Adjusted Gross Revenue-Lite

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Adjusted Gross Revenue-Lite (AGR-Lite)
Dr. G. A. “Art” Barnaby, Jr
Kansas State University and Risk
Management Agency, USDA
Phone: (785) 532-1515
Email: [email protected]
Check out our WEB at:
AgManager.info
Copyright 2008,
All Rights Reserved
1
Adjusted Gross Revenue-Lite (AGRLite)
A Whole Farm Revenue Protection Plan
 Provides protection against loss of revenue from
natural and named disasters and/or market
fluctuations
 Approved for Producers in States of:
 AK, CT, DE, ID, MA, MD, ME, NC, NH, NJ, NY,
OR, PA, RI, VA, VT, WA, WV
 States approved to proceed with rating:
 AZ, CO, HI, KS, MN, MT, NM, NV, UT, WI, WY

Copyright 2008,
All Rights Reserved
3
States Approved for Sales of AGR-Lite
KS - First Great Plains State
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All Rights Reserved
4
Adjusted Gross Revenue-Lite (AGR-Lite)
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Developed by PA Dept. of Agriculture (under section
508h of the crop insurance law) to make protection
available to almost all producers.
Expanded to other states through respective State
Depts. of Agriculture.
Kansas is working with Frontier Farm Credit (FFC), KS
State Department of Agriculture, Topeka RMA, KFMA,
and Kansas State University.
Approved and backed by USDA.
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All Rights Reserved
5
Adjusted Gross Revenue-Lite (AGR-Lite)
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STAND-ALONE POLICY: covering the whole
farming operation
OR
UMBRELLA TYPE POLICY: selected crops can also
be protected by Multiple Peril or revenue crop
policies.
Note: Loss payments from other insurance
count towards AGR-Lite revenue guarantee.
6
What is covered under AGR-Lite

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All Rights Reserved
Eligible Commodities Include:
 Most Crops
 Animal Production (includes aquaculture)
 Animal Products (milk, honey, wool, etc.)
 Greenhouse Production
 Organic Production
7
Kansas Insurance Profile
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Kansas produced $8.75 billion in agricultural
products in 2002.
98.8% ($8.65 billion) derived from
 Cattle and calves - $5.7 billion
 Grains - $2.1 billion
 Hogs - $297.5 million
 Milk and other dairy - $248.5 million
 Hay and other production - $225million
 Nursery and greenhouse - $55.5 million
74 % of agricultural production currently without
risk protection.
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Top Uninsurable Commodities with
Acreage
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Grass
Alfalfa
Rye
Triticale
Millet
Clover
Lespedeza
Mixed Forage
Pecans
Peas
5,621,672
908,218
53,175
37,641
25,512
23,977
23,303
6,546
2,953
2,597
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Cattle/Calves
 6,650,000 (Head)
Hogs & Pigs
 1,780,000(Head)
Dairy
 111,000(Head)
Sheep
 106,000 (Head)
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What is covered under AGR-Lite

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Insurable Causes of Loss:
 unavoidable natural disasters, that occurs
during the current or previous insurance year
 including but not limited to, adverse
weather, fire, insects, disease, wildlife,
earthquakes, volcanic eruption, or failure of
irrigation water supply, if applicable,
 market fluctuation (annual price change) that
causes a loss in revenue during the current
insurance year
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AGR-Lite Does Not Cover:
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Negligence, mismanagement, wrongdoing
Failure to follow good management and
irrigation practices
Water contained by any government, public,
private dam or reservoir
Failure or breakdown of irrigation
equipment or facilities
Theft and Vandalism
Inability to market the commodities due to
quarantine, boycott or refusal of anyone to
accept commodities
Lack of labor
Failure of buyer to pay for commodities
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Coverage Choices & Limits
Gov’t
Subsid
y
Coverage
Payment
Minimum #
of
Commodities
*
Maximum Annual
Income**
Level
Rate
59%
65
75
1
$2,051,282
59%
65
90
1
$1,709,401
55%
75
75
1
$1,777,777
55%
75
90
1
$1,481,481
48%
80
75
3
$1,666,666
48%
80
90
3
$1,388,888
*Must meet minimum income requirements. Commodity Grouping is available for the 80percent coverage level.
**The Maximum Annual Income represents the maximum approved farm revenue at each
coverage level and payment rate to be eligible for AGR-Lite due to the $1,000,000 maximum
liability allowed.
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AGR-Lite Protection Example
( With 1 or more commodity producing
revenue)
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* 5 year avg. revenue = $300,000
* 75% coverage level = $225,000
loss trigger
* Revenue produced = $100,000
* Revenue loss
= $125,000
* 90% payment
= $112,500
loss payment
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AGR Pilot vs AGR-Lite
COMPARISON
AGR Pilot
AGR-Lite
Maximum Coverage
$6,500,000
35 % of
Allowable
Income
$1,000,000 *
None
Yes
Optional
65, 75, 80
65, 75, 80
75, 90
1/31
75, 90
3/15***
Animal or Animal
Product Limit
MPCI Required
Coverage Level **
Payment Rate
Sales Closing Date
* Increased from $250,000
** 3 Commodity Requirement for 80 % Coverage
Copyright 2008,*** For AGR Lite only – Cancellation/Termination dates 1/31
All Rights Reserved
14
How is Coverage Established?
Federal Income Tax Records
 Usually Schedule F
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Current Year’s Farm Plan
 “Cash Flow Budget”
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Files 5 Consecutive Years of Schedule F or
equivalent – Tax Forms
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When does insurance attach?
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Insurance begins 10 days after properly
completed application is received.
If a commodity is damaged prior to
purchasing insurance, no coverage is
provided.
If commodity is damaged after insurance is
purchased, but before insurance year
begins, coverage may be provided
17
How are Claims Calculated?
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All Rights Reserved
Federal Income Tax Records reflect sales
Beginning and End of year inventories are used
to determine change in value allocated to current
year.
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Where AGR-Lite makes sense
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Otherwise uninsurable commodities are covered
Organic production is protected at realistic prices
Direct Marketed production is protected at
realistic prices
Umbrella over selected individual crop coverages
Bottom line for operation from severe economic
loss
Individual protection based on personal yield,
quality and price history plus low price protection,
Provide an alternative for farmers with reduced
APH caused by multiple years of drought.
19
Things to Consider with AGR-Lite

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AGR-Lite does not include indemnity
payments when calculating 5 years average
Gross Income that will set future
guarantees.
 This has no impact on current year’s
indemnity payment but it lowers future
guarantees.
20
Things to Consider with AGR-Lite

AGR-Lite does not adjust for feed or product
purchased.
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If farmers must buy fruit/vegetables/ product to
meet their market commitments, this will lower Net
Income but not Gross.
If it turns dry, and producers purchase hay to
cover lost forage this loss may not be covered.
This will lower Net Income but not Gross.
If producers normally sell excess hay, then it is
covered because there will be reduced hay sales.
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Example AGR-Lite1
Tax Return
1
Year
Historical Year 1
Historical Year 2
Historical Year 3
Historical Year 4
Historical Year 5
Historical Year 6
Income Trend Factor
5-year Average, Contract 1
Expected Income for Insurance Year (IACR)
Total
5-year Average Indexed, Contract 1
Lesser of Indexed AGR or Expected Income
5-year Average, Contract 2
Coverage Level
Payment Rate
AGR-Lite Loss Inception Point
AGR-Lite Liability ($ of Coverage)
265,000
250,000
260,000
287,000
271,330
Trend
Indexed Expected
Revenue Income2
0.943
1.040
1.104
0.945
1.033
266,666
275,478
290,000
275,478
75%
90%
206,609
185,948
1Prepared
by Andrew Saffert (Graduate Student), Dr. Jeffery R. Williams, Dr. G. A. (Art) Barnaby, Jr., and Dr. Michael R.
Langemeier, Professors, Department of Agricultural Economics, K-State Research and Extension, Kansas State University,
Manhattan, KS 66502, Risk & Profit August 17 & 18, 2006, Phone 785-532-1515, e-mail – [email protected], or Andrew Saffert
[email protected]
2The
expected income is generated from the annual “farm plan” similar to a cash flow budget for the upcoming year.
Copyright 2008,
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22
Example AGR-Lite
Revenue Included
Revenue To Count Against AGR Guarantee
in 5 Yr Avg
Livestock and other items bought for resale
Count
(Line 3)
Included
Raised Crop and Livestock Sales
Count
(Line 4)
Included
Net Gains from Commodity Hedging
Count
Included
APH, CRC, RA Indemnity Payments (Gross)
Count
(Line 8b)
No
GRP, GRIP Indemnity Payments (Gross)
Count
(Line 8b)
No
LRP and LGM Indemnity Payments (Gross)
Count
(Line 8b)
No
Private Hail and Mortality Payments (Gross)
Count
(Line 8b)
No
Noninsured Crop Disaster Assistance Program Payments (NAP)
Count
(Line 8b)
No
Ad Hoc Disaster Payments
No
(Line 8b)
No
FSA Loans (Including Emergency Loans)
No
(Line 8b)
No
Loan Deficiency Payment (LDP)
No
(Line 8b)
No
Commodity Loans - Commodity Credit Corporation (CCC)
Production Flexibility Contracts Agricultural Market Transaction Act
(AMTA)
Market Loss Assistance Program (MLA)
Direct Counter-Cyclical Payments (DCP) (Replaces Production Flexibility
Contracts and MLA)
Conservation Reserve Program (CRP)
Conservation Reserve Enhancement Program (CREP)
Sale of non-cull cows & other Capital Assets
Cull Cows, intended for sale
Custom Harvest for a paid fee
Refund payments for over payments
Surgarbeet - Payment in Kind
Marketing Orders - Cranberry, Tart, Cherries
Change in Accounts Recoverable
Count
Line (7a)
Included
No
No
(Line 8b)
(Line 8b)
No
No
No
No
No
No
Count
No
No
Count
Count
Count
(Line 8b)
(Line 8b)
(Line 8b)
No
No
No
No
Included
No
No
Included
Included
No
Net Change in Crop Inventory3
Count
No
Count
No
3
Net Change in Livestock Inventory
2
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(Line 9)
(Line 10)
The expected income is generated from the annual “farm plan” similar to a cash flow budget for the upcoming
year.
3
Beginning inventory is valued at the selling price during the year not the price on January 1. The ending
inventory is valued at the selling price if sold before the claim is settled or at the current terminal market price
23
adjusted for transportation at time of claim settlement and not the December 31 value.
Example AGR-Lite1
Tax
Return 1
Year
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Historical Year 1
265,000
Historical Year 2
250,000
Historical Year 3
260,000
Historical Year 4
287,000
Historical Year 5
271,330
24
Example AGR-Lite1
Tax
Return 1
Trend
Year
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Historical Year 1
265,000
Historical Year 2
250,000
0.943
Historical Year 3
260,000
1.040
Historical Year 4
287,000
1.104
Historical Year 5
271,330
0.945
25
Example AGR-Lite1
Tax
Return 1
Trend
Year
Income Trend Factor
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Historical Year 1
265,000
Historical Year 2
250,000
0.943
Historical Year 3
260,000
1.040
Historical Year 4
287,000
1.104
Historical Year 5
271,330
0.945
1.033
Average
Trend raised
to 4th power
26
Example AGR-Lite1
Tax
Return 1
Trend
Year
Historical Year 1
265,000
Historical Year 2
250,000
0.943
Historical Year 3
260,000
1.040
Historical Year 4
287,000
1.104
Historical Year 5
271,330
0.945
Income Trend Factor
5-year Average, Contract 1
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1.033
266,666
27
Example AGR-Lite1
Tax
Return 1
Trend
Indexed
Revenue
Year
Historical Year 1
265,000
Historical Year 2
250,000
0.943
Historical Year 3
260,000
1.040
Historical Year 4
287,000
1.104
Historical Year 5
271,330
0.945
1.033
Income Trend Factor
5-year Average, Contract 1
266,666
Expected Income for Insurance Year (IACR)
Total
275,478
Average Revenue Times Trend
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28
Example AGR-Lite1
Tax
Return 1
Trend
Indexed
Revenue
Expected
Income2
Year
