1. 1 1 Copyright 2008, All Rights Reserved Dr. Norm Dalsted - Colorado State University Dr. G. A. Art Barnaby, Jr - Kansas State University and Risk Management Agency, USDA Phone (Norm) (970) 491-5627 Email: Norman.Dalsted@colostate.edu Phone (Art): (785) 532-1515 Email: barnaby@ksu.edu Check out our WEB at: AgManager.info Adjusted Gross Revenue-Lite (AGR-Lite)

2. 2 2 Copyright 2008, All Rights Reserved A Whole Farm Revenue Protection Plan A Whole Farm Revenue Protection Plan Provides protection against loss of revenue from natural and named disasters and/or market fluctuations Provides protection against loss of revenue from natural and named disasters and/or market fluctuations Approved for Producers in States of: Approved for Producers in States of: AK, CT, DE, ID, MA, MD, ME, NC, NH, NJ, NY, OR, PA, RI, VA, VT, WA, WV AK, CT, DE, ID, MA, MD, ME, NC, NH, NJ, NY, OR, PA, RI, VA, VT, WA, WV States approved to proceed with rating: States approved to proceed with rating: AZ, CO, HI, KS, MN, MT, NM, NV, UT, WI, WY AZ, CO, HI, KS, MN, MT, NM, NV, UT, WI, WY Adjusted Gross Revenue-Lite (AGR- Lite)

3. 3 3 Copyright 2008, All Rights Reserved KS - First Great Plains State States Approved for Sales of AGR-Lite

4. 4 4 Copyright 2008, All Rights Reserved Developed by PA Dept. of Agriculture (under section 508h of the crop insurance law) to make protection available to almost all producers. Developed by PA Dept. of Agriculture (under section 508h of the crop insurance law) to make protection available to almost all producers. Expanded to other states through respective State Depts. of Agriculture. Expanded to other states through respective State Depts. of Agriculture. Colorado is working with Farm Credit of Southern Colorado, Premier Farm Credit, Topeka RMA, and Kansas State University. Colorado is working with Farm Credit of Southern Colorado, Premier Farm Credit, Topeka RMA, and Kansas State University. Approved and backed by USDA. Approved and backed by USDA. Adjusted Gross Revenue-Lite (AGR-Lite)

5. 5 5 Copyright 2008, All Rights Reserved Adjusted Gross Revenue-Lite (AGR-Lite) STAND-ALONE POLICY: covering the whole farming operation STAND-ALONE POLICY: covering the whole farming operation OR OR UMBRELLA TYPE POLICY: selected crops can also be protected by Multiple Peril or revenue crop policies. UMBRELLA TYPE POLICY: selected crops can also be protected by Multiple Peril or revenue crop policies. Note: Loss payments from other insurance count towards AGR-Lite revenue guarantee. Note: Loss payments from other insurance count towards AGR-Lite revenue guarantee.

6. 6 6 Copyright 2008, All Rights Reserved What is covered under AGR-Lite Eligible Commodities Include: Eligible Commodities Include: Most Crops Most Crops Animal Production (includes aquaculture) Animal Production (includes aquaculture) Animal Products (milk, honey, wool, etc.) Animal Products (milk, honey, wool, etc.) Greenhouse Production Greenhouse Production Organic Production Organic Production

7. 7 7 Copyright 2008, All Rights Reserved Colorado Insurance Profile Colorado produced $4.53 billion in agricultural products in 2002. Colorado produced $4.53 billion in agricultural products in 2002. 94.4% ($4.277 billion) derived from 94.4% ($4.277 billion) derived from Cattle and calves - $2.63 billion Cattle and calves - $2.63 billion Grains - $490 million Grains - $490 million Hogs - $179 million Hogs - $179 million Milk and other dairy - $247 million Milk and other dairy - $247 million Hay and other production - $193million Hay and other production - $193million Nursery and greenhouse - $261 million Nursery and greenhouse - $261 million Vegetable and fruit - $277 million Vegetable and fruit - $277 million 74 % of agricultural production currently without risk protection. 74 % of agricultural production currently without risk protection.

