Adjusted Gross Revenue Insurance (AGR) Available in Selected Counties

Farm Business Management Update, December 2000

By James Pease

On November 17, the Federal Crop Insurance Corporation approved for 2001 a new pilot insurance program called Adjusted Gross Revenue (AGR) for selected cities/counties in Virginia (Table 1). This program will provide sorely needed revenue coverage for diversified Virginia producers. Vegetable producers, in particular, should carefully examine the advantages of this insurance product.

Please note: At the date of this article, the closing date for 2001 policies is January 31, 2001. Please mention this policy to eligible producers at the earliest opportunity so that they may assess the economic benefits of AGR.

Table 1: Localities included in AGR Program:

Accomack	Mathews	Colonial Heights
Caroline	Middlesex	Franklin
Charles City	New Kent	Hampton
Chesterfield	Northampton	Hopewell
Essex	Northumberland	Newport News
Gloucester	Prince George	Norfolk
Hanover	Richmond	Petersburg
Henrico	Southampton	Poquoson
Isle of Wight	Surry	Portsmouth
James City	Sussex	Richmond
King and Queen	Westmoreland	Suffolk
King George	York	Virginia Beach
King William	Chesapeake	Williamsburg
Lancaster

AGR provides insurance coverage for multiple agricultural products grown on a farm under one insurance policy. AGR provides insurable revenue protection against unavoidable losses from weather-related or price-related losses. Insurable farm business revenue includes income from crops, other agricultural commodities, and livestock, animal, or aquaculture products. However, no more than 35 percent of expected income may be obtained from livestock, animal, or aquaculture products. If more than 50 percent of expected income is obtained from insurable products, Multiple Peril insurance must be purchased if it is available in the county (AGR premiums are correspondingly reduced).

The period of insurance is the farmer's tax year (usually January 1 thru December 31). The participating producer provides his/her Schedule F tax form information for the previous 5 years to provide a base level of expected income and expenses for the insurance period. In most instances, individuals must have filed federal tax forms under the same business entity for at least the past five years to be covered under this policy. AGR coverage is calculated by multiplying the approved adjusted gross revenue by the selected coverage level and payment rate percentage. Producer coverage levels and payment rate percentages include

• 65% coverage level; 75% or 90% payment rate (at least 2 commodities are necessary for the higher rate)
• 75% coverage level; 75% or 90% payment rate (at least 2 commodities are necessary for the higher rate)
• 80% coverage level; 75% or 90% payment rate (at least 4 commodities are necessary for the higher rate)

For example, assume that a producer's expected adjusted gross revenue based on historical tax returns is $132,000. The producer chooses 75% coverage at the 90% payment rate for 2001. The trigger for indemnities would then be 75% times $132,000 = $99,000. After the tax year is completed, assume that the realized adjusted gross revenue is only $60,000. The revenue shortfall would then be $99,000-$60,000=$39,000. At the 90% payment rate, the indemnity would be 90% times $39,000=$35,100.

Premiums will be subsidized more than 50% on this policy. Premium rates and other information about AGR are available from USDA/FSA and from private crop insurance agents. As noted above, the policy closing date is January 31, 2001.

Contact the author at peasej@vt.edu

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