Historical Year 1
265,000
Historical Year 2
250,000
0.943
Historical Year 3
260,000
1.040
Historical Year 4
287,000
1.104
Historical Year 5
271,330
0.945
Historical Year 6
Income Trend Factor
5-year Average, Contract 1
1.033
266,666
Lesser of
Average Trend
and Expected
Revenue
Expected Income for Insurance Year (IACR)
Total
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275,478
290,000
29
Example AGR-Lite1
5-year Average Indexed, Contract 1
Lesser of Indexed AGR or Expected
Income
275,478
Coverage Level
75%
Payment Rate
90%
AGR-Lite Loss Inception Point
206,609
AGR-Lite Liability ($ of Coverage)
185,948
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30
Example AGR-Lite1
Revenue To Count Against AGR Guarantee
Revenue Included in 5 Yr
Avg
Livestock and other items bought for resale
Count
(Line 3)
Included
Raised Crop and Livestock Sales
Count
(Line 4)
Included
Net Gains from Commodity Hedging
Count
APH, CRC, RA Indemnity Payments (Gross)
GRP, GRIP Indemnity Payments (Gross)
Count
(Line 8b)
No
Count
(Line 8b)
No
LRP and LGM Indemnity Payments (Gross)
Count
(Line 8b)
No
Private Hail and Mortality Payments (Gross)
Noninsured Crop Disaster Assistance Program
Payments (NAP)
Count
(Line 8b)
No
Count
(Line 8b)
No
No
(Line 8b)
No
Ad Hoc Disaster Payments
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Included
31
Example AGR-Lite1
Revenue To Count Against AGR Guarantee
FSA Loans (Including Emergency Loans)
No
(Line 8b)
Loan Deficiency Payment (LDP)
Commodity Loans - Commodity Credit
Corporation (CCC)
Production Flexibility Contracts Agricultural
Market Transaction Act (AMTA)
No
(Line 8b)
Revenue Included in 5 Yr
Avg
No
No
Count
Line (7a)
Included
No
(Line 8b)
No
Market Loss Assistance Program (MLA)
Direct Counter-Cyclical Payments (DCP)
(Replaces Production Flexibility Contracts and
MLA)
No
(Line 8b)
No
No
(Line 8b)
No
Conservation Reserve Program (CRP)
Conservation Reserve Enhancement Program
(CREP)
No
(Line 8b)
No
No
(Line 8b)
No
Copyright 2008,
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32
Example AGR-Lite1
Sale of non-cull cows & other Capital Assets
Cull Cows, intended for sale
No
No
Count
Included
Custom Harvest for a paid fee
No
(Line 9)
No
Refund payments for over payments
No
(Line 10)
No
Surgarbeet - Payment in Kind
Count
Included
Marketing Orders - Cranberry, Tart, Cherries
Count
Included
Change in Accounts Recoverable
Count
No
Net Change in Crop Inventory 3
Count
No
Net Change in Livestock Inventory 3
Count
No
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33
Example AGR-Lite1
Commodity Loans - Commodity Credit
Corporation (CCC)
Production Flexibility Contracts Agricultural
Market Transaction Act (AMTA)
Count
Line (7a)
Included
No
(Line 8b)
No
Market Loss Assistance Program (MLA)
Direct Counter-Cyclical Payments (DCP)
(Replaces Production Flexibility Contracts and
MLA)
No
(Line 8b)
No
No
(Line 8b)
No
Sale of non-cull cows & other Capital Assets
No
No
Count
Included
Cull Cows, intended for sale
Custom Harvest for a paid fee
No
(Line 9)
No
Refund payments for over payments
No
(Line 10)
No
Surgarbeet - Payment in Kind
Count
Included
Marketing Orders - Cranberry, Tart, Cherries
Count
Included
Change in Accounts Recoverable
Count
No
Net Change in Crop Inventory 3
Count
No
Copyright 2008,
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34
Example AGR-Lite1
AGR-Lite Loss Inception Point
206,609
Revenue To Count Against AGR Guarantee
Revenue to count
Net Insurable Loss
90% Payment rate
AGR-Lite Indemnity Payment
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150,000
56,609
90%
50,948
35
Example AGR-Lite1
Tax
Return 1
Trend
Indexed
Revenue
Expected
Income
2
Tax Return
2
Indexed
Revenue
Year
Historical Year 2
250,000
0.943
250,000
Historical Year 3
260,000
1.040
260,000
1.040
Historical Year 4
287,000
1.104
287,000
1.104
Historical Year 5
271,330
0.945
271,330
0.945
100,000
0.800
Historical Year 6
Revenue to count
Revenue to used for the next 5 year average
Net Insurable Loss
90% Payment rate
AGR-Lite Indemnity Payment
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150,000
100,000
56,609
90%
50,948
36
Example AGR-Lite1
Tax Return
2
Indexed
Revenue
Year
Historical Year 2
250,000
Historical Year 3
260,000
1.040
Historical Year 4
287,000
1.104
Historical Year 5
271,330
0.945
Historical Year 6
100,000
0.800
Income Trend Factor
1.000
5-year Average, Contract 1
Expected Income for Insurance Year (IACR)
Total
5-year Average Indexed, Contract 1
Lesser of Indexed AGR or Expected Income
5-year Average, Contract 2
233,666
Coverage Level
Payment Rate
AGR-Lite Loss Inception Point
Copyright 2008,
All Rights Reserved
175,250
37
Example AGR-Lite Premium
AGR Liability minus MPCI Liability = AGR Premium Liability e.g.
($248,400 - 34,375 (MPCI) = $214,025)
W/O MPCI
AGR Liability
Minus MPCI Liability
Premium Liability
Premium
Copyright 2008,
All Rights Reserved
248,400
0
With MPCI
248,400
34,375
248,400
214,025
7,651
6,596
38
Things to Consider with AGR-Lite
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Copyright 2008,
All Rights Reserved
Market loan gains count against the AGRLite indemnity and are included in the 5
year average tax return revenue. This is a
consistent policy.
However, LDP payments are not included
in the 5 year average nor do they count
against the guarantee.
39
Things to Consider with AGR-Lite


