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

Partners Illinois Farm Risk Management Bureau Agency

Approach Teach crop insurance and marketing Use a history of crop insurance and marketing payments (1972 – 2004) Adjust yields and prices to current conditions

Logan County, Illinois, Farm Yields Trendline increase = 1.7 bu.

Update Yields = Actual + Trendline Adjustment Actual Trendline Adjusted Year Yield Adjustment * Yield x 1.7 = x 1.7 = x 1.7 = x 1.7 = * Equals years in the past x trendline increase

Adjusted Logan County Yields

Price Adjustment Take price changes from year –Harvest price – base price Add current base price plus price change to arrive at used price

Used Price (2004 Base Price = $2.32) BaseHarvest Price Used Year Price Price Change Price * 2001 $2.46 $2.05 -$.41 $ * Equals price change + base price ($2.32)

Meetings Discuss crop insurance and marketing 2 ½ hour meeting Agenda –Introduction, description of products –Marketing/crop insurance products –Recommendations

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

Demonstration of Marketing and Crop Insurance Risk Model

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