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The Marketing and Crop Insurance Risk Model: Show Them the Data. Gary Schnitkey University of Illinois. Partners. Illinois Farm Risk Management Bureau Agency. Approach. Teach crop insurance and marketing

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the marketing and crop insurance risk model show them the data

The Marketing and Crop Insurance Risk Model: Show Them the Data

Gary Schnitkey

University of Illinois

partners
Partners

Illinois Farm Risk Management

Bureau Agency

approach
Approach
  • Teach crop insurance and marketing
  • Use a history of crop insurance and marketing payments (1972 – 2004)
  • Adjust yields and prices to current conditions
logan county illinois farm yields
Logan County, Illinois, Farm Yields

Trendline increase = 1.7 bu.

update yields actual trendline adjustment
Update Yields = Actual + Trendline Adjustment

Actual Trendline Adjusted

Year Yield Adjustment * Yield

2001 163 + 4 x 1.7 = 169.8

2002 160 + 3 x 1.7 = 165.1

2003 189 + 2 x 1.7 = 192.4

  • 188 + 1 x 1.7 = 189.7

* Equals years in the past x trendline increase

price adjustment
Price Adjustment
  • Take price changes from year
    • Harvest price – base price
  • Add current base price plus price change to arrive at used price
used price 2004 base price 2 32
Used Price (2004 Base Price = $2.32)

Base Harvest Price Used

Year Price Price Change Price *

2001 $2.46 $2.05 -$.41 $1.67

2002 2.32 2.52 .20 2.28

2003 2.42 2.26 -.16 1.92

  • 2.83 1.99 -.84 1.24

* Equals price change + base price ($2.32)

meetings
Meetings
  • Discuss crop insurance and marketing
  • 2 ½ hour meeting
  • Agenda
    • Introduction, description of products
    • Marketing/crop insurance products
    • Recommendations
marketing crop insurance models
Marketing/Crop Insurance Models
  • Microsoft Excel spreadsheet
  • Part of FAST, downloadable from farmdoc (www.farmdoc.uiuc.edu)
  • Comes with a case farm for each county and crop (corn/soybeans) in Illinois
  • User can modify yields and price
slide11
Demonstration of

Marketing and Crop

Insurance Risk Model

summary
Summary
  • Farmers have judged as successful, likely because of transparency
  • Years are important for seeing when payment occur
  • Judge risk and returns