Copyright 2008,
All Rights Reserved
Currently “cull cows” are counted in the sales
to count against the AGR-Lite guarantees and
the 5 year average tax return revenue.
If the cows are sold as part of a herd
reduction then the sales do not count against
the guarantee.
40
Things to Consider with AGR-Lite


Copyright 2008,
All Rights Reserved
Currently the counter cyclical payment does
not count against the AGR-Lite guarantee
nor does it count in the 5 year average tax
return revenue.
This works in the favor of farmers because it
does not reduce AGR-Lite payments in a loss
year caused by lower prices.
41
Adjusted Gross Revenue-Lite (AGR-Lite)

AGR Lite is whole farm revenue coverage based on
tax returns

Receives full subsidy

Can be purchased in addition to MPCI/RA/CRC

Insures livestock, hay, specialty crops, & other
uninsurable crops

Available in Kansas for 2007 with March 15 signup

All day risk workshops
Copyright 2008,
All Rights Reserved
42
Adjusted Gross Revenue-Lite (AGR-Lite)




Copyright 2008,
All Rights Reserved
This presentation does not provide full details of
policy provisions or approved procedures.
Producers should consult with a local agent for
specific details and program requirement
Farmers interested in AGR-Lite should talk to an
agent ASAP because it will require time to gather all
of the information for an application.
DO NOT WAIT UNTIL MARCH 15!
43
Thank You
DR. G. A. “ART” BARNABY, JR.
KANSAS STATE UNIVERSITY
& 4B AG CONSULTANTS, LLC
PHONE: 785-532-1515
EMAIL: [email protected]
Check out our WEB page at
http://www.AgManager.Info
Copyright 2008, All Rights Reserved
Copyright 2008,
All Rights Reserved
44
Details on data that farmers will need to
apply for AGR-Lite!
Dr. G. A. “Art” Barnaby, Jr
Kansas State University and Risk
Management Agency, USDA
Phone: (785) 532-1515
Email: [email protected]
Check out our WEB at:
AgManager.info
Steps in the Process
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
Copyright 2008,
All Rights Reserved
Step 1 – Application
Step 2 - Determine Approved AGR and
Underwriting
Step 3 - Claim
46
Forms Required At Time Of Application
AGR-Lite uses AGR forms (or similar forms)
1. Application (FCI-12 AGR)
2. AGR-Lite Histories Calculation Worksheet
3. Complete Annual Farm Report (FCI 821
AGR)
4. A beginning Inventory Report (FCI 822 AGR
or FCI 824 AGR)
5. Agricultural Commodity Profile for 75% or
80% coverage level for the last two crop years
and the Actual Commodity Report at claim
time.
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47
Application
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48
Step 1 - Determine Approved AGR

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The Approved AGR is used as a whole
farm revenue basis upon which
coverage is provided
49
Forms Required At Time Of Application






Copyright 2008,
All Rights Reserved
AGR-Lite uses AGR forms (or similar forms)
1. Application (FCI-12 AGR)
2. AGR-Lite Histories Calculation
Worksheet
3. Complete Annual Farm Report (FCI
821 AGR)
4. A beginning Inventory Report (FCI 822
AGR or FCI 824 AGR)
5. Agricultural Commodity Profile for
75% or 85% coverage level for the last two
crop years and the Actual Commodity Report
at claim time
50
AGR-Lite Histories Calculation Worksheet
The AGR-Lite Histories Calculation Worksheet is used
to calculate allowable income and expenses for the
Farm Report
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51
Excluded income applies to:
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
5 Year History – Income and Expenses

Intended Commodities

Inventory Adjustments

Accounts Receivable Adjustments

Income and Expenses for Claims
52
AGR-Lite – Allowable Expenses

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Allowable expenses - Farm expenses
that are reported to the IRS for the
production of agricultural commodities,
including only those specifically
listed…
53
AGR-Lite Histories Calculation
Worksheet – Income and Expenses
Producer
2000
340,000
7,000
2000
310,000
Copyright 2008,
All Rights Reserved
2001
345,000
10,000
2001
319,000
54
Forms Required At Time Of Application






Copyright 2008,
All Rights Reserved
AGR-Lite uses AGR forms (or similar forms)
1. Application (FCI-12 AGR)
2. AGR-Lite Histories Calculation Worksheet
3. Complete Annual Farm Report (FCI 821
AGR)
4. A beginning Inventory Report (FCI 822
AGR or FCI 824 AGR)
5. Agricultural Commodity Profile for 75% or
80% coverage level for the last two crop
years and the
Actual Commodity Report
at claim time
55
Annual Farm Report
The Approved AGR is determined using the
Annual Farm Report
The Farm Report includes
5 Years Allowable Income and Expense History
- From Histories Calculation Worksheet



