Parson, Kansas —
Many Kansas wheat producers enrolled in a Revenue Assurance or Crop Revenue Coverage crop insurance program may be surprised to find they won't receive a payment even though they may experience a revenue loss. This is a concept that runs backward to a more normal year.
The challenge in 2010 is the wide basis levels at country elevators, says Dalton Henry, governmental and membership affairs specialist with the Kansas Association of Wheat Growers. Basis is the difference between the cash price a producer receives at a local grain elevator and the commodity futures price at the Kansas City Board of Trade.
"It appears the Harvest Price, as determined at the Kansas City Board of Trade, will be too high to trigger CRC and RA program payments, even though the cash price a producer may receive could be much lower than the Harvest Price," Henry explains.
The CRC and RA programs are intended to protect against yield and price losses, according to Rebecca Davis, director of the Topeka Regional Office of the Risk Management Agency, which governs the federal crop insurance programs.
"It is important to note the methodology of establishing the price component of revenue products," Davis says. "The Harvest Price is not the price a producer receives for his crop at the local elevator/processor. Instead, it is established by the average daily settlement prices for the Kansas City Board of Trade July hard red winter wheat futures contract."
Both CRC and RA plans establish the Base Price (called the Projected Harvest Price for RA) using the same formula. For winter wheat in Kansas, the Base Price is the simple average of the final daily settlement prices from August 15 to September 14 for the following year Kansas City Board of Trade July hard red winter wheat futures contract.
The Harvest Price (called the Fall Harvest Price for RA) is used to value the production to count. This value is calculated differently for the two Revenue Plans:
•CRC: the Harvest Price is the June average daily settlement price for the harvest year's Kansas City Board of Trade July Hard Red Winter wheat futures contract. Up-to-date average prices can be viewed at the following Website: www3.rma.usda. gov/apps/pricediscovery web/ActiveDiscoveryPeri ods.aspx
•RA: the Fall Harvest Price is the July 1 to July 14 average daily settlement price for the harvest year's Kansas City Board of Trade July hard red winter wheat futures contract.
"This is one of those years that is especially challenging," Henry explains. "Kansas Wheat is working on identifying these challenges, and staying in constant contact with RMA, insurance providers and wheat producers. One thing that this year is illustrating is the need for producers to be familiar with the terms of any crop insurance program they are enrolled in."
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