Revenue Protection

Revenue Protection is the revenue policy of the US federal program, in place since the 2011 crop year, when it absorbed three older products (CRC, RA, IP). It guarantees revenue per acre. The formula fits on one line. Guarantee per acre = APH yield × coverage level (50 to 85%) × the higher of the projected price and the harvest price. Both prices come from futures markets. For corn, the projected price is the February average of the December CBOT contract; the harvest price is the October average. The indemnity is the guarantee minus revenue to count, meaning actual yield valued at the harvest price. The policy therefore pays on a price drop alone, a yield loss alone, and the two combined. The harvest price feature has an effect reinsurers know well. In a widespread drought, national yields collapse and prices rally: the guarantee rises just as yields fall apart. A grower who must deliver bushels sold forward can then buy back at the high price. In 2012, corn went from about $5.68 in February to $7.50 in October. The RP-HPE variant (harvest price exclusion) removes that upward revision for a lower premium. RP accounts for the largest share of program premium. Not to be confused with the European income stabilization tool, which tracks farm margin.