Introduction to Yield Protection (YP)
Yield Protection (YP) is one of the most fundamental multi-peril crop insurance (MPCI) policies available to producers. Unlike Revenue Protection, which accounts for both price and yield fluctuations, YP focuses strictly on production losses. To succeed on the complete Crop exam guide, you must understand how to mathematically determine when an indemnity is triggered and exactly how much the insurance provider must pay.
YP policies use the producer's Actual Production History (APH) to establish a benchmark yield. If the actual harvested production falls below the production guarantee due to covered perils—such as drought, excessive moisture, or hail—an indemnity is paid. The value of that loss is determined by a Projected Price established by the Risk Management Agency (RMA) before the growing season begins.
Core Components for Calculation
Step 1: Determining the Production Guarantee
The first step in any YP calculation is establishing the Production Guarantee. This is the amount of the crop (usually in bushels, pounds, or tons) that the insurance policy is protecting. It is calculated by multiplying the producer's APH yield by the chosen coverage level.
- Formula: APH Yield × Coverage Level = Production Guarantee (per acre)
For example, if a farmer has an APH of 200 bushels per acre and selects a 75% coverage level, the Production Guarantee is 150 bushels per acre. If the farmer harvests 151 bushels, no indemnity is paid. If they harvest 149 bushels, a loss has occurred.
Exam Tip: The Projected Price
In Yield Protection policies, the Projected Price is fixed. Unlike Revenue Protection (RP), YP does not use a 'Harvest Price' to adjust the value of the crop if market prices increase during the season. For the exam, remember: YP = Fixed Price; RP = Floating Price.
Step 2: Calculating the Yield Shortfall
Once a loss occurs, you must determine the Yield Shortfall. This is the difference between what was guaranteed and what was actually produced (harvested plus any appraised production). You can practice these scenarios using our practice Crop questions.
- Formula: Production Guarantee - Actual Production = Yield Shortfall (per acre)
If the farmer from our previous example (150-bushel guarantee) harvests only 90 bushels per acre, the Yield Shortfall is 60 bushels per acre.
Step 3: Calculating the Final Indemnity
The final step converts the physical shortfall into a dollar amount. This involves the Projected Price and the producer's Share in the crop. The share represents the percentage of the crop the producer actually owns (often 100%, but it could be 50% in a share-rent agreement with a landlord).
- Indemnity Formula: (Yield Shortfall × Projected Price) × Share = Indemnity Payment
Continuing our example: If the Projected Price is $4.00 per bushel and the farmer owns 100% of the crop, the calculation is: (60 bushels × $4.00) × 1.00 = $240.00 per acre.
YP vs. RP: Indemnity Triggers
| Feature | Yield Protection (YP) | Revenue Protection (RP) |
|---|---|---|
| Trigger | Low Yield Only | Low Yield OR Low Price |
| Price Used | Projected Price Only | Higher of Projected or Harvest |
| Calculation Base | Production Shortfall | Revenue Shortfall |
Frequently Asked Questions
Under a Yield Protection (YP) policy, you receive no indemnity. YP only covers losses in physical production. Price drops are only covered under Revenue Protection (RP) policies.
Actual production includes all harvested grain plus any 'appraised' production. Appraisals occur if a crop is so damaged it isn't worth harvesting, or if the farmer intends to use the crop for another purpose (like silage) instead of grain.
The share percentage applies to both. The producer only pays the premium for their portion of the crop and only receives an indemnity based on that same percentage of ownership.