Evaluation of the North Dakota Personal 

Transitional Yield Insurance Program and 

Feasibility Study for National Expansion

Deliverable 2

Feasibility Study for National Expansion of the 

Personal Transitional Yield Insurance Program 

Report

Contract Number: 1406-N10PC18078/0001

US Department of Interior, Acquisition Services Directorate

Solicitation Number 1406-04-09-CS-21443

Submitted to:

USDA/RMA

Attn: Charles Naglich

6501 Beacon Drive

Kansas City, MO 64133-4676

Submitted by:

Watts and Associates, Inc.

4331 Hillcrest Road

Billings, Montana 59101

watts@wattsandassociates.com

October 7, 2010

This document includes data that shall not be disclosed outside of the Government and shall not be duplicated, used, 

or disclosed, in whole or in part, for any purpose. The Government shall have the right to duplicate, use, or disclose 

the data to the extent provided in Contract 1406-N10PC18078. All pages of this document are subject to this 

restriction.
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

i

Table of Contents

Section I. Executive Summary........................................................................................................ 1

Section II. Personal Transitional Yields – National Analysis......................................................... 3

II.A. Analysis of Category B Crop Data................................................................................... 3

II.B. Analysis of Category C Crop Data ................................................................................. 16

Section III. Summary of Findings................................................................................................. 25

Section IV. Addendum.................................................................................................................. 28

IV.A. Master Yields................................................................................................................ 28

IV.B. Simple Average T-yield (SA T-yield) Procedures for Added Land ............................. 33

IV.C. Distributional Effects of Simple Average PTY Substitution........................................ 34

Section V. Overall Assessment of the Findings............................................................................ 35

List of Tables

Table 1. Change in All Category B and C Crops Loss Cost Ratios on Units that 

Used T-yields for any Purpose when Alternative Transitional Yield 

Approaches Are Employed, United States, 2007 through 2009 ..................................... 2

Table 2. Change in All Category B and C Crops Loss Cost Ratios on all Units when 

Alternative Transitional Yield Approaches Are Employed, United States, 

2007 through 2009 .......................................................................................................... 2

Table 3. Category B Crops: Data Separated into Units Using T-yield in any Form a

nd Units with No T-yield Usage, 2007 through 2009, All States................................... 4

Table 4. Category B Crops: Normalized Data for Units Using T-yield in any Form, 

2007 through 2009, All States ........................................................................................ 5

Table 5. Category B Crops: Effects of Substituting Simple Average PTY for T-yield 

for Units that Used T-yield in any Form, 2007 through 2009, All States ...................... 6

Table 6. Category B Crops: Effects of Substituting Production-weighted PTY for T-yield for 

Units that Used T-yield in any Form, 2007 through 2009, All States............................ 6

Table 7. Category B Crops: Effects of Substituting Acreage-weighted PTY for T-yield 

for Units that Used T-yield in any Form, 2007 through 2009, All States ...................... 6

Table 8. Category B Crops: Normalized Data for all Units Sorted by Yield Limitation 

Flag, 2007 through 2009, All States............................................................................... 7

Table 9. Category B Crops: Normalized Data for all Units Sorted by Yield Limitation Flag with 

Simple Average PTY Substituted for T-yield, 2007 through 2009, All States .............. 7

Table 10. Category B Crops: Normalized Data for all Units Sorted by Yield Limitation 

Flag with Production-weighted PTY Substituted for T-yield, 2007 through 2009, 

All States......................................................................................................................... 8

Table 11. Category B Crops: Normalized Data for all Units Sorted by Yield Limitation 

Flag with Acreage-weighted PTY Substituted for T-yield, 2007 through 2009, 

All States......................................................................................................................... 8

Table 12. Movement of Records among Yield Limitation Flags when Simple Average 

PTY is Substituted for T-yield, 2007 through 2009, All States...................................... 9

Table 13. Movement of Records Among Yield Limitation Flags when Simple Average 

PTY is Substituted for T-yield, 2007 through 2009, All States.................................... 10

Table 14. Movement among Selected Yield Limitation Flags by Year, 2007 through 2009 ....... 11

Table 15. Relationship of PTY to T-yield Considering all Data in the Type 15 Database .......... 11
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

ii

Table 16. Relationship of PTY to T-yield Considering Only Type 15 Records that 

Match Type 11 Records................................................................................................ 11

Table 17. Number of Actual Yields for Calculating PTY for Category B Crops for 

Policies Containing at Least One Actual Yield, All States, 2007 through 2009* ........ 12

Table 18. Percentage Distribution of Actual Yields for Calculating PTY 

for Category B Crops for Policies Containing at Least One Actual 

Yield, All States, 2007 through 2009* ......................................................................... 13

Table 19. Number of Actual Yields Used to Determine the Approved Yield for Category B 

Crops, All States, 2007 through 2009*......................................................................... 13

Table 20. Percentage Distribution of Actual Yields Used to Determine the Approved Yield for 

Category B Crops, All States, 2007 through 2009* ..................................................... 14

Table 21. Category B Crops: Change in Program Variables for Group T-yield when Simple 

Average PTY is Substituted for T-yield ....................................................................... 15

Table 22. Category C Crops: Data Separated into Units Using T-yield in any Form and Units 

with No T-yield Usage, 2007 through 2009, All States................................................ 16

Table 23. Category C Crops: Normalized Data for Units Using T-yield in any Form, 2007 

through 2009, All States ............................................................................................... 17

Table 24. Category C Crops: Effects of Substituting Simple Average PTY for 

T-yield for Units that Used T-yield in any Form, 2007 through 2009, All States........ 17

Table 25. Category C Crops: Effects of Substituting Production-weighted PTY 

for T-yield for Units that Used T-yield in any Form, 2007 through 2009, All States.. 18

Table 26. Category C Crops: Effects of Substituting Acreage-weighted PTY 

for T-yield for Units that Used T-yield in any Form, 2007 through 2009, All States.. 18

Table 27. Category C Crops: Original Data for all Units Sorted by Yield 

Limitation Flag, 2007-2009, All States* ...................................................................... 18

Table 28. Category C Crops: Normalized Data for all Units Sorted by Yield

Limitation Flag with Simple Average PTY Substituted for T-yield, 

2007 through 2009, All States ...................................................................................... 19

Table 29. Category C Crops: Normalized Data for all Units Sorted by Yield 

Limitation Flag with Production-weighted PTY Substituted for T-yield, 

2007 through 2009, All States ...................................................................................... 19

Table 30. Category C Crops: Normalized Data for all Units Sorted by Yield 

Limitation Flag with Acreage-weighted PTY Substituted for T-yield, 

2007 through 2009, All States ...................................................................................... 19

Table 31. Movement of Category C Records Among Yield Limitation Flags when Simple 

Average PTY is Substituted for T-yield, 2007 through 2009, All States..................... 20

Table 32. Movement of Category C Records Among Yield Limitation Flags when Simple 

Average PTY is Substituted for T-yield, 2007 through 2009, All States..................... 20

Table 33. Category C Crops: Movement Among Selected Yield Limitation Flags 

by Year, 2007 through 2009 ......................................................................................... 21

Table 34. Category C Crops: Relationship of PTY to T-yield Considering all 

Data in the Type 15 Database ....................................................................................... 21

Table 35. Category C Crops: Relationship of PTY to T-yield Considering Only 

Type 15 Records that Match Type 11 Records............................................................. 21

Table 36. Number of Actual Yields for Calculating PTY for Category C Crops for Policies 

Containing at Least One Actual Yield, All States, 2007 through 2009*...................... 22
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

iii

Table 37. Percentage Distribution of Actual Yields for Calculating PTY for 

Category C Crops for Policies Containing at Least One Actual Yield, 

All States, 2007 through 2009* .................................................................................... 23

Table 38. Category C Crops: Change in Program Variables for Group T-yield when 

Simple Average PTY is Substituted for T-yield........................................................... 24

Table 39. Normalized Experience Data for Crops Eligible for Master Yield and 

Alternative PTY Computations, 2007-2009 ................................................................. 28

Table 40. Normalized Experience Data for Crops Eligible for Master Yield but that 

Used T-yields, and Alternative PTY Computations, 2007-2009.................................. 29

Table 41. Normalized Data and Impact of Simple Average PTY Substitution, Crops 

Eligible for Master Yields, 2007-2009 ......................................................................... 31

Table 42. Normalized Data and Impact of Simple Average PTY Substitution, Crops 

Eligible for Master Yields that Used T-yields, 2007-2009........................................... 32

Table 43. Source of Change in Liability, Premium, and Indemnity for Crops Eligible 

for Master Yield, 2007-2009 ........................................................................................ 33

Table 44. Normalized Experience Data for Units Using Simple Average T-yield 

for Added Land and Simple Average PTY Computation, 2007-2009 ......................... 34

Table 45. Distribution of Changes to Category B Crops with Simple Average 

PTY Substitution........................................................................................................... 35
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

1

SECTION I. EXECUTIVE SUMMARY

The United States Department of Agriculture (USDA) Risk Management Agency (RMA) 

engaged the Contractor to evaluate the North Dakota Personal Transitional Yield (PTY) Pilot 

Program. The contracted evaluation addresses three unique elements. The first was an 

assessment of the impact of requiring use of the PTY within the pilot area, as opposed to 

allowing insureds to elect the use of the PTY program as an option. The second was an 

assessment of an alternative PTY calculation approach using a weighted average in the PTY 

summary database. These two elements are specifically addressed in Deliverable 1 of this 

contract. The third element of this contracted evaluation, an assessment of the feasibility of 

expanding the program beyond North Dakota using either the existing PTY calculation 

procedures or the alternative PTY calculation procedures, is addressed in this report.

In this deliverable, the Contractor evaluates the effects of using a Personal Transitional Yield 

(PTY) on all eligible crops nationwide. As mentioned previously, the first written deliverable 

dealt with North Dakota, where the PTY was introduced as a pilot program effective for the 2007 

crop year and each subsequent year. In that deliverable, it was possible to separately examine 

the impact upon experience for those units where PTY was chosen versus units where the PTY 

was not used. The present deliverable can only provide a comparison of effects of PTY against 

the effects of T-yields actually available during the years included in the analysis.

