1. The Marketing and Crop Insurance Risk Model: Show Them the Data Gary Schnitkey University of Illinois

2. www.farmdoc.uiuc.edu Partners Illinois Farm Risk Management Bureau Agency

3. www.farmdoc.uiuc.edu Approach Teach crop insurance and marketing Use a history of crop insurance and marketing payments (1972 – 2004) Adjust yields and prices to current conditions

4. www.farmdoc.uiuc.edu Logan County, Illinois, Farm Yields Trendline increase = 1.7 bu.

5. www.farmdoc.uiuc.edu Update Yields = Actual + Trendline Adjustment Actual Trendline Adjusted Year Yield Adjustment * Yield 2001 163 + 4 x 1.7 = 169.8 2002 160 + 3 x 1.7 = 165.1 2003 189 + 2 x 1.7 = 192.4 2004 188 + 1 x 1.7 = 189.7 * Equals years in the past x trendline increase

6. www.farmdoc.uiuc.edu Adjusted Logan County Yields

7. www.farmdoc.uiuc.edu Price Adjustment Take price changes from year –Harvest price – base price Add current base price plus price change to arrive at used price

8. www.farmdoc.uiuc.edu Used Price (2004 Base Price = $2.32) BaseHarvest Price Used Year Price Price Change Price * 2001 $2.46 $2.05 -$.41 $1.67 2002 2.32 2.52.20 2.28 2003 2.42 2.26 -.16 1.92 2004 2.83 1.99 -.84 1.24 * Equals price change + base price ($2.32)

9. www.farmdoc.uiuc.edu Meetings Discuss crop insurance and marketing 2 ½ hour meeting Agenda –Introduction, description of products –Marketing/crop insurance products –Recommendations

10. www.farmdoc.uiuc.edu Marketing/Crop Insurance Models Microsoft Excel spreadsheet Part of FAST, downloadable from farmdoc (www.farmdoc.uiuc.edu) Comes with a case farm for each county and crop (corn/soybeans) in Illinois User can modify yields and price

11. www.farmdoc.uiuc.edu Demonstration of Marketing and Crop Insurance Risk Model

12. www.farmdoc.uiuc.edu

14. Summary Farmers have judged as successful, likely because of transparency Years are important for seeing when payment occur Judge risk and returns