8. 8 8 Copyright 2008, All Rights Reserved Top Uninsurable Commodities with Acreage Grass5,621,672 Grass5,621,672 Alfalfa908,218 Alfalfa908,218 Rye53,175 Rye53,175 Triticale37,641 Triticale37,641 Millet25,512 Millet25,512 Clover23,977 Clover23,977 Lespedeza23,303 Lespedeza23,303 Mixed Forage6,546 Mixed Forage6,546 Pecans2,953 Pecans2,953 Peas2,597 Peas2,597 Cattle/Calves Cattle/Calves 6,650,000 (Head) 6,650,000 (Head) Hogs & Pigs Hogs & Pigs 1,780,000(Head) 1,780,000(Head) Dairy Dairy 111,000(Head) 111,000(Head) Sheep Sheep 106,000 (Head) 106,000 (Head)

9. 9 9 Copyright 2008, All Rights Reserved What is covered under AGR-Lite Insurable Causes of Loss: Insurable Causes of Loss: unavoidable natural disasters, that occurs during the current or previous insurance year unavoidable natural disasters, that occurs during the current or previous insurance year including but not limited to, adverse weather, fire, insects, disease, wildlife, earthquakes, volcanic eruption, or failure of irrigation water supply, if applicable, including but not limited to, adverse weather, fire, insects, disease, wildlife, earthquakes, volcanic eruption, or failure of irrigation water supply, if applicable, market fluctuation (annual price change) that causes a loss in revenue during the current insurance year market fluctuation (annual price change) that causes a loss in revenue during the current insurance year

10. 10 Copyright 2008, All Rights Reserved AGR-Lite Does Not Cover: Negligence, mismanagement, wrongdoing Negligence, mismanagement, wrongdoing Failure to follow good management and irrigation practices Failure to follow good management and irrigation practices Water contained by any government, public, private dam or reservoir Water contained by any government, public, private dam or reservoir Failure or breakdown of irrigation equipment or facilities Failure or breakdown of irrigation equipment or facilities Theft and Vandalism Theft and Vandalism Inability to market the commodities due to quarantine, boycott or refusal of anyone to accept commodities Inability to market the commodities due to quarantine, boycott or refusal of anyone to accept commodities Lack of labor Lack of labor Failure of buyer to pay for commodities Failure of buyer to pay for commodities

11. 11 Copyright 2008, All Rights Reserved Coverage Choices & Limits Govt Subsid y CoveragePayment Minimum # of Commodities * Maximum Annual Income** LevelRate 59%65751$2,051,282 59%65901$1,709,401 55%75751$1,777,777 55%75901$1,481,481 48%80753$1,666,666 48%80903$1,388,888 *Must meet minimum income requirements. Commodity Grouping is available for the 80- percent coverage level. **The Maximum Annual Income represents the maximum approved farm revenue at each coverage level and payment rate to be eligible for AGR-Lite due to the $1,000,000 maximum liability allowed.

12. 12 Copyright 2008, All Rights Reserved AGR-Lite Protection Example ( With 1 or more commodity producing revenue) * 5 year avg. revenue = $300,000 * 5 year avg. revenue = $300,000 * 75% coverage level = $225,000 loss trigger * 75% coverage level = $225,000 loss trigger * Revenue produced = $100,000 * Revenue produced = $100,000 * Revenue loss = $125,000 * Revenue loss = $125,000 * 90% payment = $112,500 loss payment * 90% payment = $112,500 loss payment

13. 13 Copyright 2008, All Rights Reserved COMPARISON AGR PilotAGR-Lite Maximum Coverage $6,500,000$1,000,000 * Animal or Animal Product Limit 35 % of Allowable Income None MPCI RequiredYesOptional Coverage Level ** 65, 75, 80 Payment Rate 75, 90 Sales Closing Date 1/313/15*** * Increased from $250,000 ** 3 Commodity Requirement for 80 % Coverage *** For AGR Lite only – Cancellation/Termination dates 1/31 AGR Pilot vs AGR-Lite

14. 14 Copyright 2008, All Rights Reserved How is Coverage Established? Federal Income Tax Records Federal Income Tax Records Usually Schedule F Usually Schedule F Current Years Farm Plan Current Years Farm Plan Cash Flow Budget Cash Flow Budget

15. 15 Copyright 2008, All Rights Reserved Files 5 Consecutive Years of Schedule F or equivalent – Tax Forms

16. 16 Copyright 2008, All Rights Reserved When does insurance attach? Insurance begins 10 days after properly completed application is received. Insurance begins 10 days after properly completed application is received. If a commodity is damaged prior to purchasing insurance, no coverage is provided. If a commodity is damaged prior to purchasing insurance, no coverage is provided. If commodity is damaged after insurance is purchased, but before insurance year begins, coverage may be provided If commodity is damaged after insurance is purchased, but before insurance year begins, coverage may be provided

17. 17 Copyright 2008, All Rights Reserved How are Claims Calculated? Federal Income Tax Records reflect sales Federal Income Tax Records reflect sales Beginning and End of year inventories are used to determine change in value allocated to current year. Beginning and End of year inventories are used to determine change in value allocated to current year.