The Contractor cautions that the PTY values constructed for this deliverable were necessarily 

based only on the data reported by Approved Insurance Providers (AIP) and included in the Type 

15 database. Any additional records available to the AIP, but not submitted to RMA because the 

unit was not planted for a particular crop year, were not included. However, the effect is not 

believed to be substantive and most likely affects only units where relatively few yields were 

included in the Type 15 database and additional yields were included in the policyholder files.

The Contractor included crop years 2007 through 2009 in the research for this deliverable. 

These are the same years the PTY pilot was available as a pilot program in North Dakota. At the 

time of the analysis, crop year 2010 data were not yet available. The intent was to examine the 

same time frame to eliminate any anomalies that may have existed in a single crop year. Data 

for the Category B crops were converted to an Actual Production History (APH) equivalent basis 

for this deliverable. That is, the amount of premium for all units was calculated using APH 

premium calculation procedures. Add-on premium for revenue loads was not included. 

Indemnities similarly were converted to a loss of yield basis, meaning the indemnities for the 

revenue products attributed to price changes were eliminated. The purpose of this approach was 

to develop data consistent with the data used to determine the base premium rates by eliminating 

the effect of price changes.

1

 While the insurance experience data were not “normalized” to the 

65 percent coverage level for preliminary analyses, they provide a representative indication of 

the impact on loss cost ratios (as well as for other insurance attributes) of changing to PTY. 

The effects of introducing a PTY were analyzed separately for Category B and Category C crops 

for this deliverable. PTY has a greater impact on the Category C crops in terms of an increase in 

loss cost ratios. The analysis first considered units that used T-yields in any form (as a substitute 

for a missing actual yield, for yield substitution, or to determine a floor) separately from units 

 

1 Revenue loads are a separate premium rating determination and are a function of the underlying base premium rate.
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

2

that were based on all actual yields. This provides a measure of change (impact) specific to such 

units (Table 1). The overall indication from the analysis shows a small effect upon crop 

insurance experience if either a simple average PTY or an acreage-weighted PTY is used. 

However, the differences between these two alternatives are small, leading to a legitimate 

question as to whether the added complexity of the acre weighting is compensated by 

improvements in program performance when measured by the loss cost ratio. A productionweighted PTY resulted in higher loss cost ratios relative to the status quo (i.e., relative to the 

current T-yield approach). These results are consistent with the earlier findings from North 

Dakota. Specific results are included herein for units that used a T-yield for any purpose during 

2007 through 2009.

Table 1. Change in All Category B and C Crops Loss Cost Ratios on Units that Used Tyields for any Purpose when Alternative Transitional Yield Approaches Are Employed,

United States, 2007 through 2009

Weighting Category B Category C

Simple Average -2.23% + 1.52%

Acreage-weighted -2.21% + 0.34%

Production-weighted +4.65% +12.72%

All units were then classified according to the yield limitation flag (APH, floor (Category B 

only), cup, and yield substitution). The effects of alternative approaches to calculating the PTY 

were analyzed on a total book of business basis with this categorization of the data. This 

approach reduced the percentage impacts of the substitutions relative to the first approach due to 

the larger liability included in the analysis. Those insurance experience for units included in the 

“no T-yield use” group included in this stage of the analysis were impacted only if the PTY 

created a floor or opportunity for yield substitution. Otherwise, such units were unaffected and 

the liability, premium, and indemnity do not change relative to the base. Results of this analysis 

are presented in Table 2.

Table 2. Change in All Category B and C Crops Loss Cost Ratios on all Units when 

Alternative Transitional Yield Approaches Are Employed, United States, 2007 through 

2009

Weighting Category B Category C

Simple Average -1.64% +1.38%

Acreage-weighted -1.94% +1.11%

Production-weighted +4.29% +6.53%

In addition to the limitation on inclusiveness of the estimated PTY values, another limitation of 

the analysis is related to the nature of yield substitution. This action is voluntary on the part of 

the producer. The Contractor needed a “rule” to conduct the analysis. The rule established was:

if an eligible actual yield was flagged by the producer so substitution was not performed in the 

original data that flag continued to be honored. However, if a yield eligible for substitution did 

not have a flag, the yield substitution was made. This may overstate the number of substitutions 

that will occur as some of these producers may have opted not to substitute. However, the 

original data indicate that substitution is predominant. Hence, the impact of the rule is not 

considered to be large. The results are believed to be indicative of the outcomes that would have 

been observed had PTY been the procedure rather than the T-yields actually offered.
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

3

SECTION II. PERSONAL TRANSITIONAL YIELDS – NATIONAL ANALYSIS

This report examines the impact of using a Personal Transitional Yield (PTY) considering all 

relevant crops nationwide. It is the second of two written deliverables for this Solicitation.

The Contractor cautions that the estimates of PTY developed in this analysis may not be 

completely representative of values that would be obtained in practice. That is because the 

Contractor calculated a PTY using only the data submitted by the Approved Insurance Provider 

(AIP) for a particular crop year. The producer’s files maintained by the AIP may contain records 

for additional units that were not planted to the crop for that crop year and hence were not 

transmitted to RMA. However, with the exception of policies for which only a few actual yields 

were transmitted (but additional records existed), the estimates are believed to be reasonably 

representative of the values that would be obtained in practice.

Category B and Category C crops are considered independently in the analysis. Results for all 

crops in the Category at the national level in aggregate are presented in this report, except when 

individual crops are considered. In that case, data for the crop is reported at the national level.

Since the effects of alternative approaches are relatively small, greater discussion by crop or 

region within the main body of the report was not deemed crucial to an understanding of the 

alternative approaches. Disaggregated data have been provided to RMA digitally in Microsoft 

Excel format should the agency desire to examine a particular crop at a finer scale.

Small differences exist among values in the various tables included in this report which might be 

expected to remain constant (e.g., net insured acres). This is the result of summing the data by 

subcategories which ultimately return slightly different outcomes because of mathematical 

operations such as rounding. These minor differences do not affect the overall results that need 

to be considered when evaluating the impact of using a PTY for all relevant crops nationwide.

II.A. Analysis of Category B Crop Data

The Contractor initially separated all units into two categories: those units that used a T-yield in 

some form (for a missing actual yield, yield floor, a yield substitution) and those that did not. 

Table 3 presents the data developed by this sorting process for crop years 2007 through 2009 

combined. These years correspond to the same years the PTY was available and for which 

complete data were provided in North Dakota. Use of three years rather than a single year also 

protects against an anomaly that may affect any single year. The Contractor separated the units 

by examining each yield type within each Type 15 record and by the yield limitation flag (to 

identify floors and substitutions).

Unit counts are presented in Table 3; policy counts are not. This is because a crop policy might 

have units that used T-yields in some form and units that did not; hence, if policy counts were 

compiled, the policy would be counted twice in the sorting process. Some units may be counted 

more than once due to separate lines for practice/type/variety/t map area (P/T/V/TMA) within a 

unit. However, the number of such instances should not affect the overall unit count as much as 

the number of policies would have been affected by counting policies twice if they included both 

units using T-yields and units using only actual yields. Acres, liability, premium, and indemnity 

are unaffected by the sorting process.
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

4

Use of T-yields is relatively common among Category B crops, with more than twice as many 

units using a T-yield in some form than those that did not. Acres demonstrate a similar

relationship. Premium and indemnity also are substantially greater in the group using T-yields, 

while liability is only about 30 percent greater for this group. In contrast to the data developed 

for North Dakota, the loss ratio for units nationwide using a T-yield is much larger (about 25 

percent higher) than the loss ratio for units that did not use a T-yield.

2

Table 3. Category B Crops: Data Separated into Units Using T-yield in any Form and 

Units with No T-yield Usage, 2007 through 2009, All States

Year

Use of TyieldUnits Earning 

Premium

Units 

Indemnified

Net Insured 

Acres Liability Premium Indemnity Loss Cost 

Ratio

Loss 

Ratio

-- thousands --

2007 No T-yield 701,486 95,154 48,540 17,851,513 1,479,550 566,593 0.032 0.383

2008 No T-yield 712,552 274,555 50,555 26,378,684 2,351,894 2,082,436 0.079 0.885

2009 No T-yield 639,536 58,900 55,449 23,498,029 2,130,794 509,764 0.022 0.239

Total No T-yield 2,053,574 428,609 154,544 67,728,226 5,962,238 3,158,793 0.047 0.530

2007 T-yield 1,645,352 367,506 102,013 23,181,500 3,127,938 1,922,334 0.083 0.615

2008 T-yield 1,707,893 607,882 106,683 33,524,503 4,854,908 4,348,302 0.130 0.896

2009 T-yield 1,590,395 298,558 112,848 31,194,903 4,729,937 2,220,393 0.071 0.469

Total T-yield 4,943,640 1,273,946 321,544 87,900,906 12,712,783 8,491,029 0.097 0.668

Total All Units 6,997,214 1,702,555 476,088 155,629,132 18,675,021 11,649,822 0.075 0.624

Table 4 provides the normalized data for the units shown in Table 3, using a T-yield in some 

form. “Normalization” is a procedure developed by the Contractor whereby the liability, 

premium, and indemnity are calculated using the approved yield (APH, cup, floor, or 

substitution) from the Type 15 record without regard to any optional coverage, unit structure, and 

other considerations on a yield-based coverage basis. The premium calculated under this 

procedure is based on the APH premium calculation procedure. The indemnity calculated under 

this procedure does not include any losses due to price change for the revenue insurance plans. 

Thus, the loss cost ratios are consistent with the data used by RMA for ratemaking in the 

determination of base premium rates. In addition, the “normalized” loss ratios represent 

estimates of the loss ratios for loss of yield only and are unaffected by the price changes that may 

have occurred. This process had a small effect on liability, but removed about $3.4 billion of 

premium and $2.1 billion of indemnities from the full insured dataset. The loss cost ratios are 

reduced significantly due to elimination of indemnities (e.g., revenue-based losses), but retention 

of approximately the same liability. The loss ratios, with the exception of 2008, are higher in the 

normalized dataset than in the nominal data. These data, rather than the original data in Table 3,

are the base for comparing alternatives in Tables 5, 6, and 7.

