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MASC Explains “Grade Factor” Math

“Probably the biggest part of our problem was we included an example in there.”

– DAVID VAN DEYNZE

MASC says an example used in a letter to corn growers last fall to help explain changes to how it would calculate insurance claims created confusion that left some farmers feeling misled.

“Probably the biggest part of our problem was we included an example in there,” David Van Deynze, MASC’s manager of claim services told corn growers Feb. 11 at the Manitoba Special Crops Symposium in Winnipeg.

But Van Deynze said the difference between what farmers would’ve got using the 0.47 grade factor referred to in the letter and what they received using the actual grade factor is only about $8 an acre.

“I don’t think that’s a make it or break it for most producers in terms of the decision they made,” he said.

Van Deynze walked farmers through the math. In both cases, the farmer harvested 100 bushels an acre, had a long-term average corn yield of almost 90 bushels an acre and crop insurance coverage of 80 per cent resulting in a claim being triggered with a yield of less than 72 bushels an acre.

Using the example grade factor of 0.47 would result in a crop insurance payment of $117.50 an acre. (100 bushel yield X 0.47 grade factor = 47-bushel shortfall. The farmer’s coverage is 72 bushels an acre -the 47-bushel shortfall = 25 bushels X crop insurance coverage of $4.70 a bushel = a $117.50-an-acre payout.)

In addition, the farmer has 100 bushels an acre of corn to sell. The market price used in MASC’s example was $2.50 a bushel, earning the farmer another $250 an acre. However, Van Deynze said $63 an acre should be subtracted to cover harvest and drying costs, leaving the farmer with $187 an acre from the market.

Add the $117.50 an acre from MASC and $187 from the market and the farmer, based on the “example” figures, would earn $305.50 an acre, Van Deynze said.

Plugging in the actual grade factor and market prices earns the farmer $360 an acre. The grade factor of 0.75 doesn’t trigger a crop insurance payment so the only revenue comes from the market. (100 bushels an acre X $3.60 a bushel = $360 an acre.) However, after subtracting $63 an acre for harvest and drying the total is $297 an acre or only $7.50 a bushel less than the result using the numbers from MASC’s example.

Van Deynze said if farmers don’t get the $3.60 a bushel MASC used in its calculation, it will revise farmers’ claims accordingly.

“So long as you’re getting less than the going market rate for what we guarantee then there will be an adjustment,” he said. “We don’t look at how much money you made on that crop. We compare to the market price or the guaranteed grade.”

In addition, claims will be adjusted if farmers face excess dockage.

At least one corn farmer, who asked not to be named, said he agrees with MASC. He said in an interview that farmers who say MASC misled them didn’t read MASC’s letter closely enough. They probably also misread where corn prices were going. Currently they are lower than the $4.70 a bushel used to calculate claims for farmers who destroyed their corn. [email protected]

About the author

Reporter

Allan Dawson

Allan Dawson is a reporter with the Manitoba Co-operator based near Miami, Man. Covering agriculture since 1980, Dawson has spent most of his career with the Co-operator except for several years with Farmers’ Independent Weekly and before that a Morden-Winkler area radio station.

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