18. 18 Copyright 2008, All Rights Reserved Where AGR-Lite makes sense Otherwise uninsurable commodities are covered Otherwise uninsurable commodities are covered Organic production is protected at realistic prices Organic production is protected at realistic prices Direct Marketed production is protected at realistic prices Direct Marketed production is protected at realistic prices Umbrella over selected individual crop coverages Umbrella over selected individual crop coverages Bottom line for operation from severe economic loss Bottom line for operation from severe economic loss Individual protection based on personal yield, quality and price history plus low price protection, Individual protection based on personal yield, quality and price history plus low price protection, Provide an alternative for farmers with reduced APH caused by multiple years of drought. Provide an alternative for farmers with reduced APH caused by multiple years of drought.

19. 19 Copyright 2008, All Rights Reserved Things to Consider with AGR-Lite AGR-Lite does not include indemnity payments when calculating 5 years average Gross Income that will set future guarantees. AGR-Lite does not include indemnity payments when calculating 5 years average Gross Income that will set future guarantees. This has no impact on current years indemnity payment but it lowers future guarantees. This has no impact on current years indemnity payment but it lowers future guarantees.

20. 20 Copyright 2008, All Rights Reserved Things to Consider with AGR-Lite AGR-Lite does not adjust for feed or product purchased. AGR-Lite does not adjust for feed or product purchased. If farmers must buy fruit/vegetables/ product to meet their market commitments, this will lower Net Income but not Gross. If farmers must buy fruit/vegetables/ product to meet their market commitments, this will lower Net Income but not Gross. If it turns dry, and producers purchase hay to cover lost forage this loss may not be covered. This will lower Net Income but not Gross. If it turns dry, and producers purchase hay to cover lost forage this loss may not be covered. This will lower Net Income but not Gross. If producers normally sell excess hay, then it is covered because there will be reduced hay sales. If producers normally sell excess hay, then it is covered because there will be reduced hay sales.

21. 21 Copyright 2008, All Rights Reserved Example AGR-Lite 1 1 Prepared by Andrew Saffert (Graduate Student), Dr. Jeffery R. Williams, Dr. G. A. (Art) Barnaby, Jr., and Dr. Michael R. Langemeier, Professors, Department of Agricultural Economics, K-State Research and Extension, Kansas State University, Manhattan, KS 66502, Risk & Profit August 17 & 18, 2006, Phone 785-532-1515, e-mail – Barnaby@ksu.edu, or Andrew Saffert asaffert@mail.agecon.ksu.edu. 1 Prepared by Andrew Saffert (Graduate Student), Dr. Jeffery R. Williams, Dr. G. A. (Art) Barnaby, Jr., and Dr. Michael R. Langemeier, Professors, Department of Agricultural Economics, K-State Research and Extension, Kansas State University, Manhattan, KS 66502, Risk & Profit August 17 & 18, 2006, Phone 785-532-1515, e-mail – Barnaby@ksu.edu, or Andrew Saffert asaffert@mail.agecon.ksu.edu. 2 The expected income is generated from the annual farm plan similar to a cash flow budget for the upcoming year. 2 The expected income is generated from the annual farm plan similar to a cash flow budget for the upcoming year.

22. 22 Copyright 2008, All Rights Reserved Example AGR-Lite

23. 23 Copyright 2008, All Rights Reserved Example AGR-Lite 1

24. 24 Copyright 2008, All Rights Reserved Example AGR-Lite 1

25. 25 Copyright 2008, All Rights Reserved Example AGR-Lite 1 Average Trend raised to 4 th power

26. 26 Copyright 2008, All Rights Reserved Example AGR-Lite 1

27. 27 Copyright 2008, All Rights Reserved Example AGR-Lite 1 Average Revenue Times Trend

28. 28 Copyright 2008, All Rights Reserved Example AGR-Lite 1 Lesser of Average Trend and Expected Revenue