 

2

For application in this report, loss ratio and loss cost ratios are reported in decimal form in all tables. To convert to percentage, 

simply multiply the reported decimal value by 100 and label it as a percentage (e.g. 0.562 becomes 56.2%).
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

5

Table 4. Category B Crops: Normalized Data for Units Using T-yield in any Form, 2007

through 2009, All States

Year

Units 

Earning 

Premium

Units 

Indemnified

Net 

Insured 

Acres

Normalized 

Liability

Normalized 

Premium

Normalized 

Indemnity Loss Cost 

Ratio Loss Ratio

-- thousands --

2007 1,645,352 367,506 102,013 23,287,045 2,443,980 1,819,560 0.078 0.745

2008 1,707,893 607,882 106,683 33,780,220 3,420,034 2,817,940 0.083 0.824

2009 1,590,395 298,558 112,848 31,489,845 3,436,826 1,759,577 0.056 0.512

Total 4,943,640 1,273,946 321,544 88,557,110 9,300,840 6,397,077 0.072 0.688

Tables 5, 6, and 7 provide estimates of the effects of replacing the T-yields with the simple 

average PTY, the production-weighted PTY, and the acreage-weighted PTY, respectively. The 

simple average PTY is the simple average of all yields in the PTY summary database for each 

P/T/V/PTY. The acreage-weighted PTY is the sum of all yields for each year in the database 

weighted by the acres in each year. The weighted sums are added and divided by the total of the 

acres. The production-weighted PTY is similar to the acreage-weighted approach, except the 

sum of the annual yields is weighted by the production for each year. The sum of the weighted 

yields is divided by the total of all the production across all relevant years. The data in Tables 5, 

6, and 7 consist of the changes resulting from the substitution of PTY and retention of the 

original data whenever a policy did not have at least one actual yield to calculate a PTY. This is 

the form in which the data would have been observed in the absence of some form of T-yield 

procedure since a T-yield still is needed if a policy does not have at least one actual yield.

For units that used T-yields, substituting the simple average PTY based on normalized data 

increases liability and premium slightly and reduces indemnities, the loss cost ratio, and the loss 

ratio relative to the same attributes when T-yields are used. The production-weighted PTY 

increases the liability by a greater amount than the simple average PTY, and reduces the 

premium slightly, and increases indemnities, the loss cost ratio, and the loss ratio by relatively 

larger percentages. The acreage-weighted PTY reduces all variables by a small percentage

relative to the same attributes when T-yields are used. Results for the simple average and the 

acreage-weighted PTY are similar.

These results are consistent with the data developed for North Dakota and presented in 

Deliverable 1. The production-weighted PTY causes a deterioration in performance when 

measured by either the loss cost ratio or the loss ratio relative to these ratios derived using the 

current T-yield calculations. Both the simple average and the acreage-weighted PTY slightly 

improve program performance when measured in terms of either ratio relative to the current Tyield approach.
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

6

Table 5. Category B Crops: Effects of Substituting Simple Average PTY for T-yield for 

Units that Used T-yield in any Form, 2007 through 2009, All States

Year

Restated 

Liability

Restated 

Premium

Restated 

Indemnity Loss Cost 

Ratio Loss Ratio

-- thousands --

2007 23,283,401 2,482,732 1,778,994 0.076 0.717

2008 34,000,776 3,468,933 2,787,687 0.082 0.804

2009 31,807,107 3,508,521 1,728,435 0.054 0.493

Total 89,091,284 9,460,186 6,295,116 0.071 0.665

Change from Normalized Data (Table 4) 0.60% 1.68% -1.62% -2.23% -3.36%

Table 6. Category B Crops: Effects of Substituting Production-weighted PTY for T-yield 

for Units that Used T-yield in any Form, 2007 through 2009, All States

Year

Restated 

Liability

Restated 

Premium

Restated 

Indemnity Loss Cost 

Ratio Loss Ratio

-- thousands --

2007 23,630,703 2,418,117 1,894,213 0.080 0.783

2008 34,539,575 3,382,646 3,080,622 0.089 0.911

2009 32,335,461 3,426,210 1,882,174 0.058 0.549

Total 90,505,739 9,226,973 6,857,009 0.076 0.743

Change from Normalized Data (Table 4) 2.15% -0.80% 6.71% 4.65% 7.45%

Table 7. Category B Crops: Effects of Substituting Acreage-weighted PTY for T-yield for 

Units that Used T-yield in any Form, 2007 through 2009, All States

Year

Restated 

Liability

Restated 

Premium

Restated 

Indemnity Loss Cost 

Ratio Loss Ratio

-- thousands --

2007 22,909,920 2,418,117 1,750,840 0.076 0.724

2008 33,454,955 3,382,646 2,749,425 0.082 0.813

2009 31,242,532 3,426,210 1,697,543 0.054 0.495

Total 87,607,407 9,226,973 6,197,808 0.071 0.672

Change from Normalized Data (Table 4) -1.08% -0.80% -3.22% -2.11% -2.40%

The Contractor further segregated the data into the categories defined by the yield limitation flag 

as shown in Table 8. These data represent normalization of both categories shown in Table 3

(units that did and did not use T-yields in the APH Databases). Cups and floors combined 

represent slightly less than five percent of the total acreage. About 25 percent of all net insured 

acres had a database with at least one yield substitution. About 70 percent were classified with a 

yield limitation flag representing APH.
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

7

Table 8. Category B Crops: Normalized Data for all Units Sorted by Yield Limitation Flag, 

2007 through 2009, All States

Flag

Units 

Earning 

Premium

Units 

Indemnified

Net 

Insured 

Acres

Normalized 

Liability

Normalized 

Premium

Normalized 

Indemnity Loss Cost 

Ratio Loss Ratio

-- thousands --

Actual yield 4,727,094 1,098,198 333,205 123,154,155 9,153,062 4,768,893 0.039 0.521

Cup 69,159 21,679 4,499 872,795 149,346 134,435 0.154 0.900

Floor 335,419 110,108 18,352 3,142,469 511,807 470,695 0.150 0.920

Substitution 1,844,142 473,289 119,825 29,299,945 3,509,694 2,587,660 0.088 0.737

Totals 6,975,814 1,703,274 475,881 156,469,364 13,323,909 7,961,683 0.051 0.598

Tables 9, 10, and 11 show the effect of substituting the simple average, the production-weighted

PTY, and the acreage-weighted PTY respectively for the existing procedures. The percent 

changes differ slightly from those presented in Tables 5, 6, and 7 because all the data are 

included in the analysis leading to these tables whereas the former tables included only the units 

that used a T-yield. There is an opportunity for units in the group “no T-yield” to be affected by 

the PTY since the average yield could become subject to a floor or a yield may qualify for yield 

substitution. However, the results are the same: the production-weighted PTY worsens 

experience in terms of the loss cost and loss ratios whereas the simple average and the acreageweighted PTY modestly improve experience relative to the existing procedures and do not differ 

materially from each other.

Table 9. Category B Crops: Normalized Data for all Units Sorted by Yield Limitation Flag 

with Simple Average PTY Substituted for T-yield, 2007 through 2009, All States

Flag

Net 

Insured 

Acres

Normalized 

Liability

Normalized 

Premium

Normalized 

Indemnity

Loss 

Cost 

Ratio

Loss 

Ratio

-- thousands --

Actual Yield 270,398 105,166,597 7,565,598 3,905,540 0.037 0.516

Cup 6,418 1,315,172 203,807 151,839 0.115 0.745

Floor 112 31,276 2,974 1,310 0.042 0.440

Substitution 198,951 50,501,857 5,711,282 3,802,050 0.075 0.666

Totals 475,879 157,014,902 13,483,661 7,860,739 0.050 0.583

Change from Normalized Data (Table 8) 0.35% 1.18% -1.28% -1.64% -2.50%
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

8

Table 10. Category B Crops: Normalized Data for all Units Sorted by Yield Limitation 

Flag with Production-weighted PTY Substituted for T-yield, 2007 through 2009, All States

Flag

Net 

Insured 

Acres

Normalized 

Liability

Normalized 

Premium

Normalized 

Indemnity

Loss 

Cost 

Ratio

Loss 

Ratio

-- thousands --

Actual yield 261,432 102,231,934 7,126,524 4,016,290 0.039 0.564

Cup 9,145 1,661,536 295,153 237,821 0.143 0.806

Floor 181 53,355 5,070 2,145 0.040 0.423

Substitution 205,123 54,483,151 5,823,681 4,166,401 0.076 0.715

Totals 475,881 158,429,976 13,250,428 8,422,657 0.053 0.636

Change from Normalized Data (Table 8) 1.24% -0.55% 5.47% 4.29% 5.99%

Table 11. Category B Crops: Normalized Data for all Units Sorted by Yield Limitation 

Flag with Acreage-weighted PTY Substituted for T-yield, 2007 through 2009, All States

Flag

Net 

Insured 

Acres

Normalized 

Liability

Normalized 

Premium

Normalized 

Indemnity

Loss 

Cost 

Ratio

Loss 

Ratio

-- thousands --

Actual yield 271,564 103,785,860 7,394,633 3,827,629 0.037 0.518

Cup 12,278 2,262,492 393,167 306,692 0.136 0.780

Floor 104 31,977 2,913 1,173 0.037 0.403

Substitution 191,933 49,450,446 5,459,717 3,627,872 0.073 0.664

Totals 475,879 155,530,775 13,250,430 7,763,366 0.050 0.586

Change from Normalized Data (Table 8) -0.60% -0.55% -2.55% -1.94% -1.99%

The Contractor notes yield substitution is elective on the part of the insured whereas cups and 

floors are not. Therefore, the Contractor was required to adopt a rule for managing the data 

when a potential substitution was indicated. The rule used by the contractor was: the producer 

will elect the substitution for all eligible substitutions unless a producer had previously indicated 

an eligible yield was not to be substituted. This rule may overstate the actual number that would 

be made in practice; however, the frequency of use of substitution (Table 8) indicates it is 

common, and therefore the rule was deemed reasonable.

