2017 Margin Protection Polk County, MN

Transcription

1 2017 Margin Protection Polk County, MN

2 Margin Protection (MP) Margin Protection (MP) is an area-based policy, using county level estimates of average revenue and input costs to establish the amount of coverage and indemnity payments. MP provides coverage for the insured s expected margin. MP takes into consideration changes in crop prices, county yields, and changing input prices.

3 Margin Protection (MP) Developed by Watts & Associates as a 508(h) product If you have an existing YP or RP policy, your Margin Protection policy must be with the same insurance provider No replant or PP provisions only insures planted acres Sales closing deadline is September 30, 2016

4 Where is MP Available for 2017? No changes for 2017 Corn all counties in Iowa Soybeans all counties in Iowa Wheat All counties in ND Selected counties in MN, MT, SD

5 MP Availability Map

6 2016 MP Policies Sold Commodity State Policies Sold Corn IA 41 Soybeans IA 50 Wheat MN, ND, SD 69 Rice AR, CA, LA, TX 43 Total 203

7 Basis of Coverage Expected Margin = Expected Revenue Expected Costs Expected revenue is the expected county yield multiplied by the margin projected price Expected costs based on inputs set by region Trigger Margin = Expected Margin x Coverage Level Coverage levels are 70% to 90% in 5% increments

8 MP Price Discovery

9 Wheat Input Cost Regions Region 1 Minnesota counties Region 2 ND counties in orange Region 3 ND counties in green

10 Wheat Input Costs Note: No changes from 2016

11 Wheat Input Discovery Note: Only change from 2016 is that Diesel now uses NYMEX instead of CME.

12 Loss Calculations Losses can occur when an insured cause of loss causes the Harvest Margin to be less than the Trigger Margin due to: A decrease in the county yield A decrease in the price An increase in the price of one or more inputs Or any combination of these factors

13 Loss Calculations Loss = Trigger Margin Harvest Margin Harvest Margin = Harvest Revenue Harvest Cost Harvest revenue is the final county yield multiplied by the margin harvest price Harvest cost is based on the inputs

14 Loss Calculations If there is a base YP or RP policy, the amount of any base policy indemnity is subtracted from the MP indemnity. This does not include replant or prevent plant payments. For example, if there is a $60,000 MP loss and a $50,000 RP loss, the MP policy will only pay out $10,000 ($60,000 - $50,000).

15 MP Premium Credit The amount of the credit for having a base YP or RP policy will depend on: The base policy projected price and volatility The producer s approved yield and coverage level How much the base policy coverage is estimated to pay out and whether the base policy will pay out in the same year as the MP policy The greater the odds of a base policy payment, the higher the credit The credit cannot be determined until the acreage report is processed next summer

16 MP Loss Payment Dates The final county yields will be determined prior to April 1 of the following year If an indemnity is due, the payment will be issued prior to May 1 of the following year

17 Polk Comparison 2016 Expected 2016 Harvest 2017 Expected as of 9/7/16 County Yield 58.2??? 60.2 Price $5.61 $5.04 $5.43 Urea $ $ $ MAP $ $ $ Potash $ $ $ Diesel $1.60 $1.25 $1.55 Interest 6.66% 6.41% 6.65% Total Fixed Costs $85.00 $85.00 $85.00 Total Variable Costs $75.22 $61.16 $55.73 Total Costs $ $ $140.73

18 Polk Expected Costs Percentage Input 2016 Expected Costs Percentage of Costs 2017 Expected Costs Seed $ % $ % Maintenance $ % $ % Chemicals $ % $ % Lubrication $3.00 2% $3.00 2% Urea $ % $ % MAP $ % $ % Potash $7.92 5% $5.05 4% Diesel $9.60 6% $9.30 7% Interest $5.12 3% $4.53 3% Percentage of Costs Totals: $ % $ %

19 How did MP turn out for Polk County in 2016? Expected revenue = $5.61 x 58.2 bu. = $ Expected costs = $ Expected margin = $ $ = $ Trigger margin = $ x coverage level Harvest revenue = $5.04 x county harvest yield Harvest costs = $146.17

20 How did MP turn out for Polk County in 2016? County Harvest Yield? Coverage Level Trigger Margin Harvest Margin Loss % $ $ $ % $ $ $ % $ $ $ % $ $ $ % $ $ $43.82 Note: 2016 premium at 90% was $14.98 before the premium credit

21 How did MP turn out for Polk County in 2016? County Harvest Yield? Coverage Level Trigger Margin Harvest Margin Loss % $ $ $ % $ $ $ % $ $ $ % $ $ $ % $ $80.63 $35.77 Note: 2016 premium at 70% was $5.30 before the premium credit

22 Polk Quotes for 2017 as of 9/7/16 Projected price = $5.43 Expected county yield = 60.2 Expected revenue per acre = $ Expected costs per acre = $ Expected margin per acre = $186.16

23 Polk Quotes for 2017 as of 9/7/16 Level Expected Margin Trigger Margin Producer Premium 70% $ $ $ % $ $ $ % $ $ $ % $ $ $ % $ $ $14.46 Note: Producer premium does not include any possible premium credit.

24 Polk Final County Yield History Year Final County Yield 2017 Polk Expected County Yield is 60.2 bu.

25 Should you buy MP in Polk for the 2017 crop year? How likely is it that input costs based on futures prices in April will be higher than: $186.37/ton for urea? $305.67/ton for MAP? $288.31/ton for potash? $1.55/gallon for diesel? How likely is it that the harvest price will be lower than $5.43 (based on MGE Sept 2017 futures in Aug)? How likely is it that the county wide yield for Polk county wheat in 2017 will be lower than 60.2 bushels?

26 Any Questions? Martinson Ag Risk Management 1555 S 43 rd St, Suite 105A Fargo, ND Office Phone: Website: Visit us at Big Iron on Sept. 13, 14 & 15 We will be in Building K, booth 42 Follow us on amy@martinsonag.com Cell: