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The Marketing and Crop Insurance Risk Model: Show Them the Data

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

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The Marketing and Crop Insurance Risk Model: Show Them the Data

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

  2. Partners Illinois Farm Risk Management Bureau Agency

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

  5. 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 • 188 + 1 x 1.7 = 189.7 * Equals years in the past x trendline increase

  6. Adjusted Logan County Yields

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

  8. Used Price (2004 Base Price = $2.32) Base Harvest 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 • 2.83 1.99 -.84 1.24 * Equals price change + base price ($2.32)

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

  10. 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. Demonstration of Marketing and Crop Insurance Risk Model

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

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