Copyright 2008,
All Rights Reserved
Intended Commodity Report
Report of Changes
Adjustments to Approved AGR
56
Annual Farm Report –
Allowable Income / Expenses
2000
2001
2002
2003
2004
347,000
355,000
348,000
338,000
337,000
266,000
265,000
275,000
273,000
289,000
1,725,000
1,368,000
345,000
Copyright 2008,
All Rights Reserved
273,600
273,600
57
Annual Farm Report
Includes

5 Years Allowable Income and Expense History
- From Histories Calculation Worksheet

Intended Commodity Report

Report of Changes

Adjustments to Approved AGR
Copyright 2008,
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58
Intended Commodities
The commodities to be produced during the
insurance year (see definitions)






Copyright 2008,
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Commodity name
No. Years Produced
Intended Amount (acres, bu, etc)
Expected Value
Total Number Commodities
Total Expected Income
59
Annual Farm Report
Includes

5 Years Allowable Income and Expense History
- From Histories Calculation Worksheet

Intended Commodity Report

Report of Changes

Adjustments to Approved AGR
Copyright 2008,
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60
Annual Farm Report: Changes Must report
any changes that affect the Approved AGR
Farm changes may include:

Tax Entities or Accounting Methods

Ownership / Business Structure

Crops/Crop Mix / Marketing Plans

Copyright 2008,
All Rights Reserved
Size of Operation / Farming Practice / Type of
Farming Activity
61
Annual Farm Report
Includes

5 Years Allowable Income and Expense History
- From Histories Calculation Worksheet

Intended Commodity Report

Report of Changes

Adjustments to Approved AGR
Copyright 2008,
All Rights Reserved
62
Possible Adjustments To Approved AGR
For Expanding Operations
Income may be indexed if:


Copyright 2008,
All Rights Reserved
At least one of the last two years of allowable
income is greater than the average of the 5
years of allowable income, and
Expected income for current year is higher than
the 5 year average of allowable income.
63
Annual Farm Report
2006
x
WA
Producer
Individual
Franklin
XXXXX
X
XXXXX
2000
2001
2002
2003
2004
347,000
355,000
348,000
338,000
337,000
1,725,000
345,000
266,000
265,000
275,000
273,000
289,000
Cattle: Cow/Calf 0800
Alfalfa (Irr) 0850
Wheat (Irr) 0948
Dry Beans (Irr) 0047
Sweet Cherries 0099
6
92 head
6
3
200 ac
100 ac
55 ac
3
6
2.5 ac
685 lbs
9T/ac
120 bu/ac
26 cwt/ac
4/T/ac
63,020 lbs $1.00
1,800 T
$110
12,000 bu
1,430 cwt
10T
$63,020
$198,000
$3.35
$23
$40,200
$32,890
$1,200
$12,000
1,368,000
$346,110
273,600
273,600
345,000
345,000
None
Copyright 2008,
All Rights Reserved
64
Program Vulnerability Protection
Allowable Expenses
If expenses for the insurance year fall below
70% of the average, the approved AGR
(coverage) is reduced before the claim is
settled.
Example
Approved AGR
Approved expenses
70% Approved Expenses
Actual Expenses
Adj. Approved AGR
Copyright 2008,
All Rights Reserved
$100,000
80,000
56,000
50,000
94,000
65
Forms Required At Time Of Application
AGR-Lite uses AGR forms (or similar forms)
1. Application (FCI-12 AGR)
2. AGR-Lite Histories Calculation Worksheet
3. Complete Annual Farm Report (FCI 821
AGR)
4. A beginning Inventory Report (FCI 822 AGR
or FCI 824 AGR)
5. Agricultural Commodity Profile for 75% or
80% coverage level for the last two crop years
and the Actual Commodity Report at claim
time.
Copyright 2008,
All Rights Reserved
66
For Accrual Adjustment of Claims
Beginning Inventory and Accounts Receivable
Reports are required at the start of the
insurance year*
A beginning inventory of the amount commodities not sold or otherwise disposed of
A beginning accounts receivable report income earned but not received
* Jan 31 for a calendar year, last day of the first month of a fiscal year
Copyright 2008,
All Rights Reserved
67
(Beginning) Inventory & Accounts
Receivable Report
X
2006
WA
Producer
X
Franklin
Alfalfa (Irr)
2005
On Farm
200 T
Wheat (Irr)
2005
On Farm
5,000 bu
Copyright 2008,
All Rights Reserved
68
(Beginning) Animal
Inventory/Accounting Worksheet
Producer
XXX
2006
Fall 05 heifers 22
300
.9/270
5,940 n/a
5,940
Fall 05 steers
300
1.1/330
8,250 n/a
8,250
25
69
Copyright 2008,
All Rights Reserved
69
Forms Required At Time Of Application
AGR-Lite uses AGR forms (or similar forms)
1. Application (FCI-12 AGR)
2. AGR-Lite Histories Calculation Worksheet
3. Complete Annual Farm Report (FCI 821
AGR)
4. A beginning Inventory Report (FCI 822 AGR
or FCI 824 AGR)
5. Agricultural Commodity Profile for 75% or
80% coverage level for the last two crop years
and the Actual Commodity Report at claim
time.
Copyright 2008,
All Rights Reserved
70
Commodity Profile Report
For 75 and 80 percent coverage
For last two years include:
Commodity
Acres
Market percent by open vs. contracted
Copyright 2008,
All Rights Reserved
71
Minimum Commodity Income Qualification
For 80% coverage level determination
only
Formula:
Divide 1.0 by the number of commodities on Farm
Report x 0.333 x total expected allowable
income
Example:
5 commodities on farm report
$346,110 expected income
(1/5 x 0.333 x $346,110) = $23,050
Copyright 2008,
All Rights Reserved
72
AGR Coverage - for our example
80 % Coverage Level
90 % Payment Rate
Approved AGR x Coverage Level x Payment
Rate
$345,000
x
0.80
x
.90
= $248,400 (total asset protections for this
insured)
Copyright 2008,
All Rights Reserved
73
AGR-Lite Premium Calculation
AGR Liability = $248,400
AGR-Lite Gross Premium
$248,400 x .059 (AGR rate)* = $14,656
AGR Lite Producer Premium
USDA Subsidy Removed plus Administrative
Fee
($14,656 - $7,035) + $30 = $7,651
(3.1% premium rate)
* Rates based on 2006 AGR Franklin County. Rates vary by farm
operation, commodity mix and county.
Copyright 2008,
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74
If MPCI is Purchased, the AGR-Lite
premium is reduced (optional)