Regardless of the type of PTY, replacing a T-yield with PTY reduced the number of acres with 

the APH flags and the floor limitation flags and increased the number of acres with the cup flags

and substitution flags. The greatest absolute increase as a result of the modified procedures was 

in the yield limitation flag corresponding to yield substitution. This may in part be due to the 

assumption made by the Contractor. To better understand the changes that occurred, the 

Contractor tracked the changes in yield limitation flags, as shown in Tables 12 and 13. The only 

difference between these tables is the grouping of the data. Table 12 groups the data by 

destination yield limitation flag while Table 13 groups the data by the origin flag. About 80 

percent of the acreage with the approved yield flag remained in that category, while nearly 100 

percent of the acreage with the substitution flag remained in that category. Most of the acreage 

that moved from the actual yield flag went to substitution yield flag. This likely indicates the 

PTY was higher than the T-yield by an amount sufficient to trigger at least one substitution on 
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

9

those acres, a condition demonstrated in Tables 15 and 16. This represented about one-eighth of 

the total acreage insured for the three years. Most of the acreage previously at the floor or that 

was cupped also moved to substitution.

Table 12. Movement of Records among Yield Limitation Flags when Simple Average PTY 

is Substituted for T-yield, 2007 through 2009, All States

From To

Net 

Insured 

Acres

Normalized 

Liability

Normalized 

Premium

Normalized 

Indemnity Loss Cost 

Ratio Loss Ratio

-- thousands --

Actual Yield Actual Yield 268,151 104,608,030 7,501,875 3,871,613 0.037 0.516

Cup Actual Yield 102 29,963 3,396 2,417 0.081 0.712

Floor Actual Yield 1,051 255,979 28,093 13,703 0.054 0.488

Substitution Actual Yield 1,094 272,626 32,234 17,806 0.065 0.552

Actual Yield Cup 4,526 953,074 143,152 106,053 0.111 0.741

Cup Cup 450 105,745 16,704 11,811 0.112 0.707

Floor Cup 541 101,263 15,751 11,568 0.114 0.734

Substitution Cup 900 155,088 28,200 22,407 0.144 0.795

Actual Yield Floor 90 25,388 2,301 1,119 0.044 0.487

Cup Floor 0 34 5 2 0.066 0.455

Floor Floor 22 5,798 661 185 0.032 0.281

Substitution Floor 0 55 7 3 0.055 0.423

Actual Yield Substitution 60,437 18,695,105 1,604,697 939,469 0.050 0.585

Cup Substitution 3,946 695,836 132,762 103,415 0.149 0.779

Floor Substitution 16,737 2,289,644 493,859 276,273 0.121 0.559

Substitution Substitution 117,830 28,821,271 3,479,962 2,482,893 0.086 0.713

Totals 475,877 157,014,899 13,483,659 7,860,737 0.050 0.583
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

10

Table 13. Movement of Records Among Yield Limitation Flags when Simple Average PTY 

is Substituted for T-yield, 2007 through 2009, All States

From To

Net 

Insured 

Acres

Normalized 

Liability

Normalized 

Premium

Normalized 

Indemnity Loss Cost 

Ratio Loss Ratio

-- thousands --

Actual Yield Actual Yield 268,151 104,608,030 7,501,875 3,871,613 0.037 0.516

Actual Yield Cup 4,526 953,074 143,152 106,053 0.111 0.741

Actual Yield Floor 90 25,388 2,301 1,119 0.044 0.487

Actual Yield Substitution 60,437 18,695,105 1,604,697 939,469 0.05 0.585

Cup Actual Yield 102 29,963 3,396 2,417 0.081 0.712

Cup Cup 450 105,745 16,704 11,811 0.112 0.707

Cup Floor 0 34 5 2 0.066 0.455

Cup Substitution 3,946 695,836 132,762 103,415 0.149 0.779

Floor Actual Yield 1,051 255,979 28,093 13,703 0.054 0.488

Floor Cup 541 101,263 15,751 11,568 0.114 0.734

Floor Floor 22 5,798 661 185 0.032 0.281

Floor Substitution 16,737 2,289,644 493,859 276,273 0.121 0.559

Substitution Actual Yield 1,094 272,626 32,234 17,806 0.065 0.552

Substitution Cup 900 155,088 28,200 22,407 0.144 0.795

Substitution Floor 0 55 7 3 0.055 0.423

Substitution Substitution 117,830 28,821,271 3,479,962 2,482,893 0.086 0.713

Totals 475,877 157,014,899 13,483,659 7,860,737 0.050 0.583

When examining the data, the Contractor noticed an increase in each year in the percentage of 

acreage that remained in the actual yield category and a reduction in the acreage that changed 

from the actual yield category to the substitution category (Table 14). The sum of these 

percentages remained constant at 98.6 percent. These data may indicate the PTY became less 

competitive with the T-yield in each succeeding year. There are insufficient data to determine 

the cause of this unusual pattern. During these same years, the same percentage of acreage that 

originated in the substitution category remained in that category. This may indicate the 

relationship of the PTY to T-yield remained about constant for the acreage that originated in the 

substitution category.
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

11

Table 14. Movement among Selected Yield Limitation Flags by Year, 2007 through 2009

Year From To

Original 

Net 

Insured 

Acres

New Net 

Insured 

Acres

Percent

2007 Actual Yield Actual Yield 104,734 83,418 79.65

2008 Actual Yield Actual Yield 109,945 88,420 80.42

2009 Actual Yield Actual Yield 118,526 96,311 81.26

2007 Actual Yield Substitution 104,734 19,890 18.99

2008 Actual Yield Substitution 109,945 19,958 18.15

2009 Actual Yield Substitution 118,526 20,589 17.37

2007 Cup Cup 1,602 119 7.43

2008 Cup Cup 1,488 122 8.20

2009 Cup Cup 1,409 208 14.76

2007 Floor Floor 6,370 7 0.11

2008 Floor Floor 5,764 5 0.09

2009 Floor Floor 6,218 9 0.14

2007 Substitution Substitution 37,778 37,179 98.41

2008 Substitution Substitution 39,981 39,357 98.44

2009 Substitution Substitution 42,066 41,293 98.16

Distinct differences in the relationship of PTY to T-yield exist in the originating yield limitation 

flag categories. The Contractor compared the PTY to the T-yield for all data in the Type 15 

database and determined the relationships as displayed in Table 15. All data in the Type 15 

database are included because all available records must be used to establish the PTY even 

though acreage might not be reported for some units. Table 16 contains the relationships of PTY 

to T-yield for those acres actually reported for insurance. All data in the Type 15 database were 

used in the calculation of the PTY for this table; however, the comparisons relate only to the 

acreage actually reported.

Table 15. Relationship of PTY to T-yield Considering all Data in the Type 15 Database

Original Flag PTY > t PTY < t PTY = T

Percent

APH 69.0 25.9 5.2

Cup 34.5 61.2 4.3

Floor 7.9 89.4 2.7

Substitution 43.8 50.5 5.7

Table 16. Relationship of PTY to T-yield Considering Only Type 15 Records that Match 

Type 11 Records

Original Flag PTY > t PTY < t PTY = T

Percent

APH 75.7 20.3 4.0

Cup 36.0 60.0 3.9

Floor 5.9 92.8 1.3

Yield Substitution 48.9 46.6 4.5
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

12

The PTY for acreage for which the original flag is actual yield exceeds the T-yield in more than 

two-thirds of the instances in both tables. This is the reason a relatively large number of acres 

moved from this category to substitution: the higher PTY qualified at least one actual yield for 

substitution that previously did not qualify. In the case of acreage for which the original flag is 

floor, the PTY was less than the T-yield in nearly all instances. These acres changed category 

since the floor at the PTY was less than the floor at T-yield and the acreage no longer qualified 

for the floor. The relationships for substitution are more evenly split between higher and lower 

PTY. However, the overall amount of difference must not be large enough to eliminate 

substitutions as the appropriate adjustment in the majority of the records contained in the 

substitution category (Table 14).

The Contractor also examined the number of actual yields per policy for the units included in the 

category T-yield in Table 3. These units used at least one T-yield to derive the approved yield. 

The purpose of this review was to determine the number of policies behind those units that could 

support a PTY and the number of yields available to form the PTY.

These results are shown in Table 17 while Table 18 provides a percentage distribution of the 

results in Table 17. Of the approximately 322 million acres included in the Category “T-yield” 

in Table 3, about 308 million (over 95 percent) were associated with a policy that had at least 

one actual yield; thus, a PTY could be calculated with the rules for that procedure for the 

majority of the acreage. Over 85 percent of the acreage is associated with policies having four or 

more actual yields, meaning that a PTY could be calculated without recourse to use of any Tyields. About 60 percent of the acres had 10 or more actual yields at the policy level.

Table 17. Number of Actual Yields for Calculating PTY for Category B Crops for Policies 

Containing at Least One Actual Yield, All States, 2007 through 2009*

Number of 

Actual 

Yields

Policies 

Earning 

Premium

Policies 

Indemnified

Net 

Insured 

Acres

Liability Premium Indemnity Loss Cost 

Ratio Loss Ratio

-- thousands --

1 118,220 31,984 11,788 2,875,203 440,102 337,499 0.117 0.767

2 102,469 28,482 10,798 2,813,306 413,063 309,187 0.110 0.749

3 101,916 28,923 11,235 3,096,044 431,153 319,301 0.103 0.741

4 81,450 24,897 9,644 2,450,228 376,777 285,549 0.117 0.758

5 79,233 23,385 9,385 2,396,987 371,713 264,037 0.110 0.710

6 76,262 22,852 8,987 2,305,600 363,692 259,628 0.113 0.714

7 76,756 23,576 9,201 2,364,137 368,140 274,538 0.116 0.746

8 79,171 23,834 9,767 2,542,570 393,447 278,234 0.109 0.707

9 86,909 25,653 11,266 2,932,076 443,429 302,578 0.103 0.682

10 or more 1,247,269 383,184 216,007 61,046,602 8,608,848 5,465,304 0.090 0.635

Total 2,049,655 616,770 308,078 84,822,753 12,210,364 8,095,855 0.095 0.663

* From Table 3 Category “T-yield”.
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

13

Table 18. Percentage Distribution of Actual Yields for Calculating PTY for Category B 

Crops for Policies Containing at Least One Actual Yield, All States, 2007 through 2009*

Number of 

Actual 

Yields

Policies 

Earning 

Premium

Policies 

Indemnified

Net 

Insured 

Acres

Liability Premium Indemnity

-- Percent --

1 5.77 5.19 3.83 3.39 3.60 4.17

2 5.00 4.62 3.50 3.32 3.38 3.82

3 4.97 4.69 3.65 3.65 3.53 3.94

4 3.97 4.04 3.13 2.89 3.09 3.53

5 3.87 3.79 3.05 2.83 3.04 3.26

6 3.72 3.71 2.92 2.72 2.98 3.21

7 3.74 3.82 2.99 2.79 3.01 3.39

8 3.86 3.86 3.17 3.00 3.22 3.44

9 4.24 4.16 3.66 3.46 3.63 3.74

10 or more 60.85 62.13 70.11 71.97 70.50 67.51

Total 100.00 100.00 100.00 100.00 100.00 100.00

* From Table 3 Category “T-yield”.

