Two neighbors insure similar acres at the same coverage level, then see very different indemnity checks in a year when prices climb after planting. The gap often traces back to one election made before the sales closing date. That election is the harvest price option, and it changes how your revenue guarantee responds to the market.
Harvest Price Option Mechanics Explained
Revenue Protection sets a guarantee by multiplying three inputs: your coverage level, your Actual Production History (APH) yield, and a price. Without the harvest price option, that price is the projected price, which is set from futures averaging during a pre-season window. With the option elected, the price becomes the higher of the projected price or the harvest price, which reflects futures during the fall harvest window.
The option works in one direction only. It can raise your guarantee when prices rise into harvest, but it cannot lower it below the projected price. That asymmetry is the reason it is priced into your premium.
Quick Tips
- Confirm the harvest price option election on your policy declarations before the sales closing date.
- Multiply coverage level by APH and the chosen price to see your guarantee per acre.
- Ask your agent for the current premium with and without the option before deciding.
- Keep the election consistent with your marketing plan for that crop.
How the Guarantee Moves With the Harvest Price
Consider an illustrative example with round numbers only. Suppose your APH is 180 bushels per acre, your coverage level is 80 percent, and your projected price is 5.00 dollars per bushel. Without the option, your per-acre guarantee is 0.80 x 180 x 5.00, or 720 dollars.
If the harvest price comes in at 5.50 dollars and you elected the option, the guarantee rises to 0.80 x 180 x 5.50, or 792 dollars per acre. If the harvest price falls to 4.50 dollars, the option adds nothing, and the guarantee stays at 720 dollars. These numbers are illustrations, not forecasts or current prices.
| Scenario | Harvest Price Option Elected | Option Not Elected |
|---|---|---|
| Prices rise into harvest | Guarantee moves up with harvest price | Guarantee stays at projected price |
| Prices fall into harvest | Guarantee stays at projected price | Guarantee stays at projected price |
| Prices near projected level | Little difference in guarantee | Little difference in guarantee |
| Premium cost | Higher premium paid | Lower premium paid |
The Costly Mistake of Electing by Habit
The most common error is electing the option out of habit, or skipping it without checking, instead of running the numbers for that year's contract. A producer who always elects it may keep paying a premium in years when the market has already priced in the outcome. Another producer may drop it to save money and miss a rally into harvest that would have raised the guarantee.
Consider a producer who left the option off in a year when futures climbed through the harvest window. Their guarantee stayed at the projected price while the market moved well above it. They had no way to change that after the sales closing date passed.
The fix is a simple yearly check. Compare the premium difference against the guarantee gain in a rising scenario and a falling scenario. Write the result down before the deadline, and do not rely on last year's decision.
Tying Your APH to Long-Term Yield Records
APH is built from your own yield history, usually a set of recent crop years with adjustments set by the insurance rules. Because it is your record rather than a county average, the way you document yields and acres directly shapes the guarantee. Gaps, miscounted acres, or inconsistent harvest records can pull it down.
Long-term fertility and soil management feed into those yields over time. Decisions such as those covered in Phosphorus Management Mechanics Determine Your Long-Term Row Crop Yield show up in your history years later. Stable, well-documented yields help build a higher APH, which raises the base for every guarantee you buy.
Deciding Whether the Option Fits Your Marketing Plan
The option should match how you actually sell grain. If you plan to store and sell after harvest, the harvest price may matter less than your post-harvest price. If you sell at harvest or contract forward, the option's price reference lines up more closely with your cash exposure.
Look at your storage capacity, cash flow needs, and debt schedule. A producer with tight cash flow and a forward contract already in place may value the option differently than one holding grain. Your insurance agent can run the premium difference for your specific policy.
Action Steps Before Your Sales Closing Date
Start by pulling your APH worksheet and confirming every acre and yield record is accurate. Next, get projected price and premium quotes for each insured crop, with and without the option. Then compare those figures against your marketing plan for that crop.
Record your election reason in writing. That note helps you repeat good decisions and correct weak ones at the next sign-up. Review it again after harvest, once actual yields and prices are known.
Program dates and premiums change, so verify details with your agent rather than relying on a prior year's figures. The rules for each crop live in the policy documents, and those documents control your coverage.
Frequently Asked Questions
What is the harvest price option in Revenue Protection?
It is an election that lets your guarantee rise if the harvest price is higher than the projected price. It cannot lower the guarantee below the projected price.
Does the harvest price option cost extra?
Yes, electing it raises your premium, so compare that cost against the potential guarantee gain each year.
Can I change my harvest price option election after the sales closing date?
Generally no. The election must be made by the sales closing date for the crop, so decide before that deadline.
What is APH and how does it affect my guarantee?
APH stands for Actual Production History, a yield record built from your own past crops. A higher, well-documented APH raises the bushel base used in your guarantee.
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