29. 29 Copyright 2008, All Rights Reserved Example AGR-Lite 1

30. 30 Copyright 2008, All Rights Reserved Example AGR-Lite 1

31. 31 Copyright 2008, All Rights Reserved Example AGR-Lite 1

32. 32 Copyright 2008, All Rights Reserved Example AGR-Lite 1

33. 33 Copyright 2008, All Rights Reserved Example AGR-Lite 1

34. 34 Copyright 2008, All Rights Reserved Example AGR-Lite 1

35. 35 Copyright 2008, All Rights Reserved Example AGR-Lite 1

36. 36 Copyright 2008, All Rights Reserved Example AGR-Lite 1

37. 37 Copyright 2008, All Rights Reserved Example AGR-Lite Premium AGR Liability minus MPCI Liability = AGR Premium Liability e.g. ($248,400 - 34,375 (MPCI) = $214,025) W/O MPCIWith MPCI AGR Liability 248,400248,400 Minus MPCI Liability 0 34,375 Premium Liability 248,400 214,025 Premium 7,651 6,596

38. 38 Copyright 2008, All Rights Reserved Things to Consider with AGR-Lite Market loan gains count against the AGR- Lite indemnity and are included in the 5 year average tax return revenue. This is a consistent policy. Market loan gains count against the AGR- Lite indemnity and are included in the 5 year average tax return revenue. This is a consistent policy. However, LDP payments are not included in the 5 year average nor do they count against the guarantee. However, LDP payments are not included in the 5 year average nor do they count against the guarantee.

39. 39 Copyright 2008, All Rights Reserved Things to Consider with AGR-Lite Currently cull cows are counted in the sales to count against the AGR-Lite guarantees and the 5 year average tax return revenue. Currently cull cows are counted in the sales to count against the AGR-Lite guarantees and the 5 year average tax return revenue. If the cows are sold as part of a herd reduction then the sales do not count against the guarantee. If the cows are sold as part of a herd reduction then the sales do not count against the guarantee.

40. 40 Copyright 2008, All Rights Reserved Things to Consider with AGR-Lite Currently the counter cyclical payment does not count against the AGR-Lite guarantee nor does it count in the 5 year average tax return revenue. Currently the counter cyclical payment does not count against the AGR-Lite guarantee nor does it count in the 5 year average tax return revenue. This works in the favor of farmers because it does not reduce AGR-Lite payments in a loss year caused by lower prices. This works in the favor of farmers because it does not reduce AGR-Lite payments in a loss year caused by lower prices.

41. 41 Copyright 2008, All Rights Reserved Adjusted Gross Revenue-Lite (AGR-Lite) AGR Lite is whole farm revenue coverage based on tax returns AGR Lite is whole farm revenue coverage based on tax returns Receives full subsidy Receives full subsidy Can be purchased in addition to MPCI/RA/CRC Can be purchased in addition to MPCI/RA/CRC Insures livestock, hay, specialty crops, & other uninsurable crops Insures livestock, hay, specialty crops, & other uninsurable crops Available in Kansas for 2007 with March 15 signup Available in Kansas for 2007 with March 15 signup All day risk workshops All day risk workshops

42. 42 Copyright 2008, All Rights Reserved Adjusted Gross Revenue-Lite (AGR-Lite) This presentation does not provide full details of policy provisions or approved procedures. This presentation does not provide full details of policy provisions or approved procedures. Producers should consult with a local agent for specific details and program requirement Producers should consult with a local agent for specific details and program requirement Farmers interested in AGR-Lite should talk to an agent ASAP because it will require time to gather all of the information for an application. Farmers interested in AGR-Lite should talk to an agent ASAP because it will require time to gather all of the information for an application. DO NOT WAIT UNTIL MARCH 15! DO NOT WAIT UNTIL MARCH 15!

43. 43 Copyright 2008, All Rights Reserved Thank You DR. NORM DALSTED – COLORADO STATE UNIVERSITY PHONE: 970-491-5627 EMAIL: Norman.Dalsted@colostate.edu DR. G.A. ART BARNABY, JR-KANSAS STATE UNIVERSITY PHONE: 785-532-1515 EMAIL: barnaby@ksu.edu Check out our WEB page at: http://www.AgManager.info Copyright 2008, All Rights Reserved

44. Details on data that farmers will need to apply for AGR-Lite! Dr. Norm Dalsted - Colorado State University Dr. G. A. Art Barnaby, Jr - Kansas State University and Risk Management Agency, USDA Phone (Norm) (970) 491-5627 Email: Norman.Dalsted@colostate.edu Phone (Art): (785) 532-1515 Email: barnaby@ksu.edu Check out our WEB at: www.AgManager.info

45. 45 Copyright 2008, All Rights Reserved Steps in the Process Step 1 – Application Step 2 - Determine Approved AGR and Underwriting Step 3 - Claim

46. 46 Copyright 2008, All Rights Reserved Forms Required At Time Of Application AGR-Lite uses AGR forms (or similar forms) 1. Application (FCI-12 AGR) 2. AGR-Lite Histories Calculation Worksheet 2. AGR-Lite Histories Calculation Worksheet 3. Complete Annual Farm Report (FCI 821 AGR) 4. A beginning Inventory Report (FCI 822 AGR or FCI 824 AGR) 5. Agricultural Commodity Profile for 75% or 80% coverage level for the last two crop years and the Actual Commodity Report at claim time.