The Contractor also examined the number of actual yields per unit for the units included in the 

Category T-yield (units for which T-yields were used in some form) in Table 3. These results 

are shown in Tables 19 and 20. Nearly 40 percent of all net insured acres were associated with 

units on which ten actual yields were used. About 25 percent either had no actual or only 1 

actual yield. 

Table 19. Number of Actual Yields Used to Determine the Approved Yield for Category B 

Crops, All States, 2007 through 2009*

Number of 

Actual 

Yields

Net 

Insured 

Acres

Liability Premium Indemnity

-- thousands --

0 46,400 12,527,153 1,795,245 1,369,052

1 33,925 9,585,668 1,329,374 913,734

2 27,696 8,280,142 1,114,432 742,380

3 24,625 7,657,270 1,011,829 670,084

4 10,369 2,247,369 441,944 283,684

5 10,590 2,414,434 440,925 292,924

6 10,628 2,517,392 436,303 293,348

7 10,886 2,643,333 436,537 293,146

8 11,410 2,866,259 452,956 307,273

9 12,886 3,301,976 502,458 328,172

10 122,127 33,859,995 4,750,797 2,997,228

Total 321,542 87,900,991 12,712,800 8,491,025

* From Table 3 Category “T-yield”.
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

14

Table 20. Percentage Distribution of Actual Yields Used to Determine the Approved Yield 

for Category B Crops, All States, 2007 through 2009*

Number of 

Actual 

Yields

Net 

Insured 

Acres

Liability Premium Indemnity

-- Percent --

0 14.43 14.25 14.12 16.12

1 10.55 10.91 10.46 10.76

2 8.61 9.42 8.77 8.74

3 7.66 8.71 7.96 7.89

4 3.22 2.56 3.48 3.34

5 3.29 2.75 3.47 3.45

6 3.31 2.86 3.43 3.45

7 3.39 3.01 3.43 3.45

8 3.55 3.26 3.56 3.62

9 4.01 3.76 3.95 3.86

10 37.98 38.52 37.37 35.30

Total 100.00 100.00 100.00 100.00

* From Table 3 Category “T-yield”.

The Contractor examined the data for any significant differences among crops with regard to the 

impact of using simple average PTY. These results are shown in Table 21. With only a few 

minor exceptions (Flax, Forage Production, Processing Beans, and Processing Tomatoes), the 

restated loss cost ratio and the loss ratio changed by small amounts relative to the original data.
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

15

Table 21. Category B Crops: Change in Program Variables for Group T-yield when Simple 

Average PTY is Substituted for T-yield

Crop

Units 

Earning 

Premium

Units 

Indemnified

Net 

Insured 

Acres

Original 

Loss 

Cost 

Ratio

Restated 

Loss 

Cost 

Ratio

Original 

Loss 

Ratio

Restated 

Loss 

Ratio

New 

LCR / 

Old 

LCR

New 

LR / 

Old 

thousands LR

Corn 1,546,410 344,147 96,865 0.046 0.045 0.547 0.519 0.969 0.948

Soybeans 1,388,182 356,282 82,650 0.049 0.050 0.504 0.521 1.026 1.034

Wheat 1,211,713 396,405 91,337 0.148 0.144 1.066 1.018 0.973 0.955

Cotton 252,380 73,186 15,699 0.156 0.153 0.989 0.974 0.982 0.985

Grain Sorghum 243,127 48,534 12,634 0.118 0.111 0.704 0.632 0.942 0.898

Sugar Beets 17,570 2,516 1,130 0.039 0.041 0.584 0.613 1.038 1.050

Rice 10,735 1,500 1,323 0.045 0.045 0.379 0.400 1.005 1.055

Potatoes 7,786 1,056 449 0.038 0.036 0.327 0.306 0.956 0.936

Forage Production 70,820 10,223 5,947 0.048 0.056 0.293 0.374 1.172 1.278

Sunflowers 24,881 6,729 2,322 0.104 0.089 0.592 0.503 0.855 0.849

Dry Beans 24,277 3,785 1,318 0.059 0.059 0.383 0.401 0.995 1.048

Barley 34,672 8,080 3,633 0.097 0.096 0.690 0.664 0.987 0.962

Burley Tobacco 18,984 4,286 147 0.137 0.120 1.040 0.915 0.872 0.880

Tomatoes, Processing 2,492 121 216 0.008 0.010 0.212 0.267 1.189 1.254

Onions 4,107 1,263 102 0.155 0.141 0.810 0.750 0.914 0.926

Sweet Corn, C&P 6,694 571 416 0.043 0.072 0.659 1.244 1.656 1.886

Green Peas 7,141 1,384 378 0.062 0.060 0.488 0.463 0.958 0.948

Dry Peas 10,292 2,629 1,082 0.118 0.114 0.894 0.841 0.963 0.940

Popcorn 3,650 364 253 0.028 0.030 0.217 0.239 1.077 1.105

Cotton Ex Long Staple 923 240 107 0.188 0.189 2.322 2.317 1.005 0.998

Sugarcane 4,309 235 199 0.015 0.014 0.218 0.181 0.896 0.831

Tomatoes, Fresh Market & GP 883 239 7 0.096 0.096 0.279 0.274 0.999 0.981

Beans, Processing 4,031 731 197 0.050 0.056 0.394 0.429 1.114 1.088

Oats 24,776 4,546 866 0.111 0.106 0.643 0.597 0.960 0.928

Millet 15,148 2,421 1,079 0.094 0.096 0.410 0.428 1.017 1.044

Cigar Binder Tobacco 1,298 493 5 0.335 0.316 1.906 1.684 0.944 0.884

Cultivated Wild Rice 223 20 57 0.029 0.025 0.460 0.401 0.882 0.872

Cigar Wrapper Tobacco 63 1 0 0.019 0.019 0.202 0.198 1.011 0.980

Canola 1,836 766 141 0.200 0.160 0.597 0.656 0.796 1.098

Cabbage 522 99 4 0.071 0.051 0.556 0.401 0.717 0.721

Alfalfa Seed 416 70 18 0.049 0.040 0.490 0.410 0.822 0.837

Mint 435 121 11 0.050 0.045 0.179 0.163 0.898 0.911

Safflower 1,275 242 131 0.095 0.099 0.449 0.430 1.043 0.957

Mustard 307 142 45 0.292 0.184 1.469 0.834 0.630 0.567

Flax 508 204 42 0.197 0.247 1.046 1.318 1.254 1.261

Rye 757 315 55 0.257 0.279 0.722 0.745 1.086 1.032

Cigar Filler Tobacco 16 0 0 0.000 0.000 0.000 0.000 0.000 0.000

Maryland Tobacco 1 0 0 0.000 0.000 0.000 0.000 0.000 0.000

Total 4,943,640 1,273,946 320,865 0.072 0.071 0.688 0.665 0.978 0.967
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

16

II.B. Analysis of Category C Crop Data

The analysis for Category C crops was conducted in much the same manner as was done for the 

Category B crops. Differences included: 1) since there are no revenue plans associated with any 

of these crops, no adjustments to premium or indemnity were needed other than normalization to 

the yield from the Type 15 record, and 2) to accommodate the specialized yield types associated 

with certain Category C crops, the PTY value used to replace certain T-yields was PTY x (Tyield in Type 15 record / published T-yield). This adjustment was necessary whenever a yield 

type such as EK3appeared (denotes 80 percent of T-yield adjusted for percent stand).

Table 22 contains the data separated into the two groups representing units that did not use Tyields for any purpose and those that did use T-yields as in Table 3 for Category B crops. In 

contrast to the Category B crops, there is much less use of T-yields among the Category C crops. 

This is to be expected since Category C represents perennial crops for which unit configuration 

within a crop policy changes little from year to year. Hence, use of a T-yield for calculating the 

approved yield should occur less frequently since many crops have long productive lives and 

build longer continuous APH histories than do many units of annual crops (rotations, planted 

acreage responsiveness to change in market prices, and other issues). A higher loss cost ratio 

and loss ratio for units having T-yield usage is the same characteristic as was observed for the 

Category B crops.

Table 22. Category C Crops: Data Separated into Units Using T-yield in any Form and 

Units with No T-yield Usage, 2007 through 2009, All States

Use of Tyield

Units 

Earning 

Premium

Units 

Indemnified

Net 

Insured 

Acres

Liability Premium Indemnity Loss Cost 

Ratio Loss Ratio

-- thousands --

No T-yield 71,477 10,011 2,395 5,367,418 407,542 288,521 0.054 0.708

T-yield 12,561 1,973 266 473,337 43,985 40,429 0.085 0.919

Total 84,038 11,984 2,661 5,840,755 451,527 328,950 0.056 0.729

Table 23 contains the normalized data for the Category C crops for those units classified as using 

a T-yield. Since revenue plans did not apply to any of these crops during 2007 through 2009, 

there is much less difference between the original and the normalized data. As was the case for 

the Category B crops, the normalized data provide the base against which alternatives are 

compared since the alternatives are calculated in the same manner as the normalized data.

