Why is RP So Popular?

There are two main factors that make RP policies particularly appealing:

Comprehensive, Flexible Coverage

RP policies protect against both production AND revenue losses

RP policies insure against the following:

  • Natural outdoor disasters that decrease your crop production
  • Natural market fluctuations that decrease your revenue
  •  A combination of both a loss of yield and a loss of revenue

Harvest Price Option

With this option, you can let the futures work in your favor

Revenue Guarantee Based on Highest Priced Futures

  • If the fall price is lower than the spring price, you are still guaranteed the spring price

  • If the fall price is higher than the spring price, your guarantee increases – but your premium doesn’t!

Who benefits the most from RP coverage?

  • The Revenue Protection policy is especially beneficial to farmers who market their crop before harvest.  

Many farmers enter a forward contract to sell a portion of their production before harvest. Basically, the farmer for agrees to deliver a certain amount of product for a certain price. But, most forward contracts don’t pay the farmer until delivery –after harvest. So even if the farmer suffers crop loss, he is still obligated to fulfill the contract. So he must either:

  1. Deliver the commodity (meaning he’d have to purchase it at harvest price from someone else); or
  2. Financially settle the buyer’s contract, at contract price.

Generally in this scenario, the purpose of RP is to provide the farmer with sufficient funds to settle the forward contract.

  • RP is also particularly valuable to farmers who provide their cattle, hogs or other farm-raised animals with their own supply of grown feed.

If a disaster wipes out the farmer’s feed production there are two issues:

  1. The animals still need to be fed, so the farmer will have to enter the market to purchase the food.
  2. If disaster struck him, it likely struck on a widespread scale. The limited supply and high demand will then drive up the price he must pay for the food

A Revenue Protection plan provides these farmers with the funds to take care of their animals and the comfort of knowing they can afford higher costs even if feed prices rise.

  • RP protects you if the fall futures prices drop, making it potentially beneficial to all farmers.

If high projected yields drive the fall market prices down, you can still utilize the spring projected price to determine your revenue guarantee.

RP Policy Examples
Endorsement Options
Indemnity Calculator

Revenue Protection – Harvest Price Exclusion (RP-HPE)

You automatically receive the harvest price option when buying a Revenue Protection policy, but you can exclude it by selecting the Harvest Price Exclusion (HPE). If you apply this exclusion you will pay a lower premium rate, but your guaranteed revenue will always be based upon the spring projected prices.

If you don’t market your commodities and you don’t grow feed for your own animals, this may be a smarter option for you. You still retain the benefits if the fall price drops, and you … Need the rest of the copy

RP-HPE Policy Examples
Endorsement Options
Indemnity Calculator