AGR Liability minus MPCI Liability = AGR Premium Liability
e.g. ($248,400 - 34,375 (MPCI) = $214,025)
AGR Liability
Minus MPCI Liability
Premium Liability
Premium
W/O MPCI
248,400
0
248,400
7,651
With MPCI
248,400
34,375
214,025
6,596
Note: MPCI Liability is not used in our example
Copyright 2008,
All Rights Reserved
75
Claim Processing
Claim Cannot be Settled Until:



Copyright 2008,
All Rights Reserved
Taxes filed for insurance year
Other insurance claims covering insured
commodities finalized
If an indemnity is to be paid, copies of the tax
forms (IRS Schedule F 1040 or equivalent)
used to calculate the 5-year histories and the
year of the claim must be submitted
76
AGR-Lite Claim

Prepare actual commodity report

Review the Approved AGR – adjust for any farm
changes (only downward adjustments allowed)

Apply expense adjustments if any

Determine allowable income from insurance year tax
form

Adjust for uninsured causes, indemnities paid and
disaster payments

Adjust commodities purchased for resale

Make adjustments for inventory and accounts
receivable
Copyright 2008,
All Rights Reserved
77
AGR-Lite Claim - An Actual Commodity
Report must be filled out
Copyright 2008,
All Rights Reserved
The Actual Commodity Report is used to verify actual intended
commodities and production as a checkpoint on the claim.
78
AGR-Lite Claim
Revenue to Count for the Insurance Year
(Line 26 Claim Form)

Determine allowable income from tax form

Adjust commodities purchased for resale

Copyright 2008,
All Rights Reserved
Adjust for uninsured causes, indemnities
paid and disaster payment
79
Excluded Revenue Income for Claim
Purposes

Additional income from value added items

Cooperative dividends (not related to commodity
production)

Processing of insured commodities

Custom hire (machine work)

Agricultural program payments

Commodities not covered

Ad Hoc disaster payments
Copyright 2008,
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80
AGR-Lite Claim
Adjustments to Revenue to Count


Copyright 2008,
All Rights Reserved
Make inventory adjustments (line 27 claim
form) Subtract beginning inventory (price
received/value) Add ending inventory (value
first of month claim settled)
Make accounts receivable adjustments (line
28 claim form) Ending accounts receivable
(adjusted for costs) - beginning accounts
receivable (adjusted for costs)
81
Inventory Market Value
The value of ending inventories will be the actual price
received if the inventory is sold prior to the time the
claim is finalized,
Or
The local market value on the first day of the month in
which the claim is finalized if the inventory is not sold at
the time the claim is finalized
Copyright 2008,
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82
Inventory Local Market Value
Policy Definition

