An RP revenue guarantee is calculated by multiplying that higher futures price by your Actual Production History (APH) and your chosen percentage of coverage. If the harvest price goes up in the fall, so does your guarantee. The premium you locked in on, however, stays the same. (APH x Highest Projected Price x % of Coverage = Revenue Guarantee)

Whether it is higher or lower, the Harvest Price is always the number used to calculate Actual Revenue. (Actual Yield x Harvest Price = Actual Revenue)

If you suffer a loss, indemnity payments are determined by taking subtracting the actual revenue from the revenue guarantee. (Revenue Guarantee – Actual Revenue = $/Acre Indemnity)

For Example:
Spring projected price = $4.22
Your APH = 160 Bushels/Acre
Your elected coverage = 80%

  • $4.22 x 160bu x 80% = $540.14 — This is your initial Revenue Guarantee

Let’s say you have a low yield of 110 bushels/acre:

  • 110bu x $5.10 = $561 – This is your Actual Revenue (Remember, Actual Revenue is always based on the harvest price.

Now, this next part is important, because if YOU have a low yield, it’s likely that MANY farmers will have a low yield. The low supply will then drive the price of the commodity up in the market:

With RP, if low supply drives the Harvest Price up to $5.10, your guarantee will also increase:

  • $5.10 x 160bu x 80% = $652.80 – This is your new Revenue Guarantee

Now, if you calculate your Revenue Guarantee versus your Actual Revenue:

  • $652.80 – $561 = $91.80/Acre – This is your $/Acre Indemnity

Without the harvest price option, your guaranteed revenue would have stayed at $540.14, and you would not have been able to claim a loss.