Good News on Revenue Assurance for Sunflower
Saturday, December 1, 2007
filed under: Marketing/Risk Management
Last year, USDA’s Risk Management Agency (RMA) announced that sunflower would not be part of the projected “Combo Policy” and that Revenue Assurance (RA) for sunflower would be eliminated as an option.
That decision has now been reversed.
Tim DeKrey, president of the National Sunflower Association Board of Directors, says that keeping RA for sunflower was a a top priority. “Our board and staff spent a lot of time on this issue, and we were very pleased to recently learn that sunflower RA will be continued,” DeKrey states.
One reason for discontinuing sunflower RA, according to RMA officials, was that only a limited number of sunflower RA policies had been written in recent years. DeKrey says that reality opened an opportunity to look at this issue first hand.
“We informed RMA that with the advent of NuSun® and the hulling markets, the historical relationship to the Chicago Board of Trade (CBoT) soybean oil contract no longer worked,” he points out. That formula divided the soybean oil contract by two and subtracted one. “Those numbers simply did not work with the higher-value NuSun — and we are very pleased that RMA agreed with us,” DeKrey notes. The new formula will add one to the divided number instead of subtracting.
The change, which goes into effect for the 2008 crop year, will make RA a much more viable producer choice compared to typical multi-peril coverage. For example, the 2007 RA spring price was $14.80, with a fall harvest price of $18.40. Had the new formula been in place this year, those prices would have been $17.05 and $21.40 respectively — levels that are more in line with current market prices.
In addition, confection sunflower will, for the first time, receive an upward price adjustment in relation to oil sunflower in order to compensate for higher confection values. RMA will calculate an upward adjustment based on the (oil-type) price as determined above, plus an adjustment as determined by RMA based on the difference between the USDA estimate available in January for the next harvest year of confection and oil-type season average prices.
For example, if the estimated season- average price for confections was $24.50 per cwt., and the season-average price for oil types was $20.00 per cwt., the adjustment for confections would be $4.50 per cwt. If the announced RA price for oils was $21.00, the actual RA price for confections would be $25.50.
Revenue Assurance coverage for sunflower is available in the following states for 2008: Colorado, Kansas, Minnesota, Montana, North Dakota and South Dakota. Unlike the multi-peril (APH) policy, RA coverage offers additional protection for price fluctuations during the crop year.
NSA’s DeKrey is very complimentary of RMA officials. “They really worked with us,” he says. “It was clear last spring that RA was not a choice for the sunflower producer. The coverage was not at all competitive with the RA for corn and soybeans. [RMA officials] listened to us and made the change. Most important, they kept the RA option for sunflower.” -- John Sandbakken