If this is your first time to our blog I would recommend reading up on our previous posts:

• Intro to APH
• APH and the YA Option
• Coverage Levels
• Unit Structure
• Projected and Harvest Prices
• Revenue Protection vs Yield Protection

Now that you have a basic understanding of Crop Insurance let’s now figure out how that translates into coverage. When it comes to Federal Crop Insurance there are numerous Options you can add to your Crop Contract.  We already discussed the YA Option in a previous article, and you will also need to have a firm grasp on the basics of APH in order to fully comprehend the YE option.

YE – Yield Exclusion

Assumptions

• Farmer’s APH for Summer Fallow Winter Wheat is 50 bushels per acre
• Farmer’s Coverage Level is 70%
• Projected Price for Winter Wheat is $4.74 per bushel
• Harvest Price for Winter Wheat is $3.74 per bushel
• Farmer already has elected the YAYC Options (formerly just YA)

Yield Exclusion (YE)

Here is the verbiage from our friends over at Rain & Hail:

The Yield Exclusion (YE) is a provision in the 2014 Farm Bill that allows farmers with qualifying crops in eligible counties to exclude low yields in exceptionally bad years (such as a year in which a natural disaster or other extreme weather occurs) from their production history when calculating yields used to establish their crop insurance coverage. Crop years are eligible when the average per planted acreage yield for the county was at least 50 percent below the simple average for the previous 10 consecutive crop years. It will allow eligible producers to receive a higher approved yield on their insurance policies through the federal crop insurance program.

My take on it:

When a Crop in a County qualifies – this is step 1, the Crop AND County need to qualify first at a County level – then you can elect to “use” aka opt-in or “not use” aka opt-out the YE option for any one APH database.

Let us say that in 2022 Winter Wheat in Cascade County qualifies under the YE provisions.  In 2022 your SF WW units did average to slightly above average, but your CC WW was bad.  If you have the YE option you could then elect to “use” aka opt-in the YE Option on your CC WW unit/s.  That means that when factoring your APH for those specific Units the year that qualifies will be excluded from your APH calculation.  As a result your APH would be higher then it would have been if you used the bad year of production.

Now at the same time on the SF WW units you had that year that did well, you could “not use” aka opt-out the YE Option for those APH databases.  That way those “good” production numbers would be used in that database’s APH calculation.

In Central Montana I have seen a YE bump of about 1-3 bushels per acre.  It is not much, but it is something.  Especially when you are seeing relatively high Projected Prices for certain crops.  In other parts of the Country the YE bump is pretty substantial.   Why does the size of the increase matter?  Premium cost.

How much does YE Cost?

Probably more important than what it does; is what does it costs.  In theory, it is free*!  That’s right, free*!   *DISCLAIMER – if you added the YE Option to your Crop Contract AND Opted-Out every year, it would not add any additional premium as your APH’s would not be affected.  You get to decide if you want to Opt-In or Opt-Out each year, but ONLY if you add it to your policy by the appropriate Sales Closing Deadline.

Whenever you Opt-In to use the YE Option is when the premium changes.  The easiest way to explain it is this – your premium rate is based on your “naked APH” and then multiplied by your Coverage.  Your Coverage is based on your “massaged APH” which is based on any and all Options you have, or have not, taken.

Your low naked APH has a higher rate then your high massaged APH, so by utilizing the YE Option you are taking a higher rate of premium times a higher coverage amount.  If the YE Option is only increasing your APH by 1-3 bushels per acre then you are not seeing a huge premium increase.  If the YE Option is increasing your APH by 10-20+ bushels per acre then the increase in premium is fairly substantial.

In my experience – YE has only been around since 2014 so only 9 years of experience at the time of this article – the YE option is worth it.  We are seeing more Crops/Counties qualify under this program, and the ability to increase your APH for a marginal premium increase is worth it, again – this is just my opinion.

How much work is it to Opt-In / Opt-Out?

Are you telling me that I have to go through every single database, every single year, for every single crop?  No, your agent does 😄.

Now, if you agent is as tech savvy as me – or has an awesome AIP like Rain & Hail – their system handles it for you.  I am certain other AIP’s do this as well, to be fair.    BUT and this is a HUGE BUT – you MUST elect to add the YE Option prior to the appropriate Sales Closing Deadline.

Please keep in mind that crops, Counties, rules, etc. may vary so please contact your crop insurance agent to discuss this Option, and any other Options you may be considering.  Crop Insurance is a highly customizable program, and you need to have an agent you can trust to walk you through it.

Continue to check out our blog as we dive deeper into Crop Insurance to help educate you.

Disclaimer

There are a lot of rules behind this program, so the above information is very high level.  You will want to take a deeper dive into understanding the program before making a purchasing decision.  Keep in mind the above information is for informational purposes only, and does not replace anything found in the Crop Insurance Handbook, Loss Adjustment Manual, RMA’s website, etc.  Always consult the Crop Insurance Handbook, Loss Adjustment Manual, RMA’s website, etc. before making a purchasing decision.  Any discrepancy between the above information and the policy is not intended.  The information provided in this article does not supersede policy and procedure.  Any changes to the policy and procedures may make this material obsolete.