Area Yield Protection

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Area Yield Protection (AYP)

AYP is available in select counties and states for the following crops: barley, corn, cotton, forage production, grain sorghum, peanuts, rice, soybeans, and wheat.

The guarantee and final production are based solely upon the performance of the yields countywide and do not reflect what happened on the grower’s farm. The insured could have a loss on their farm and not receive a payment if the county did not experience a loss. Vice versa, a grower could receive a payment if the county had a loss even if they did not experience a loss on their operation.

AYP provides a payment if the final yield for the county is less than the trigger yield elected by the insured. AYP uses a price that is established by averaging a futures contract price from a board of trade over a given period of time known as the “Discovery Period”. This price is called the “Projected Price” and the parameters outlining the futures contract, board of trade and discovery period can be found in the Commodity Exchange Price Provisions (CEPP).

Coverage Levels

The Coverage Level is used to calculate the Trigger Yield used to determine if an indemnity is due and ranges from 70% to 90% in 5% increments. The insured may elect a different coverage level for each crop, type and practice.

Protection Factor

The producer elects a Protection Factor between 80% and 120% in 1% increments (unless otherwise specified in the Special Provisions). This factor allows producers to purchase protection below, equal to or above the county average represented by the Expected County Yield. The producer may elect a different Protection Factor for each crop, type and practice.

AYP Indemnity Example

To be eligible for an indemnity on the AYP plan, the Final County Yield must be less than the Trigger Yield.

150 Expected County Yield
X 90% Coverage Level
135 Trigger Yield

Assume for this example the Final County Yield is 110, so an indemnity would be due.

Area Yield Protection Indemnity
Step 1: Calculate the Final Policy Protection
150 Expected County Yield
X $5 Projected Price
X 120% Protection Factor
X 100 Acres
X 100% Share
$90,000 Final Policy Protection ($900 per acre)
Step 2: Calculate the Payment Factor
25 Loss (135 Trigger – 110 Final County Yield)
/ 108 Trigger Yield of 135 – 27 (150 Exp. Cty. Yld X .18 Loss Limit Factor)
.231  
Step 5: Calculate the Indemnity
$ 90,000 Final Policy Protection
X .231 Payment Factor
$ 20,790 Indemnity