47. 47 Copyright 2008, All Rights Reserved Application

48. 48 Copyright 2008, All Rights Reserved Step 1 - Determine Approved AGR The Approved AGR is used as a whole farm revenue basis upon which coverage is provided

49. 49 Copyright 2008, All Rights Reserved Forms Required At Time Of Application AGR-Lite uses AGR forms (or similar forms) 1. Application (FCI-12 AGR) 2. AGR-Lite Histories Calculation Worksheet 3. Complete Annual Farm Report (FCI 821 AGR) 4. A beginning Inventory Report (FCI 822 AGR or FCI 824 AGR) 5. Agricultural Commodity Profile for 75% or 85% coverage level for the last two crop years and the Actual Commodity Report at claim time

50. 50 Copyright 2008, All Rights Reserved AGR-Lite Histories Calculation Worksheet The AGR-Lite Histories Calculation Worksheet is used to calculate allowable income and expenses for the Farm Report

51. 51 Copyright 2008, All Rights Reserved Excluded income applies to: 5 Year History – Income and Expenses Intended Commodities Inventory Adjustments Accounts Receivable Adjustments Income and Expenses for Claims

52. 52 Copyright 2008, All Rights Reserved AGR-Lite – Allowable Expenses Allowable expenses - Farm expenses that are reported to the IRS for the production of agricultural commodities, including only those specifically listed…

53. 53 Copyright 2008, All Rights Reserved AGR-Lite Histories Calculation Worksheet – Income and Expenses Producer 20002001 340,000 345,000 7,00010,000 2000 2001 310,000319,000

54. 54 Copyright 2008, All Rights Reserved Forms Required At Time Of Application AGR-Lite uses AGR forms (or similar forms) 1. Application (FCI-12 AGR) 2. AGR-Lite Histories Calculation Worksheet 3. Complete Annual Farm Report (FCI 821 AGR) 4. A beginning Inventory Report (FCI 822 AGR or FCI 824 AGR) 5. Agricultural Commodity Profile for 75% or 80% coverage level for the last two crop years and the Actual Commodity Report at claim time

55. 55 Copyright 2008, All Rights Reserved Annual Farm Report The Approved AGR is determined using the Annual Farm Report The Farm Report includes 5 Years Allowable Income and Expense History - From Histories Calculation Worksheet Intended Commodity Report Report of Changes Adjustments to Approved AGR

56. 56 Copyright 2008, All Rights Reserved Annual Farm Report – Allowable Income / Expenses 1,725,0001,368,000 345,000 273,600 2000 2001 2003 2004 347,000 355,000 338,000 337,000 266,000 265,000 273,000 289,000 2002348,000 275,000

57. 57 Copyright 2008, All Rights Reserved Annual Farm Report Includes 5 Years Allowable Income and Expense History - From Histories Calculation Worksheet Intended Commodity Report Report of Changes Adjustments to Approved AGR

58. 58 Copyright 2008, All Rights Reserved Intended Commodities The commodities to be produced during the insurance year (see definitions) Commodity name No. Years Produced Intended Amount (acres, bu, etc) Expected Value Total Number Commodities Total Expected Income

59. 59 Copyright 2008, All Rights Reserved Annual Farm Report Includes 5 Years Allowable Income and Expense History - From Histories Calculation Worksheet Intended Commodity Report Report of Changes Adjustments to Approved AGR

60. 60 Copyright 2008, All Rights Reserved Annual Farm Report: Changes Must report any changes that affect the Approved AGR Farm changes may include: Tax Entities or Accounting Methods Ownership / Business Structure Crops/Crop Mix / Marketing Plans Size of Operation / Farming Practice / Type of Farming Activity

61. 61 Copyright 2008, All Rights Reserved Annual Farm Report Includes 5 Years Allowable Income and Expense History - From Histories Calculation Worksheet Intended Commodity Report Report of Changes Adjustments to Approved AGR

62. 62 Copyright 2008, All Rights Reserved Possible Adjustments To Approved AGR For Expanding Operations Income may be indexed if: At least one of the last two years of allowable income is greater than the average of the 5 years of allowable income, and Expected income for current year is higher than the 5 year average of allowable income.

