Comments on AFSC Spring Price Endorsement/Revenue Insurance

[charliep]

Just a note to highlight that the fall prices for the above programs are not available. Many crops got good payouts.

http://www.afsc.ca/Insurance/Market Prices/default.htm

Any comments on these programs? The areas I am most interested in hearing about are the basis levels used in the fall price calculations. I am also interested in comments as to whether the revenue insurance prices are neutral/do not overly favor any one crop (ala GRIP mid 1990's/lentils).

[charliep]

Error alter on first sentence.

Just a note to highlight that the fall prices for the above programs are NOW available.

Should make sure I have my second cup of coffee before posting.

[crusher]

Thanks Charlie for explaining the program to me this spring. I ended up only taking CPS SPE coverage. I note I have coverage on 22,000 bushels. Will that equate to about a $20,000 payment? I see canola and CPS just snuck under the 10% price drop for SPE. Sorry I haven't answered your questions. Got to get back to my Environmental Farm Plan and my 2004 CAIS.

[charliep]

I am going to back up three paces.

How many used the program this past spring?

Does the program have merit and therefore should be maintained?

Are there flaws in the program? What changes should be made?

[TOM4CWB]

Charlie;

The deductable should be offered at different levels i.e. 5,10,15,20% instead of just 10%

Grade loss needs to be an option in the program... i.e. a feed wheat grade loss compensation from the CWRS 2 grade base.

Revenue Insurance needs to more emulate the US loan rate.

It is better to have this program than nothing, for sure! Thanks!

[charliep]

Tom4cwb

Just looking a clarification on your thoughts to make more like US loan rate.

Does this mean separating revenue insurance from spring price endorsement? Whether a premium is paid? Should a change from replacement cost (market price times yield) to an approach where farmers insure the expense side?

Just looking for comments. This is a year when these programs provided the coverage they were supposed (with a note it highlighted some problems in the fall calculation process). With this in mind, what are your thoughts as to its future and your potential use of it.

[silverback]

You guys are smarter than me, but if there was some way to tie in a way to protect us from massive spikes in inputs that would sure be nice. Is that how the U.S. loan rate works? Is there a way that CAIS can be quicker to respond to spiking inputs or rapidly falling prices?

[TOM4CWB]

Charlie;

At our Alberta Barley Commission meeting today we dealt with the 10% trigger on Spring Price Endorsement payments moving a resolution to move to a 10% deductable instead.

It seems unfair that a 9.5% change down in price leaves the program participant with nothing, while a 10.5% movement downward in price yeilds the full 10.5% payment.

With a 10% deductable instead of the trigger, the crop with the 9.5% drop would be paid out 8.55% and the crop with the 10.5% drop in prices would be paid out 9.45%.

It looks like the present system cross subsidises premiums between crops, whereas a straight 10% deductable would not.

Now on Revenue Insurance, could you take a moment and explain if the same issues apply please?

[charliep]

silverback

The loan rate is a subsidy and does protect US farmers from low prices. Massive increases in nitrogen and fuel costs that US farmers will face this spring (same as here) are not covered (loan rates were set in the farm bill when it was passed and do not include any provision for a massive increase in cost). Given the US deficit and other issues with trade partners, I don't think there is any appetite to fork out additional money over and above what they get today. The US farmer is likely to react by increasing acres of lower production cost crops (i.e. soybeans).

CAISP is historical so hard to get payments out much more quickly (hopefully the administrative part can be smoothed out with less changes to rules). I note the Alberta idea is meant to maximise your historic margin (3 year average or olympic) in a payout year and rebuild your margins as quickly as possible in the better years that hopefully will follow.

Tom4cwb

There is no trigger as such on the revenue insurance side with the comment a farmer does not get the full payout (50 % normally and 70 % this past year). That inludes a potential payout when the current 10 % trigger is not hit on SPE. Happened with peas this year where the spring price was $120/tonne, the calculated fall price is $110 (not 10 % decline so no SPE) and the Revenue insurance price was $145/tonne. The program did generate a $25/tonne RI payment (70 % of the difference between $145 and $135/tonne).

Hopefully this helps.

[charliep]

Error alert second last sentence.

The program did generate a $25/tonne RI payment (70 % of the difference between $145 and $110/tonne).

Sorry about that.