2021's hot, dry conditions continue to impact producers throughout Alberta and as we move through the harvest season, producers may want to note the following items.
Harvested Production Report
The Harvested Production Report (HPR) remains a key part of post-harvest reporting. This report, which must be filed by October 15 for perennial crop insurance and November 15 for annual crop insurance, gives the first indication if the client is in a production shortfall and eligible for coverage.
To speed up the review and calculation of losses, clients are encouraged to:
- submit their HPR as soon as possible after finishing harvest;
- submit the HPR by logging into their AFSC Connect account (HPR’s may also be submitted by email, fax, mail or in person at their local AFSC office); and
- sign up for the new direct deposit option by logging into their AFSC Connect account.
Clients who are in a claim position, may:
- qualify for faster payment through the payment by declaration option; or
- choose to receive an advance.
Payment by Declaration
When clients file their HPR, they are declaring their reported production for that crop year. If certain criteria are met, including the dollar amount of the shortfall and the grade (for annual crops) of the crop, clients can be compensated for their production loss through a payment by declaration. An on-farm inspection is not required and the full amount owing to the client can be paid in a more timely fashion. In most situations, clients can choose to defer the indemnity to the following year.
If, after the HPR has been filed, it is determined that crops are in a production shortfall, clients may want to take advantage of post-harvest advance options. These options allow eligible clients to receive a portion of their estimated shortfall as an early payment prior to adjusters completing an on-farm production review. Clients do not have to take an advance on all crops and can choose to defer their advances to the following year.
Hay and Export Timothy Hay crops will have the advance calculated based on 50 per cent of the estimated shortfall.
Annual crop post-harvest advance options include:
- a 50 per cent advance option where clients receive half of their estimated shortfall; or
- the preliminary payment option where eligible clients receive a higher percentage of their estimated shortfall.
Variable Price Benefit
Included with insurance is the Variable Price Benefit, a price protection feature, that increases coverage when fall market prices are higher than the spring insurance price. It applies to most crops and compensates the client when they have a production shortfall below their insurance coverage and the price increases by at least 10 per cent, to a maximum of 50 per cent, during the growing season. This benefit is also included in area-based programs such as Pasture and Silage Greenfeed insurance.
If a client’s crop has suffered grade degradation due to Mother Nature, AFSC will adjust total production for quality loss on most insured crops. If quality is a concern on annual crops, AFSC only accepts the receipted grade on sales from buyers who have a primary elevator or terminal elevator license from the Canadian Grain Commission. Clients who intend to sell grain to a grain dealer, private buyer, or process elevator before an AFSC adjuster preforms a post-harvest inspection should contact AFSC first for details on how to retain an acceptable sample. Export Timothy also has an adjustment made to harvested yields when the grade falls below the designated grade of ‘Choice’ as determined by the TrueGrade Hay Scan System.
A producer may decide to put the crop to another use other than harvest; they may not be able to harvest; or in some cases, they may choose to abandon the acres entirely.
Producers declaring unharvested or abandoned acres on their Harvest Production Report (HPR) are required to provide an estimated yield for those acres.
For perennial crops, the total baled production and the estimated yield on the acres declared abandoned are used to determine if there is a potential claim. AFSC will assess the reported production and estimated yields on abandoned acres when finalizing the claim.
For annual crops acres, the estimated yields on abandoned acres will be added to the harvested production to determine if there is a potential claim. AFSC will assess the reported production and estimated yields on abandoned acres when finalizing the claim. The estimated yields on unharvested acres and abandoned acres are used to determine an advance, preliminary payment or finalize a claim. Claims with a significant number of unharvested acres will be finalized after the unharvested acres are managed the following spring.
Future coverage impacts from losses
One feature of production insurance is cushioning of low yield records. Cushioning stabilizes coverage by reducing year-to-year fluctuations.
- Cushioning is a formula applied to a yield when a client’s production for the year is low.
- The purpose of cushioning is to minimize the impact of abnormally low yields on the client’s individual normal yield.
- For the purposes of calculating future coverage, the low yield will be replaced with 70 per cent of the individual normal yield for that crop in the year in question.
For most annual crops, due to improvements in varieties and management practices, yields generally increase over time. In order to ensure that individual coverage reflects this trend, individual yield records are adjusted by a trend factor.
- Older yield records will be increased more than recent yield records.
- Adjustments will be made by multiplying individual actual or cushioned yields by a trend factor.