63. 63 Copyright 2008, All Rights Reserved Annual Farm Report 2000 2001 2002 2003 2004 347,000 355,000 348,000 338,000 337,000 ProducerIndividual XXXXX WA Franklin 266,000 265,000 275,000 273,000 289,000 Cattle: Cow/Calf 0800 Alfalfa (Irr) 0850 Wheat (Irr) 0948 Dry Beans (Irr) 0047 Sweet Cherries 0099 6 6 3 3 6 92 head 200 ac 100 ac 55 ac 2.5 ac 685 lbs 9T/ac 120 bu/ac 26 cwt/ac 4/T/ac 63,020 lbs 1,800 T 12,000 bu 1,430 cwt 10T $1.00 $110 $3.35 $23 $1,200 $63,020 $198,000 $40,200 $32,890 $12,000 1,725,0001,368,000 345,000 273,600 345,000 None X x 2006 $346,110

64. 64 Copyright 2008, All Rights Reserved Program Vulnerability Protection Allowable Expenses If expenses for the insurance year fall below 70% of the average, the approved AGR (coverage) is reduced before the claim is settled. Example Approved AGR$100,000 Approved expenses 80,000 70% Approved Expenses 56,000 Actual Expenses 50,000 Adj. Approved AGR 94,000

65. 65 Copyright 2008, All Rights Reserved Forms Required At Time Of Application AGR-Lite uses AGR forms (or similar forms) 1. Application (FCI-12 AGR) 2. AGR-Lite Histories Calculation Worksheet 2. AGR-Lite Histories Calculation Worksheet 3. Complete Annual Farm Report (FCI 821 AGR) 4. A beginning Inventory Report (FCI 822 AGR or FCI 824 AGR) 5. Agricultural Commodity Profile for 75% or 80% coverage level for the last two crop years and the Actual Commodity Report at claim time.

66. 66 Copyright 2008, All Rights Reserved For Accrual Adjustment of Claims Beginning Inventory and Accounts Receivable Reports are required at the start of the insurance year* A beginning inventory of the amount - commodities not sold or otherwise disposed of A beginning accounts receivable report - income earned but not received * Jan 31 for a calendar year, last day of the first month of a fiscal year

67. 67 Copyright 2008, All Rights Reserved (Beginning) Inventory & Accounts Receivable Report X Producer Alfalfa (Irr) Wheat (Irr)2005 On Farm 200 T 5,000 bu WA Franklin 2006 X

68. 68 Copyright 2008, All Rights Reserved (Beginning) Animal Inventory/Accounting Worksheet 68 ProducerXXX2006 Fall 05 heifers 22300.9/270 5,940n/a5,940 Fall 05 steers 25300 1.1/330 8,250n/a8,250

69. 69 Copyright 2008, All Rights Reserved Forms Required At Time Of Application AGR-Lite uses AGR forms (or similar forms) 1. Application (FCI-12 AGR) 2. AGR-Lite Histories Calculation Worksheet 2. AGR-Lite Histories Calculation Worksheet 3. Complete Annual Farm Report (FCI 821 AGR) 4. A beginning Inventory Report (FCI 822 AGR or FCI 824 AGR) 5. Agricultural Commodity Profile for 75% or 80% coverage level for the last two crop years and the Actual Commodity Report at claim time.

70. 70 Copyright 2008, All Rights Reserved Commodity Profile Report For 75 and 80 percent coverage For last two years include: Commodity Acres Market percent by open vs. contracted

71. 71 Copyright 2008, All Rights Reserved Minimum Commodity Income Qualification For 80% coverage level determination only Formula: Divide 1.0 by the number of commodities on Farm Report x 0.333 x total expected allowable income Example:5 commodities on farm report $346,110 expected income (1/5 x 0.333 x $346,110) = $23,050

72. 72 Copyright 2008, All Rights Reserved AGR Coverage - for our example Approved AGR x Coverage Level x Payment Rate $345,000 x 0.80 x.90 =$248,400 (total asset protections for this insured) 80 % Coverage Level 90 % Payment Rate

73. 73 Copyright 2008, All Rights Reserved AGR-Lite Premium Calculation AGR Liability = $248,400 AGR-Lite Gross Premium $248,400 x.059 (AGR rate)* = $14,656 $248,400 x.059 (AGR rate)* = $14,656 AGR Lite Producer Premium USDA Subsidy Removed plus Administrative Fee ($14,656 - $7,035) + $30 = $7,651 (3.1% premium rate) * Rates based on 2006 AGR Franklin County. Rates vary by farm operation, commodity mix and county.

