Big risk management decisions require big support.
Between March 15 and April 15, crop insurers face the most important risk management decision of the year.
While growers make “seeding decisions” in early spring, crop insurers make “ceding decisions,” or the determination to move risk to the Federal government for the entire 2020 season.
This decision, called “ceding,” requires the best risk management decision support available.
The decision helps spread risk for the entire industry, by moving – or ceding – risk from a handful of approved crop insurers to the Federal government.
How the USDA Risk Management Agency (RMA) ceding system works.
Created in 1938, the Federal Crop Insurance Program or FCIP, began helping growers mitigate risk by covering revenue loss on certain crops. This insurance, called “multiple peril,” is offered by only 15 insurance companies and covers about 83% of cultivated land in the U.S. The program is backed by the Federal government and run by the USDA Risk Management Agency (RMA). It acts like a form of reinsurance – if a crop insurer needs help covering any of their own risk, they can rely on the RMA to help.
The catch is, crop insurers must inform the USDA RMA by April 15 if they want to cede risk for the 2020 season.
This is tough because no one knows what the season will hold – and if 2019 is any guide, the weather can play a major role in that outcome.
Data is the answer to this difficult risk management question.
And Main Street Data’s new Preplanting Radar product can help. The map below shows 2020 YTD geographies with higher identified risk of prevented or delayed planting as of the forecast dates. These forecasts are based on Main Street Data’s unique, proprietary data and tools that measure soil moisture, and permit us to forecast changes in soil moisture using the IBM 15 day and Seasonal Weather (six months) forecasts and our proprietary forecast tools built over the last 10 years.
These Preplanting Radar screenshots show the corn yield risk area clustering in a few states due to excess soil moisture that will delay planting. Hover over the image and click to enlarge it.
Main Street Data will continue to make Preplanting Radar risk updates daily until April 15.
We will use those insights to help our clients make more informed decisions about risk mitigation and farm operational support. As of April 15, we will have accumulated a rich set of actual moisture conditions at granular geographies and at various depths and forecast conditions – using the market leading forecast from April 15 to planting date at the county level and, if desired, at sub-county levels.
With Preplanting Radar, Main Street Data can make the most scientifically based forecasts, for use in making the most significant decisions of the crop insurance year.
As historic proof of this risk management precision, Main Street Data’s 2019 yield forecasts were phenomenally accurate forecasts of final USDA numbers.
As shown below, we were within .1 bushel for corn and .4 bushel for soybeans from our August 2019 forecast to the final USDA estimates. Read the full story on our 2019 forecasts for soybeans and corn.
Preplanting Radar applies this same business intelligence to risk management forecasts.
Preplanting Radar can make all the difference between a shot in the dark and a precise estimate.
Find out more about Main Street Data’s data science capabilities, review our scenario modelling ability and learn how our product can improve the quality of your fast approaching fund designation decisions. Contact us today.
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