of the trend adjustment. Producers with yields for 1 year out of the past 12 years will only receive 25 percent of the trend adjustment.

Effect on Your Insurance Cost.

Your main choice when electing to take the TA Option will be either to: 1) benefit from the protection afforded by a higher insurance yield or revenue guarantee or 2) move to a lower level of coverage and take advantage of higher premium subsidies. A producer electing the TA option and keeping the same coverage level will likely pay a slightly higher premium because of the higher TA APH yield (because your premium cost is influenced by many factors, it is important to discuss all your options with your crop insurance agent). A benefit for some farmers may be the opportunity to use a TA APH and opt for a lower level of coverage that provides a similar yield or revenue guarantee. Although the overall level of protection would be similar, selecting a lower coverage level would be less expensive because of the way in which crop insurance premiums are subsidized by the Federal government. For example, if you are currently insuring your corn or soybeans at 85% coverage level, you may be able to get a similar level of protection at lower cost by using the TA option and insuring at the 80% level. The amount of subsidy varies greatly depending on the coverage level and insurance unit (ie. basic, enterprise, optional, or whole farm units) you select; contact your crop insurance agent for a more detailed evaluation of your coverage options.

More Information

For more information on crop insurance programs and availability visit:

Note: This publication is for educational purposes only and does not cover all aspects of the crop insurance products described. For specific information about crop insurance product and how you can use them to manage risk on you operation, contact your local crop insurance agent.

Appendix: Pennsylvania County Corn and Soybean Trend Adjusted Yield Factors for 2015

CountyCornSoybean
Adams0.830.44
Allegheny0.27*
Armstrong0.480.47
Beaver0.35n/a
Bedford0.25n/a
Berks0.450.46
Blair0.180.49
Bradford0.56*
Bucks0.64n/a
Butler0.480.46
Cambria0.32n/a
Cameronn/a*
Carbon0.30n/a
Centre0.200.40
Chester0.580.47
Clarion0.80n/a
Clearfield0.22*
Clinton0.23n/a
Columbia0.590.42
Crawford1.050.44
Cumberland0.650.48
Dauphin0.590.45
Delawaren/an/a
Elk0.44*
Erie1.110.42
Fayette0.410.45
Forest0.84*
Franklin0.540.45
Fulton0.22n/a
Greene0.30*
Huntingdon0.210.49
Indiana0.420.47
Jefferson0.70n/a
Juniata0.470.45
Lackawanna0.24*
Lancaster0.570.49
Lawrence0.630.48
Lebanon0.480.49
Lehigh0.380.35
Luzerne0.320.42
Lycoming0.54n/a
McKean0.91*
Mercer0.910.45
Mifflin0.470.46
Monroe0.40n/a
Montgomery0.50n/a
Montour0.550.43
Northampton0.470.28
Northumberland0.610.44
Perry0.540.44
Philadelphia**
Piken/a*
Potter0.79*
Schuylkill0.400.38
Snyder0.520.43
Somerset0.420.48
Sullivan0.57*
Susquehanna0.45*
Tioga0.66n/a
Union0.460.44
Venango0.87n/a
Warren1.04*
Washington0.27n/a
Wayne0.22*
Westmoreland0.350.48
Wyoming0.50n/a
York0.980.45

Notes:
n/a: trend adjusted yield option not available for this crop in this county.
* crop insurance is not available for this crop in this county.

Pennsylvania Crop Insurance Education & Participation Program.
A partnership of the USDA Risk Management Agency, the Pennsylvania Department of Agriculture and the Pennsylvania State University.

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