74. 74 Copyright 2008, All Rights Reserved If MPCI is Purchased, the AGR-Lite premium is reduced (optional) AGR Liability minus MPCI Liability = AGR Premium Liability e.g. ($248,400 - 34,375 (MPCI) = $214,025) AGR Liability minus MPCI Liability = AGR Premium Liability e.g. ($248,400 - 34,375 (MPCI) = $214,025) W/O MPCIWith MPCI AGR Liability 248,400 248,400 Minus MPCI Liability 0 34,375 Premium Liability 248,400 214,025 Premium 7,651 6,596 Note: MPCI Liability is not used in our example

75. 75 Copyright 2008, All Rights Reserved Claim Processing Claim Cannot be Settled Until: Taxes filed for insurance year Taxes filed for insurance year Other insurance claims covering insured commodities finalized Other insurance claims covering insured commodities finalized If an indemnity is to be paid, copies of the tax forms (IRS Schedule F 1040 or equivalent) used to calculate the 5-year histories and the year of the claim must be submitted If an indemnity is to be paid, copies of the tax forms (IRS Schedule F 1040 or equivalent) used to calculate the 5-year histories and the year of the claim must be submitted

76. 76 Copyright 2008, All Rights Reserved AGR-Lite Claim Prepare actual commodity report Prepare actual commodity report Review the Approved AGR – adjust for any farm changes (only downward adjustments allowed) Review the Approved AGR – adjust for any farm changes (only downward adjustments allowed) Apply expense adjustments if any Apply expense adjustments if any Determine allowable income from insurance year tax form Determine allowable income from insurance year tax form Adjust for uninsured causes, indemnities paid and disaster payments Adjust for uninsured causes, indemnities paid and disaster payments Adjust commodities purchased for resale Adjust commodities purchased for resale Make adjustments for inventory and accounts receivable Make adjustments for inventory and accounts receivable

77. 77 Copyright 2008, All Rights Reserved AGR-Lite Claim - An Actual Commodity Report must be filled out The Actual Commodity Report is used to verify actual intended commodities and production as a checkpoint on the claim.

78. 78 Copyright 2008, All Rights Reserved AGR-Lite Claim Revenue to Count for the Insurance Year (Line 26 Claim Form) Determine allowable income from tax form Adjust commodities purchased for resale Adjust for uninsured causes, indemnities paid and disaster payment

79. 79 Copyright 2008, All Rights Reserved Excluded Revenue Income for Claim Purposes Additional income from value added items Additional income from value added items Cooperative dividends (not related to commodity production) Cooperative dividends (not related to commodity production) Processing of insured commodities Processing of insured commodities Custom hire (machine work) Custom hire (machine work) Agricultural program payments Agricultural program payments Commodities not covered Commodities not covered Ad Hoc disaster payments Ad Hoc disaster payments

80. 80 Copyright 2008, All Rights Reserved AGR-Lite Claim Adjustments to Revenue to Count Make inventory adjustments (line 27 claim form) Subtract beginning inventory (price received/value) Add ending inventory (value first of month claim settled) Make accounts receivable adjustments (line 28 claim form) Ending accounts receivable (adjusted for costs) - beginning accounts receivable (adjusted for costs)

81. 81 Copyright 2008, All Rights Reserved Inventory Market Value The value of ending inventories will be the actual price received if the inventory is sold prior to the time the claim is finalized, Or The local market value on the first day of the month in which the claim is finalized if the inventory is not sold at the time the claim is finalized

82. 82 Copyright 2008, All Rights Reserved Inventory Local Market Value Policy Definition Value as reported by Ag Market News Service, if available, otherwise Value as reported by Ag Market News Service, if available, otherwise Agreed-upon average price by two commercial buyers (one from insured one from insurance provider) Agreed-upon average price by two commercial buyers (one from insured one from insurance provider) Value of animals will not exceed local market value for same breed and type being valued Value of animals will not exceed local market value for same breed and type being valued

83. 83 Copyright 2008, All Rights Reserved Inventories (Claims) Post–production Adjustments If post-production operations …. will result in a more accurate determination of the quantity and/or the local market value of inventoried commodities, such claims may be suspended and submitted for payment later than 60 days after insureds have filed their income tax forms. (see Policy 10(a)(4)) However, the latest date that claims (including suspended claims) may be submitted for payment remains 60 days after the first day of the seventh month after the end of the insurance year, unless an IRS filing extension is approved.

