Question

 

 

Revenue protection crop insurance payment calculation

 

A 100-acre corn farm with a 5—year average yield of 160 by/acre. The farm purchases a revenue protect insurance at the 80% coverage level. The projected price is $4.00/bu in spring.

 

 

a. What is the guaranteed revenue per acre in the spring?

 

b. If yields are 100 bushels per acre and harvest price average $ 4.00, What is the actual revenue, and what is the guaranteed revenue?

 

C. Can the farmer get any payment? If so, how much per acre?

 

d. If the yields are 100 bushels per acre and harvest price average $5.00, What will be the new guaranteed revenue and actual revenue?

 

e. Can the farmer get any payment? If so, how much per acre?

Answer 1

a) guaranteed revenue per acre = coverage level*average yield*projected price = 0.8*160*4 = $ 512

b) actual revenue = yeild*price =100*4 = $ 400

guaranteed reveue =$ 512

c) Yes, farmer will get payment. Because actual revenue is less than guaranteed revenue.

Payment per acre = guaranteed revenue per acre-actual revenue per acre = 512-400 = $ 112

d)

actual revenue = yeild*price = 100*5= $ 500

guaranteed reveue =$ 512

e) Yes, farmer will get payment. Because actual revenue is less than guaranteed revenue.

Payment per acre = guaranteed revenue per acre-actual revenue per acre = 512-500 = $ 12