Value as reported by Ag Market News Service, if
available, otherwise

Agreed-upon average price by two commercial
buyers (one from insured one from insurance
provider)

Value of animals will not exceed local market value
for same breed and type being valued
Copyright 2008,
All Rights Reserved
83
Inventories (Claims)
Post–production Adjustments
If post-production operations …. will result in a more accurate
determination of the quantity and/or the local market value of
inventoried commodities,
such claims may be suspended and submitted for payment
later than 60 days after insureds have filed their income tax
forms. (see Policy 10(a)(4))
However, the latest date that claims (including suspended
claims) may be submitted for payment remains 60 days after
the first day of the seventh month after the end of the
insurance year, unless an IRS filing extension is approved.
Copyright 2008,
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84
(Ending) Inventory & Accounts
Receivable Report
2006
X
WA
Producer
Individual
Franklin
X
Alfalfa (Irr)
Wheat (Irr)
Wheat (Irr)
2005
2006
2005
2006
200 T
0
Dry Beans
Sweet Cherries
2006
2006
0
0
Alfalfa (Irr)
5,000 bu
0
0
0
0
4,000 bu
0
S
200T
5,000 bu
4,000 bu
$100/T
S $3.60bu
C/O $3.60bu
0
[20,000]
0
[18,000]
14.400
0
0
(+) if revenue to count for tax year
(-) if revenue not to count for tax year
[23,600]
Copyright 2008,
All Rights Reserved
85
(Ending) Animal Inventory/Accounting
Producer
Fall 05 heifers
22
Fall 05 steers
25
XXX
300 .9/270
300 1.1/330
5,940 n/a
8,250 n/a
2006
5,940
8,250
Fall 06 heifers
24
240
1.00
5,760
n/a
5,760
Fall 06 steers
21
300
1.10
6,930
n/a
6,930
14,190
12,690
Copyright 2008,
All Rights Reserved
14,190
12,690
[1,500]
86
AGR-Lite Claim For Indemnity
53
Produce
r
021
Individual
XXXXXX
2006
80% coverage level 90% payment rate
289,000
[25,100]
273,600
0
1.056
0
223,575
345,000
52,425
0
345,000
90%
80%
47,182
276,000
7,651
248,675
39,531
Adjustments to Revenue to Count
2005 Removed from Revenue to count: [20,000] ’05 alfalfa; [18,000] ’05 wheat; [5940] ’05 heifers; [8,250] ’05 steers + 27,090
2006 Added to Revenue to count: 14,400 ’06 wheat (c/o 2007); 5,760 ’06 heifers (c/o to 2007);
- 52,190
[25,100]
6,930 ’06 steers (c/o to 2007)
Copyright 2008,
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87
CLAIM DEADLINES
Initial Notice(s) of Loss
Within 72 hours
Notice of loss after filing taxes
Within 15 days
File taxes
By 1st day of 7th
month after Insurance Year *
Submit claim for payment
Within 60 days after
filing taxes (Policy a(4))
Claim suspension
May submitted for payment
later than 60 days after
filing taxes…
Pay Indemnity
Within 30 days after….
60 Days
Insurance Year End
Tax
Deadline *
* unless an IRS filing extension is approved
Copyright 2008,
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88
AGR- Lite Date Summary
Sales Closing Date
March 15
Cancellation / Termination Date
January 31
Billing Date
December 1
Claim Settlement
Copyright 2008,
All Rights Reserved
After tax forms are
filed and other crop
insurance indemnities
are finalized
89
AGR-LITE SUMMARY

Maximum coverage (liability) per policy is $1 Million

5-years tax records must be available for inspection at the time
of application


Requires AGR-Lite Histories Calculation Worksheet
2-years required for Commodity Profile report (75 and 80%
coverage)

Commodity grouping for increased coverage

MPCI is optional

No animal/animal product limit

5-year tax records must be submitted for claim purposes

Requires Actual Commodity Report at claim time
Copyright 2008,
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90
Adjusted Gross Revenue-Lite (AGR-Lite)




Copyright 2008,
All Rights Reserved
This presentation does not provide full details of
policy provisions or approved procedures.
Producers should consult with a local agent for
specific details and program requirement
Farmers interested in AGR-Lite should talk to an
agent ASAP because it will require time to gather all
of the information for an application.
DO NOT WAIT UNTIL MARCH 15!
91
Thank You
DR. G. A. “ART” BARNABY, JR.
KANSAS STATE UNIVERSITY
& 4B AG CONSULTANTS, LLC
PHONE: 785-532-1515
EMAIL: [email protected]
Check out our WEB page at
http://www.AgManager.Info
Copyright 2008, All Rights Reserved
Copyright 2008,
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92
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