 

3

For Category C crops, used to identify if adjusted for percent stand prior to adjustment for 80 percent T-Yield.
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

17

Table 23. Category C Crops: Normalized Data for Units Using T-yield in any Form, 2007

through 2009, All States

Year

Units 

Earning 

Premium

Units 

Indemnified

Net 

Insured 

Acres

Normalized 

Liability

Normalized 

Premium

Normalized 

Indemnity Loss Cost 

Ratio Loss Ratio

-- thousands --

2007 3,531 785 69 123,957 11,324 18,149 0.146 1.603

2008 4,074 651 80 142,980 13,607 11,914 0.083 0.876

2009 4,956 537 116 208,241 17,583 10,132 0.049 0.576

Total 12,561 1,973 265 475,178 42,514 40,195 0.085 0.945

Tables 24 through 26 present the effects of substituting the simple average PTY, the productionweighted PTY, and the acreage-weighted PTY, respectively. The T-yield data were retained 

whenever a PTY could not be calculated; hence, the loss cost ratio is representative of the group 

as it would appear in the experience data. This is because the T-yield is mandatory for units 

whenever a policy does not have at least one actual yield. A T-yield also is needed whenever 

there are fewer than four actual yields on a policy. As was observed with the Category B crops, 

the production-weighted PTY increases the loss cost ratio by the greatest amount among the 

three alternatives. The increase is nearly three times larger than the increase observed for the 

Category B crops, while the percentage increase in the loss ratio is about double that seen for 

Category B crops. The simple average PTY and the acreage-weighted PTY again developed 

substantially similar results, with a change in the loss cost ratio ranging from +0.34 percent 

(acreage-weighted) to +1.52 percent (simple average). These results, together with the results 

from the Category B crops, suggest the added complexity of acre weighting may not be offset by 

significantly improved program performance relative to simple average PTY.

Table 24. Category C Crops: Effects of Substituting Simple Average PTY for T-yield for 

Units that Used T-yield in any Form, 2007 through 2009, All States

Year

Restated 

Liability

Restated 

Premium

Restated 

Indemnity Loss Cost 

Ratio Loss Ratio

-- thousands --

2007 132,712 11,978 21,238 0.160 1.773

2008 152,170 13,901 11,677 0.077 0.840

2009 217,138 17,984 10,204 0.047 0.567

Total 502,020 43,863 43,119 0.086 0.983

Change from Normalized Data (Table 23) 5.35% 3.08% 6.78% 1.52% 3.82%
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

18

Table 25. Category C Crops: Effects of Substituting Production-weighted PTY for T-yield 

for Units that Used T-yield in any Form, 2007 through 2009, All States

Year

Restated 

Liability

Restated 

Premium

Restated 

Indemnity Loss Cost 

Ratio Loss Ratio

-- thousands --

2007 139,058 12,697 24,093 0.173 1.898

2008 162,090 14,995 14,325 0.088 0.955

2009 229,773 18,963 13,036 0.057 0.687

Total 530,921 46,655 51,454 0.097 1.103

Change from Normalized Data (Table 23) 10.50% 8.88% 21.88% 12.72% 14.27%

Table 26. Category C Crops: Effects of Substituting Acreage-weighted PTY for T-yield for 

Units that Used T-yield in any Form, 2007 through 2009, All States

Year

Restated 

Liability

Restated 

Premium

Restated 

Indemnity Loss Cost 

Ratio Loss Ratio

-- thousands --

2007 133,988 12,115 21,425 0.160 1.768

2008 153,280 13,963 11,533 0.075 0.826

2009 219,251 17,919 10,033 0.046 0.560

Total 506,519 43,997 42,991 0.085 0.977

Change from Normalized Data (Table 23) 6.19% 3.37% 6.50% 0.34% 3.24%

Table 27 contains the normalized data for those policies for which a PTY could be calculated 

organized by yield limitation flag. Since the floor is not an allowable option for Category C 

crops, it is not included. As was the case with the Category B crops, most acreage is in the 

actual yield and the substitution category. Substitution was much less of a factor in establishing 

the approved yield than was observed for the Category B crops. Few acres were subject to a cup. 

Table 27. Category C Crops: Original Data for all Units Sorted by Yield Limitation Flag,

2007-2009, All States*

Flag

Units 

Earning 

Premium

Units 

Indemnified

Net 

Insured 

Acres

Normalized 

Liability

Normalized 

Premium

Normalized 

Indemnity Loss Cost 

Ratio Loss Ratio

-- thousands --

APH 56,456 6,393 1,954 4,569,888 294,047 187,373 0.041 0.637

Cup 3,642 846 83 186,837 18,544 23,583 0.126 1.272

Substitution 22,382 4,511 584 1,041,620 98,490 107,675 0.103 1.093

Totals 82,480 11,750 2,621 5,798,345 411,081 318,631 0.055 0.775

* Excludes policies for which a PTY could not be calculated

Tables 28, 29, and 30 present the effects of substituting a simple average, a production-weighted, 

and an acreage-weighted PTY, respectively. Units in the original sorting category denoted as 

“no T-yield” can be affected because a PTY higher than the T-yield allows certain yields to 

qualify for substitution that previously did not qualify. Qualification for a cup also is affected by 

the size of the PTY relative to the T-yield since at least some of the units classified as APH

would have used a T-yield to determine the actual yield. Again, the production-weighted PTY 
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

19

causes the greatest increase in loss cost ratio and loss ratio. The percentages of change relative 

to the base data differ from Tables 24, 25, and 26 because the effects upon the units 

(collectively) in the original sorting category “no T-yield” are significantly lesser than upon the 

units (collectively) category “T-yield.” However, the overall indications again are that the 

production-weighted PTY will worsen program performance while there is little difference 

between the simple average and the acreage-weighted PTY. The production-weighted PTY also 

resulted in the greatest reduction in acres classified as actual yield.

Table 28. Category C Crops: Normalized Data for all Units Sorted by Yield Limitation 

Flag with Simple Average PTY Substituted for T-yield, 2007 through 2009, All States

Flag

Net 

Insured 

Acres

Normalized 

Liability

Normalized 

Premium

Normalized 

Indemnity Loss Cost 

Ratio Loss Ratio

-- thousands --

APH 1,244 3,079,735 183,365 118,246 0.038 0.645

Cup 38 89,549 6,793 6,863 0.077 1.010

Substitution 1,340 2,692,713 225,658 201,528 0.075 0.893

Totals 2,622 5,861,997 415,816 326,637 0.056 0.786

Change from Normalized Data (Table 23) 1.09% 1.14% 2.45% 1.38% 1.33%

Table 29. Category C Crops: Normalized Data for all Units Sorted by Yield Limitation 

Flag with Production-weighted PTY Substituted for T-yield, 2007 through 2009, All States

Flag

Net 

Insured 

Acres

Normalized 

Liability

Normalized 

Premium

Normalized 

Indemnity Loss Cost 

Ratio

Loss Ratio

-- thousands --

APH 1,160 2,878,662 171,467 114,749 0.040 0.669

Cup 53 106,204 8,974 9,373 0.088 1.044

Substitution 1,409 2,974,348 245,546 226,229 0.076 0.921

Totals 2,622 5,959,214 425,987 350,351 0.059 0.822

Change from Normalized Data (Table 23) 2.70% 3.50% 9.05% 6.53% 5.76%

Table 30. Category C Crops: Normalized Data for all Units Sorted by Yield Limitation 

Flag with Acreage-weighted PTY Substituted for T-yield, 2007 through 2009, All States

Flag

Net 

Insured 

Acres

Normalized 

Liability

Normalized 

Premium

Normalized 

Indemnity Loss Cost 

Ratio Loss Ratio

-- thousands --

APH 1,277 3,146,664 189,072 123,216 0.039 0.652

Cup 58 119,443 10,164 11,111 0.093 1.093

Substitution 1,286 2,599,905 216,525 191,641 0.074 0.885

Totals 2,621 5,866,012 415,761 325,968 0.056 0.784

Change from Normalized Data (Table 23) 1.15% 1.13% 2.25% 1.11% 1.14%

Tables 31 and 32 track movement of acreage among yield limitation flags that resulted in the 

data reported in Table 28 (simple average PTY substitution). The only difference between 

Tables 31 and 32 is the organization of the data. Table 31 is organized in a manner that groups 
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

20

each category after substitution (approved yield, cup, etc.). Table 32 groups the data as it existed 

originally. The tables demonstrate the same outcomes as observed with the Category B crops. 

Most acres originally classified as actual yield and then as substitution after changing to PTY 

remained in that classification under the alternative PTY procedures. Most acres that transferred 

from actual yield went to substitution. Some of this transfer undoubtedly is due to the rule that 

substitution was performed for any yield that qualified for substitution. In actuality, producers 

most likely will not choose to substitute all yields, especially when there is only a minor effect 

on the guarantee.

Table 31. Movement of Category C Records Among Yield Limitation Flags when Simple 

Average PTY is Substituted for T-yield, 2007 through 2009, All States

From To

Net 

Insured 

Acres

Normalized 

Liability

Normalized 

Premium

Normalized 

Indemnity Loss Cost 

Ratio Loss Ratio

-- thousands --

APH APH 1,222 3,033,404 180,188 115,648 0.038 0.642

Cup APH 1 3,403 330 349 0.103 1.056

Substitution APH 21 42,928 2,846 2,250 0.052 0.791

APH Cup 13 30,964 2,147 2,063 0.067 0.961

Cup Cup 20 49,713 3,865 3,675 0.074 0.951

Substitution Cup 5 8,872 780 1,124 0.127 1.442

APH Substitution 719 1,586,725 118,608 84,590 0.053 0.713

Cup Substitution 62 129,052 13,803 18,250 0.141 1.322

Substitution Substitution 559 976,937 93,247 98,688 0.101 1.058

Total 2,622 5,861,998 415,814 326,637 0.056 0.786

Table 32. Movement of Category C Records Among Yield Limitation Flags when Simple 

Average PTY is Substituted for T-yield, 2007 through 2009, All States

From To

Net 

Insured 

Acres

Normalized 

Liability

Normalized 

Premium

Normalized 

Indemnity Loss Cost 

Ratio Loss Ratio

-- thousands --

APH APH 1,222 3,033,404 180,188 115,648 0.038 0.642

APH Cup 13 30,964 2,147 2,063 0.067 0.961

APH Substitution 719 1,586,725 118,608 84,590 0.053 0.713

Cup APH 1 3,403 330 349 0.103 1.056

Cup Cup 20 49,713 3,865 3,675 0.074 0.951

Cup Substitution 62 129,052 13,803 18,250 0.141 1.322

Substitution APH 21 42,928 2,846 2,250 0.052 0.791

Substitution Cup 5 8,872 780 1,124 0.127 1.442

Substitution Substitution 559 976,937 93,247 98,688 0.101 1.058

Total 2,622 5,861,998 415,814 326,637 0.056 0.786

The Contractor also examined the data for any changes by year in the transfers among 

classifications. As was the case with the Category B crops, there is an increase in the acreage 

remaining in the actual yield classification and a reduction in the acres transferring from actual 

yield to substitution by year. The changes are smaller than was observed with the Category B 
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

21

crops. Again, the data are not adequate to determine if the shifts have any significance or are 

only an interesting artifact of the data analysis procedures.

