Each year RMA uses certain futures and other cash prices to come up with the projected price for crop insurance and the final harvest price.
As an example, corn projected prices are based on the December contract traded during the month of February. RMA takes the ending value of the contract and rounds the average to the nearest cent. It then takes the average of those prices to come up with the projected price for crop insurance. It also determines the amount of volatility based on the trading activity during that month. Volatility leads to higher premiums if it is high and lower premiums if it is low.
For example, for this year during February, there was very little difference between the high and low price during most of the month. Between February 1 and February 21, the high was $5.98 and the low was $5.91. It was during the last four trading days that the price finally dropped to $5.70 on February 28 which dropped the final discovery price to $5.91.
This led to a volatility factor of .18 instead of .23 for the 2022 crop.
The harvest price discovery is during the month of October. So far this year, we have seen a low of $4.86 and a high of $5.05 set last Thursday. The current average price is $4.92 and we would expect the final harvest price to be somewhere between $4.85 and $4.95.
If the final harvest price is $4.90, this would be 17% lower than the projected price which would lead to some crop insurance proceeds for those farmers who elected 85% coverage assuming their final yield is no more than their APH.
It provides information as follows:
The year,
The commodity,
The type of commodity (such as spring wheat, winter wheat, durum, etc.),
The practice (conventional, organic, etc.)
The state, and
The sales closing date
After you click on all of those details, it then shows the projected and harvest price, plus the volatility and the daily trade details.
