Crop Insurance 101: Price Discovery Periods
Chelsea Heatherington - Account Executive
I advise Iowans on the best insurance products for their risk tolerance and budget.
Multi-Peril Crop Insurance (MPCI) is a federally regulated product, with premiums being the same across all Approved Insurance Providers (AIPs). The USDA’s Risk Management Agency (RMA) adjusts crop insurance protection based on projected commodity prices and market risk.
Revenue Protection (RP) policies calculate coverage and guarantees based on market prices and individual yields. The market prices used are sourced from CME Group Inc., a leading global markets provider.
Spring “Projected” Price
For Iowa corn and soybeans, the price discovery period runs through the month of February. The Projected Price is set on March 1st, calculated as the average price of each commodity during February, multiplied by a volatility factor derived from the last 5 days of February. This figure, along with the farmer’s yield history, determines the level of revenue protection available for the crop year.
The price discovery period tracks the December CME Group futures contract for corn and the November CME Group futures contract for soybeans.
Fall “Harvest” Price
The price discovery period for Iowa corn and soybeans runs through the month of October. The Harvest Price for each is set on November 1st, based on the average price for October. The number of bushels required to prevent a loss is determined by the specific MPCI policy in place.
Happy Farming!