84. 84 Copyright 2008, All Rights Reserved (Ending) Inventory & Accounts Receivable Report 2006 Alfalfa (Irr) 2005 Wheat (Irr) 200 T 5,000 bu Producer X Franklin WA Alfalfa (Irr)2006 0 0 0 0 X 0 0 0 Wheat (Irr)2006 Dry Beans2006 Sweet Cherries2006 4,000 bu 0 0 200T 5,000 bu 4,000 bu S S C/O $100/T $3.60bu 0 0 [18,000] [20,000] 0 14.400 [23,600] (+) if revenue to count for tax year (-) if revenue not to count for tax year Individual

85. 85 Copyright 2008, All Rights Reserved (Ending) Animal Inventory/Accounting Producer Fall 05 heifers Fall 05 steers Fall 06 steers Fall 06 heifers 22 25 24 21 300.9/270 1.1/330 n/a 300 2401.00 1.10 5,760 6,930 5,760 6,930n/a 14,19012,690 14,19012,690[1,500] XXX2006 5,940 8,250

86. 86 Copyright 2008, All Rights Reserved AGR-Lite Claim For Indemnity 53021 XXXXXX Individual Produce r 2006 80% coverage level 90% payment rate 289,000273,6001.0560345,0000 80%276,000248,675 [25,100]0223,57552,42590%47,1827,651 39,531 2006 Added to Revenue to count: 14,400 06 wheat (c/o 2007); 5,760 06 heifers (c/o to 2007); 6,930 06 steers (c/o to 2007) + 27,090 2005 Removed from Revenue to count: [20,000] 05 alfalfa; [18,000] 05 wheat; [5940] 05 heifers; [8,250] 05 steers - 52,190 [25,100] Adjustments to Revenue to Count

87. 87 Copyright 2008, All Rights Reserved CLAIM DEADLINES Initial Notice(s) of LossWithin 72 hours Notice of loss after filing taxesWithin 15 days File taxesBy 1 st day of 7 th month after Insurance Year * Submit claim for paymentWithin 60 days after filing taxes (Policy a(4)) Claim suspensionMay submitted for payment later than 60 days after filing taxes… Pay IndemnityWithin 30 days after…. Tax Deadline * 60 Days Insurance Year End * unless an IRS filing extension is approved

88. 88 Copyright 2008, All Rights Reserved AGR- Lite Date Summary

89. 89 Copyright 2008, All Rights Reserved AGR-LITE SUMMARY Maximum coverage (liability) per policy is $1 Million Maximum coverage (liability) per policy is $1 Million 5-years tax records must be available for inspection at the time of application 5-years tax records must be available for inspection at the time of application Requires AGR-Lite Histories Calculation Worksheet Requires AGR-Lite Histories Calculation Worksheet 2-years required for Commodity Profile report (75 and 80% coverage) 2-years required for Commodity Profile report (75 and 80% coverage) Commodity grouping for increased coverage Commodity grouping for increased coverage MPCI is optional MPCI is optional No animal/animal product limit No animal/animal product limit 5-year tax records must be submitted for claim purposes 5-year tax records must be submitted for claim purposes Requires Actual Commodity Report at claim time Requires Actual Commodity Report at claim time

90. 90 Copyright 2008, All Rights Reserved Adjusted Gross Revenue-Lite (AGR-Lite) This presentation does not provide full details of policy provisions or approved procedures. This presentation does not provide full details of policy provisions or approved procedures. Producers should consult with a local agent for specific details and program requirement Producers should consult with a local agent for specific details and program requirement Farmers interested in AGR-Lite should talk to an agent ASAP because it will require time to gather all of the information for an application. Farmers interested in AGR-Lite should talk to an agent ASAP because it will require time to gather all of the information for an application. DO NOT WAIT UNTIL MARCH 15! DO NOT WAIT UNTIL MARCH 15!

91. 91 Copyright 2008, All Rights Reserved Thank You DR. NORM DALSTED – COLORADO STATE UNIVERSITY PHONE: 970-491-5627 EMAIL: Norman.Dalsted@colostate.edu DR. G.A. ART BARNABY, JR-KANSAS STATE UNIVERSITY PHONE: 785-532-1515 EMAIL: barnaby@ksu.edu Check out our WEB page at: http://www.AgManager.info Copyright 2008, All Rights Reserved