Table 33. Category C Crops: Movement Among Selected Yield Limitation Flags by Year, 

2007 through 2009

Year From To

Original 

Net 

Insured 

Acres

New Net 

Insured 

Acres Percent

--thousands--

2007 APH APH 570 354 62.105

2008 APH APH 648 403 62.191

2009 APH APH 736 464 63.043

2007 APH Substitution 570 211 37.018

2008 APH Substitution 648 241 37.191

2009 APH Substitution 736 266 36.141

2007 Cup Cup 28 7 25.000

2008 Cup Cup 29 7 24.138

2009 Cup Cup 26 5 19.231

2007 Substitution Substitution 135 128 94.815

2008 Substitution Substitution 217 208 95.853

2009 Substitution Substitution 232 223 96.121

Tables 34 and 35 demonstrate the relationships of the PTY relative to the T-yield among the 

yield limitation flags. The results are similar to those reported for the Category B crops. For 

acreage actually reported for insurance, the PTY exceeded the T-yield nearly 80 percent of the 

time for the APH yield limitation flag. In contrast, this condition existed in less than half the 

cases for the yield limitation flag substitution. Hence, as in the case of the Category B crops, the 

higher PTY on acreage with the APH flag qualified additional actual yields for substitution.

Table 34. Category C Crops: Relationship of PTY to T-yield Considering all Data in the 

Type 15 Database

Original Flag PTY > t PTY < t PTY = T

percent

APH 77.6 21.8 0.6

Cup 55.4 44.1 0.5

Substitution 43.5 56.0 0.5

Table 35. Category C Crops: Relationship of PTY to T-yield Considering Only Type 15 

Records that Match Type 11 Records

Original Flag PTY > t PTY < t PTY = T

percent

APH 78.2 21.2 0.6

Cup 55.8 43.7 0.6

Yield Substitution 45.1 54.5 0.5
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

22

The Contractor also examined the potential of those units categorized as “using the T-yield” in 

Table 22 to be able to develop a PTY based solely on the data provided to RMA. The summary 

of the number of actual yields at the policy level is contained in Table 36, and the percentage 

distribution of the data is shown in Table 37. About two-thirds of all policies, representing over 

95 percent of the acres, liability, premium, and indemnity, had the potential to include at least 1 

actual yield for determining the PTY. Only about one-third of the policies, representing about 

one-half of the acres, etc., had four or more actual yields in the Type 15 database. In contrast, by 

definition, all the acres in the category “no T-yield”, which is the majority of the data, had at 

least four actual yields to form the PTY. Thus, most of the acreage of Category C crops could 

form a PTY without use of T-yields.

Table 36. Number of Actual Yields for Calculating PTY for Category C Crops for Policies 

Containing at Least One Actual Yield, All States, 2007 through 2009*

Number of 

Actual 

Yields

Policies 

Earning 

Premium

Policies 

Indemnified

Net 

Insured 

Acres

Liability Premium Indemnity Loss Cost 

Ratio Loss Ratio

-- thousands --

1 1,192 198 33 55,965 4,636 3,425 0.061 0.739

2 1,518 224 42 75,774 6,186 5,270 0.070 0.852

3 1,795 269 52 101,780 8,080 6,560 0.064 0.812

4 315 57 12 21,973 1,810 1,707 0.078 0.943

5 1,277 429 39 77,926 12,355 18,478 0.237 1.496

6 211 21 6 11,119 765 237 0.021 0.311

7 188 16 6 11,706 1,016 679 0.058 0.669

8 193 22 5 9,438 742 209 0.022 0.282

9 160 23 4 7,546 536 393 0.052 0.734

10 or more 1,445 164 54 89,263 6,835 2,201 0.025 0.322

Total 8,294 1,423 253 462,490 42,961 39,159 0.085 0.912

* From Table 22 Category “T-yield”
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

23

Table 37. Percentage Distribution of Actual Yields for Calculating PTY for Category C 

Crops for Policies Containing at Least One Actual Yield, All States, 2007 through 2009*

Number of 

Actual 

Yields

Policies 

Earning 

Premium

Policies 

Indemnified

Net 

Insured 

Acres

Liability Premium Indemnity

-- percent --

1 14.37 13.91 13.04 12.10 10.79 8.75

2 18.30 15.74 16.60 16.38 14.40 13.46

3 21.64 18.90 20.55 22.01 18.81 16.75

4 3.80 4.01 4.74 4.75 4.21 4.36

5 15.40 30.15 15.42 16.85 28.76 47.19

6 2.54 1.48 2.37 2.40 1.78 0.61

7 2.27 1.12 2.37 2.53 2.36 1.73

8 2.33 1.55 1.98 2.04 1.73 0.53

9 1.93 1.62 1.58 1.63 1.25 1.00

10 or more 17.42 11.52 21.34 19.30 15.91 5.62

Total 100.00 100.00 100.00 100.00 100.00 100.00

* From Table 22 Category “T-yield”

The Contractor considered the effects of substituting the simple average PTY for the T-yield

among Category C crops in the group T-yield. The general indications are the same as for the 

Category B crops in that changes were relatively small for most crops. However, due to the very 

limited acreage of some of the crops, more large divergences occurred in the Category C crops. 

This is believed to be the artifact of very limited data for some category C crops and states.
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

24

Table 38. Category C Crops: Change in Program Variables for Group T-yield when Simple 

Average PTY is Substituted for T-yield

Crop

Units 

Earning 

Premium

Units 

Indemnified

Net 

Insured 

Acres

Original 

Loss 

Cost 

Ratio

Restated 

Loss 

Cost 

Ratio

Original 

Loss 

Ratio

Restated 

Loss 

Ratio

New 

LCR / 

Old 

LCR

New 

LR / 

Old 

thousands LR

Grapes 2,919 263 50 0.034 0.031 0.440 0.410 0.924 0.931

Almonds 895 30 44 0.011 0.012 0.164 0.185 1.071 1.134

Peaches 1,314 631 19 0.472 0.460 1.901 2.162 0.975 1.138

Navel Oranges 637 75 18 0.043 0.038 0.616 0.545 0.880 0.885

Apples 1,412 302 16 0.082 0.078 1.477 1.397 0.948 0.946

Prunes 264 93 10 0.209 0.205 1.193 1.182 0.984 0.991

Table Grapes 388 55 7 0.056 0.042 0.677 0.517 0.755 0.764

Plum 787 157 7 0.061 0.059 0.464 0.453 0.974 0.978

Walnuts 205 17 6 0.029 0.027 0.520 0.487 0.944 0.937

Fresh Nectarines 652 55 5 0.029 0.028 0.344 0.338 0.980 0.980

Pumpkins 90 0 4 0.000 0.000 0.000 0.000 - -

Valencia Oranges 209 14 4 0.032 0.031 0.366 0.354 0.966 0.966

Processing Cling Peaches 457 31 4 0.034 0.033 0.726 0.705 0.968 0.971

Fresh Freestone Peaches 537 51 3 0.025 0.018 0.431 0.317 0.721 0.736

Blueberries 377 79 2 0.092 0.095 1.042 1.084 1.034 1.040

Mandarins 105 8 1 0.040 0.032 0.339 0.274 0.811 0.807

Avocado 36 1 0 0.000 0.004 0.000 0.040 - -

Macadamia Nuts 2 0 0 0.000 0.000 0.000 0.000 - -

Cranberries 70 12 0 0.070 0.050 1.193 0.778 0.715 0.652

Figs 7 0 0 0.000 0.000 0.000 0.000 - -

Pears 473 16 0 0.007 0.006 0.264 0.207 0.764 0.787

Grapefruit 42 3 0 0.029 0.028 0.426 0.426 0.980 1.000

Lemons 78 5 0 0.172 0.148 2.012 1.680 0.860 0.835

Mineola Tangelos 60 6 0 0.039 0.037 0.393 0.367 0.942 0.933

Sweet Oranges 12 1 0 0.088 0.079 1.333 1.167 0.895 0.875

Fresh Apricots 62 15 0 0.137 0.154 1.133 1.284 1.121 1.133

Processing Apricots 20 5 0 0.057 0.064 0.500 0.526 1.130 1.053

Processing Freestone Peaches 33 3 0 0.000 0.000 0.000 0.000 - -

Early and Midseason Oranges 81 10 0 0.050 0.041 0.714 0.576 0.807 0.806

Late Oranges 38 6 0 0.027 0.025 0.162 0.152 0.922 0.934

All Other Grapefruit 1 0 0 - - - - - -

Ruby Red Grapefruit 23 0 0 0.000 0.000 0.000 0.000 - -

Rio Red & Star Ruby Grapefruit 114 22 0 0.087 0.076 0.440 0.387 0.883 0.879

Grand Total 12,310 1,966 196 - - - - - -
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

25

SECTION III. SUMMARY OF FINDINGS

The Contract precludes presentation of any Contractor recommendations derived from this 

analysis. Consequently, the derived values must speak for themselves. To that end, this 

summary is presented in place of specific conclusions, which would include elements of 

judgment inherent in specific recommendations. The Contractor examined the impacts of 

replacing T-yields with three distinct approaches to calculating a PTY: simple average, acreageweighted average, and production-weighted average. The impacts for each of these alternative 

transitional yield calculation approaches were separately estimated for Category B and Category 

C crops. Within each Category, estimates were made separately for all units that had used Tyields calculated using currently accepted approaches and for the total of all units included in 

each Category.

