2012 Drought: Yield Loss, Revenue Loss, and Harvest Price Option

By: Carl Zulauf, Professor, Department of Agricultural, Environmental, and Developmental Economics, The Ohio State University

This article examines the impact of the 2012 drought on per acre revenue for corn and soybeans compared with the revenue expected in February. The article also examines the impact of crop insurance and, more specifically, the harvest price option, on per acre revenue. The harvest price option permits the insurance guarantee to be calculated using the higher of the insurance plant price determined in February for corn and soybeans or the price determined at harvest. Despite the reduction in yield caused by the drought, per acre revenue is higher in August than in February for the average U.S. acre of corn and soybeans. To emphasis, the previous statement is for the average acre of corn and soybeans; many farms will have yield declines greater than the average decline. However, the harvest price option may result in some of these farms also having August revenue greater than the February revenue. To read the article click here http://aede.osu.edu/sites/drupal-aede.web/files/publications/Zulauf%20-%202012%20Drought%20-%20Yield%20Loss,%20Revenue%20Loss,%20and%20HPO.pdf.

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