- The trend factor is a number which reflects the average annual increase in yield for a specific crop in a specific risk area.
Q: The combination of extreme heat and dry conditions has severely impacted my insured crop. How will insurance help me with that?
Drought is a recognized insurable peril on dryland crops as is hail, fire by lightning and insect infestation, and so on. AFSC crop insurance covers clients at a selected bushel / kilogram amount on each individual crop. When your reported production for the total acres of the insured crop is below your selected coverage, AFSC will compensate you for production lost due to insurable perils on the difference between selected coverage less production, at the crop’s kilogram price.
Q: What is the process for abandoned acres?
If the value of your crop is less than the cost of harvesting, you may be considering abandoning the crop.
If you are planning to do something to the crop (e.g. spray out or plough down), contact AFSC branch office to request a preharvest inspection and report your intention for the field(s).
If you are simply doing nothing with it, you can report the acres as abandoned on your Harvested Production Report (HPR). An adjuster will confirm the lack of the crop when they complete the post-harvest inspection.
Q: What is the process for filing a Harvested Production Report (HPR)?
If you are combining part of the acres of the insured crop, it is important you file your HPR as soon as you are done harvest. AFSC will add the yield appraisal on the acres put to an alternate use to the combined production and grade. If the total production is less than your elected coverage, you are in a production shortfall and eligible for a post-harvest claim.
Q: Can I get an advance on my insurance benefits if I think I am in a loss position?
Yes, AFSC offers advances on production shortfalls to provide clients with partial payments ahead of an on-farm inspection. You will need to complete harvest and file your HPR to know if you are eligible for an advance payment. Full or partial payment are made from the information on your HPR, therefore, it is important that this information be as accurate as possible.
Q: Will my insurance compensate me when the yield is very low and it will cost more to harvest than the crop is worth?
Low Yield Allowance is a standard part of the production insurance program, and is meant for situations of extreme heat and severe drought. If the appraised yield falls below the established threshold level, AFSC can reduce the appraisal to zero, based on information gathered by the adjuster during the inspection. The appraised yield of the crop is used in the calculation of any subsequent indemnities.
The threshold values are meant to reflect the approximate cost of harvesting when a crop is not worth harvesting. In response to the extreme heat and dry conditions in 2021, Alberta has doubled the low yield threshold to allow for additional cereal or pulse crops to be salvaged for livestock feed. The Low Yield Allowance also applies to all harvested crops, based on the average of the whole crop. Combined crops will continue to have the established low yield allowances apply.
Q: Fall prices are way higher than the insurance prices set in spring, is there any compensation available?
Variable Price Benefit (VPB) is included for most crops and increases coverage when the fall market price rises from a minimum of 10 per cent up to a maximum of 50 per cent, and will compensate producers when there is a production shortfall below the insurance coverage guarantee. AFSC anticipates many crops will trigger for VPB this fall.
The fall market price of hay is based on Alberta Agriculture and Forestry’s hay price from the Farm Input Survey for the month of October. Annual crop fall prices are also a provincial price from specified sources; information on the fall market price methodology for annual crops can be found here https://afsc.ca/wp-content/uploads/2020/03/Market-Price-Methodology.pdf
Q: Will insurance help if I contracted my production and won’t be able to fill it because of the drought conditions?
There are cases where clients are in production loss situations and have contracts that need to be “bought out” or settled at the price specified in the contract. That price could be different than our fall market price which means that in some cases, the farm may experience a gap between our fall market price used for insurance settlement and the contract price. If the contracted price is higher, the client is responsible for paying out the difference. If the contracted price is lower, the client keeps the difference.
Q: The growing conditions this year were dismal and I’m worried my crop will not grade well. Am I covered for that?
Losses on insured crops are based on production and quality. For crop that is harvested, the total production is adjusted for any grade losses and compared to the total coverage to determine the amount of loss.
Designated grade is the grade established by the Canada Grain Commission (CGC) for varieties registered under the Canada Seeds Act, and assigned by AFSC for each insurable crop. AFSC uses the Canadian Grain Commission Grade Determinate Table as a standard for the designated grade for each crop, then converts that from kg/hl to lb/bu for the HPR.
AFSC determines a fall market price in order to compare the value of the harvested grade to the value of the designated grade to create a grade factor. Then, to compensate for grade loss, the affected production is multiplied by the appropriate grade factor, which decreases net production and increases potential indemnities.