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September 14, 2017
Crop Insurance Papers
2
establish liability under the base policy is known. The website www.MarginProtection.com also
provides estimates of the MP premium credits. The grower may only receive the greater of the MP and
RP/YP indemnity after final calculations are complete.
Margin Protection coverage includes a deductible that may be set as low as 5% of the expected margin.
These low deductibles may appeal to some producers. Overall, deductibles range from 5% to 30% of
the expected margin. However, a low deductible also tends to result in a more costly premium.
Two examples of MP premium costs are provided below for 2018 corn production in Kansas: dryland
corn for Nemaha County (northeast Kansas) and irrigated corn for Finney County (southwest Kansas).
The example assumes a Projected Price for corn of $3.95 per bushel (versus the 2017 price of
$3.92/bu), along with projected prices for inputs as determined by MarginProtection.com at the time.
Table 1 shows premiums and premium credits for Nemaha County. The top section shows the MP
premium for the various coverage levels, which range from 95% of the expected margin (= 5%
deductible) to 70% of the expected margin (=30% deductible). The columns on the left show projected
premiums for RP coverage at various guarantee levels, and the “Premium credits” section on the lower
right shows the savings in premiums for the various combinations of MP and RP coverage. Table 2
shows similar results for irrigated corn in Finney County.
Combined cost of MP and RP coverage is calculated by adding MP and RP premiums, then subtracting
the premium credit. For example, for non‐irrigated corn in Nemaha County (table 1), the combination
of 75% RP coverage and 85% MP coverage would cost $20.37 + $38.84 ‐ $13.08 = $46.13 per acre. The
same 75% RP + 85% MP coverage for irrigated corn in Finney County (table 2) would cost $15.83 +
$19.73 ‐ $2.39 = $33.17 per acre.
These estimates suggest that the premiums for the highest MP coverage levels will be relatively
expensive. The premium credits for RP/MP combinations provide some reduction, but for the 95%,
90%, and 85% MP levels, the credit is less than half the total MP premium. A related question is
evaluating the potential mix of RP and MP coverage. In the examples mentioned above, the 75% RP +
85% MP combination is roughly the same cost as the 85% RP coverage. Many producers may prefer
spending any additional premium dollars on a higher RP guarantee rather than shifting some to the
area‐based MP coverage.
It should also be noted that the amount of premium credit will depend on one’s own farm yield
history, and how it tracks relative to the county average. The examples in Tables 1 and 2 used farm
yields that matched area averages; credits may differ as farm yields diverge from area averages.
Producers are encouraged to use their APH histories when getting estimates for premiums and credits
on the website.
The Sales Closing Date for Margin Protection is September 30.
Kansas State University Department Of Agricultural Economics Extension Publication …
September 3, 2017
Section 5: Long-Range Planning (FINLRB)
Raised breeding stock have no tax basis since the
cost of production have already been deducted
• …
June 27, 2017
KFMA Research
relative price, cost, and production trends; credit quality varies …
October 1, 2018
2018 Ag Lenders Conference Presentations
Separated by crop type & production method• Tillage• Irrigation
• …
June 27, 2016
Precision Ag and Technology Articles
3
quantifiable. These losses are the ‘actual damages’ that the expert witness would estimate using net present
value of subsequent changes in farm revenue.
Reasonable royalty
Reasonable royalty will not likely be the damages sought by individual farms because the hypothetical
negotiation is expected to arrive at an impasse. In this scenario, the farmer and aggregator enter into a
hypothetical negotiation where the farmers’ bargained‐for price of data were determined. Again, we look to the
economic theory of networks to examine how this hypothetical negotiation turned out. Economic theory
suggests that, in the long run, the aggregator places very little value on data from any individual farm and
therefore would not negotiate beyond $0. The farmer who values farm data as a good, i.e. positive value, would
not accept the $0 offered by the aggregator. Farmers’ reservation prices, or willingness‐to‐accept for their farm
data, starkly differ from the price that aggregators are willing to pay. From the perspective of the aggregator, it
makes very little difference whether any given farmer participates in the network. This is where the estimation
becomes tricky. We know that the value to the aggregator is greater than the summation of all the individual
benefits; however we also know that any given farmer can withdraw from the network without causing the
aggregator to lose value with respect to the network once a critical number of farms are in the system. Therein
lies the problem of determining the bargained‐for price; the aggregator can argue that the value of any given
farm is $0 to the aggregator. Since the parties are not likely to converge on an agreed upon price, the
‘reasonable royalty’ would be the most difficult of the three damages to defend. As the expert witness for the
farmer, I would avoid attempting to prove a ‘reasonable royalty’ since the testimony would be based on an
individual farm’s losses.
Unjust enrichment
As the expert witness, ‘unjust enrichment’ is the damage that my testimony would be easiest to prove and
therefore the most likely candidate for farmers to claim damages. Given that the marginal value to an individual
farm is relatively small, the misappropriator has the opportunity to disproportionately benefit or enjoy some
sort of “unjust enrichment.” Even for well‐meaning aggregators who initially would not disclose data to others
for a profit, the temptation may become too large to ignore. For these reasons, ‘unjust enrichment’ is a logical
damage to seek. At the community level, farm data has value to the aggregator and other third parties for
commodity marketing manipulation, supply chain management, improvement of products, and so on. Although
the preceding examples are not malicious on their own, we’ll proceed assuming that the agreement between
the farm and aggregator precluded these examples. In this case, the misappropriator has opportunity to
disproportionately gain from the unauthorized use or sale of community farm data. However, a value to the
misappropriator may be in the millions of dollars but would equate to only pennies on the acre to the farmer.
…
August 1, 2019
Breakout Sessions
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• A crop insurance product• Charges a premium, rates reflect expected payouts• …