The results, measured in terms of change in the loss cost ratio, are summarized in Tables 1 and 2

(found in the executive summary). Use of the production-weighted PTY resulted in the greatest 

impact on both Categories B and C crops. Loss cost ratios increased 4.65 and 12.72 percent, for 

crops in Category B and crops in Category C respectively, for units where T-yields were already 

used in some form, and 7.29 and 6.53 percent for all units with Type 15 records. Both the simple

average and the acreage-weighted PTY were associated with relatively small decreases in the 

loss cost ratio for the Category B crops but indicated a small increase for the Category C crops. 

Changes in loss ratios generally had the same sign as the changes in loss cost ratios and tended to 

be larger when measured as a percentage of the original value calculated using the currently 

accepted PTY procedures.

The results when simple average PTYs were substituted for T-yields were substantially the same 

for individual crops as for the aggregated crop data. Changes in the loss cost ratio and the loss 

ratio generally were small. Considering the relationship between the insurance attributes for 

simple average PTY and acreage-weighted PTY for the aggregated data, the same would be 

expected for substitution of the acreage-weighted PTY for T-yields. No one crop stands out as 

an extreme outlier when insurance attributes are evaluated by crop.

Finally, an interesting finding of this analysis relates to the relationship of PTY to T-yield among 

yield limitation flags. For units classified with the flag “APH”, the PTY was larger than the Tyield in a very high percentage of the cases. For units classified with the flag “floor”, the PTY 

was smaller than the T-yield in nearly all cases. For units classified with the flag “substitution”, 

the relationship was closer to 50/50, but the PTY was smaller than the T-yield in more cases than 

those where the T-yield was smaller. These results were observed for both crop categories.

RMA’s objectives for this report, as identified in the SOW (Combined Solicitation page 38), are:

“to evaluate the North Dakota PTY Insurance Program and provide:

1) An assessment of the impact of requiring use of the PTY within the pilot 

area, as opposed to allowing producers to elect it as an option; 

2) An assessment on [the effects of] an alternative PTY using a weighted 

average in the PTY summary database; and

3) An assessment of the feasibility of expanding the program beyond North

Dakota as a program requirement as either the existing Pilot PTY or 

Alternative PTY.”
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

26

The SOW then continues, stating:

“The feasibility assessment should be a clear and complete analysis of the impact 

associated with expanding the option as a program requirement, however, RMA does not 

want the contractor to provide a specific recommendation, but rather to lay out all the 

issues to consider and weigh regarding any decision to make the pilot program part of 

the program requirements.”

Results for all crops in the Category (B or C) in aggregate at the national level are presented in 

this report, except when individual crops are considered. In that case, data for the crop is 

reported at the national level. The estimated impacts of requiring the use of the simple average 

PTYs on a national basis for the yield-based crops in RMA’s database is addressed by comparing 

Tables 4 and 5 (for Category B crops) and Tables 23 and 24 (for Category C crops). The 

estimated impacts of requiring the use of the weighted PTYs on a national basis for the yieldbased crops in RMA’s database is addressed by comparing Tables 4, 6, and 7 (for Category B 

crops) and Tables 23, 25, and 26 and 24 (for Category C crops). Since the effects of alternative 

approaches are relatively small (even if the crop uses Master Yields and simple average T-yields 

for added land) greater discussion by crop or region within the main body of the report was not 

deemed crucial to an understanding of the effects associated with the alternative approaches.

Disaggregated data by crop and region have been provided digitally should RMA desire to 

examine a particular crop at a finer scale.

For producers whose yields fall well below the county average, floors, cups, and yield 

substitutions are intended to mitigate the effects of particularly bad years on insurance 

guarantees going forward. The movement of yields among these database flags and the effects 

on insurance experience are addressed in Tables 20 through 29 of Deliverable 1 (for eligible 

crops in North Dakota) and Tables 9 through 14 (for Category B crops) and Tables 28 through 

33 (for Category C crops) of this report. Inasmuch as use of 60 percent of PTY in yield 

substitutions maintained a very large percentage (>98 percent) of the T-yield substitutions in the 

yield limitation class “Substitution” and resulted in substantial movement from the class “Actual 

Yield” to the class “Substitution,” it is clear that using higher percentages of PTY in establishing 

values for substitution would accentuate these effects.

The Contractor found no evidence in North Dakota of program abuse. Although stakeholders 

indicated they were aware of the potential for yield building by farming limited acres in early 

years with exceptional attention to management, in fact, the learning curve for production of 

most crops requires such attention just to maintain a “normal” yield. Standard underwriting 

procedures should identify cases of fraud. Use of the Inconsistent Yield procedure4provides a 

mechanism to address unusual yield and acreage patterns in early years of production. The 

 

4 The “Inconsistent Yield” procedure addresses both unusually high yields and the pattern of acreage planted from one year to 

the next. Each approved yield is compared to 1.15 times the simple average of all Databases or the applicable county T-yield 

if there is only one Database. Any Database that is greater than the 1.15 times the average is then subject to acreage 

limitations for the following year. If the acreage planted the following year on this Database is greater than 400 percent of the 

average acreage on this Database or if there are 2 or more APH crop years within the Database that are less than 10 percent of 

the insurable acreage planted the following year, then it is considered “inconsistent.” The producer must then submit an 

explanation as to why the acreage and yield patterns occurred and may also have to submit production records and acreage 

verification.
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

27

combination of production from different units in the PTY database should limit the 

administrative burden of this procedure to cases where attention is particularly required.

The simplest summary estimating the loss performance for North Dakota based on the alternative 

approaches in calculating PTY is found in Table 13 of Deliverable 1. Estimates of the effects of 

alternative PTY calculation procedures on the Loss Cost Ratio at the national level are found in 

Tables 1 and 2 of this report. Similarities in outcomes of using a simple average PTY and an 

acreage-weighted PTY are illustrated throughout both deliverables, including Table 12 of 

Deliverable 1 and in Tables 1, 2, 5 and 7, and Tables 24 and 26 of this report. The data in Tables 

1 and 2 of this report illustrate substantial differences in using PTY for Category B and Category 

C crops. Effects of using simple average PTY by crop are evident in Table 4 of Deliverable 1 

and Tables 21 and 38 of this report. This is not to say that data in other tables should not be 

considered as changes in procedure are contemplated. The wide range of comparisons that can 

be made in considering the effects of procedural changes is evident in the alternative analyses 

presented in the revised Deliverable 1 and the differential effects illustrated in this report.

In preparing these analyses, the Contractor did not incorporate the surcharge in establishing 

premium (and therefore in determining the Loss Ratio and Loss Cost Ratio). It is neither 

feasible, nor desirable to attempt to recreate all the elements of the DAS in comparing 

hypothetical situations. Doing so introduces elements that render the comparison invalid

because each outcome is defined by its unique situation. No summary would be possible. 

Consequently, the Contractor used normalized data and standardized situations to provide a valid 

basis for comparison. 

The best measure of the impact of using PTY on rating is a comparison of the Loss Cost Ratio

for each transitional yield approach. Ultimately, the specific impact of requiring the use of PTY 

on rating will depend on whether a simple average or a weighted PTY is used. Regardless, the 

effects on rating will be small. However, as with all RMA products, the effects on rating will 

need to be evaluated at the crop and county level. 

A more substantial, and less quantifiable, impact on rates will be if the PTY is retained as an 

option rather than as a program requirement. If choice is allowed, the selection of a transitional 

yield approach (T-yield or PTY) by producers to maximize their guarantees and minimize their 

premiums may need to be addressed by a rate surcharge for use of PTY. Currently in North 

Dakota, if a producer uses PTY, an option surcharge is assessed. The PTY option surcharge 

sometimes varies by county/crop/P/T/V. If the PTY program is offered as an option nationwide, 

assessment of an appropriate surcharge will depend on the specific manner in which the PTY is 

calculated and county/crop level experience. In addition, the PTY calculation approach will 

influence the rate yield, which in turn affects the yield ratio and ultimately the premium rate. 
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

28

SECTION IV. ADDENDUM

This addendum was prepared to address RMA comments following the submission of the initial 

report. These materials include analysis of Master Yields, Simple Average T-yield Procedures 

for added land, and a study on the distributional effects of Simple Average PTY substitution.

IV.A. Master Yields

Normalized data and the PTY alternative calculations for master yield crops are included in 

Table 39. These data include all units of the eligible crops. In contrast to other crops, the crops 

eligible for master yield have two possible procedures to establish a unit guarantee. An approved 

yield can be based on standard APH procedures or, at the producer’s option; the master yield 

procedures can be selected. If selected, the master yield applies to the entire contract. The 

calculation of the master yield is substantially similar to the procedures for a simple average 

PTY with the exception that at least four continuous crop years of production reports must be 

certified for master yields. In addition, both an operator and a landlord must select the master 

yield option. The other substantive difference is in use. When the master yield option is 

selected, the approved yield for a unit is the master yield regardless of the number of actual 

yields certified for that unit or the average of those actual yields. In contrast, the PTY functions 

in a manner similar to a T-yield. Only one actual yield for a practice/type/variety/T-Map area 

(P/T/V/TMA) at the policy level is required to establish the PTY.

Table 39. Normalized Experience Data for Crops Eligible for Master Yield and Alternative 

PTY Computations, 2007-2009

Year Units 

Insured

Units 

Indemnified

Net 

Acres

Liability Total 

Premium Indemnity

Loss 

Cost 

Ratio

Loss 

Ratio

Normalized Data 

2007 42,801 7,261 2,856 1,624,600 118,309 44,798 0.028 0.379

2008 40,717 7,367 2,730 1,845,436 136,028 109,609 0.059 0.806

2009 43,205 4,727 3,003 2,214,608 156,770 67,372 0.030 0.430

Totals 126,723 19,355 8,589 5,684,644 411,107 221,779 0.039 0.539

Simple Average PTY 

2007 1,634,151 118,532 44,073 0.027 0.372

2008 1,859,276 136,633 108,710 0.058 0.796

2009 2,232,730 157,187 66,474 0.030 0.423

Totals 5,726,157 412,352 219,257 0.04 0.532

Percent Change Relative to Normalized Data 0.7 0.3 -1.1 -1.9 -1.4

Production Weighted PTY 

2007 1,603,101 114,716 44,480 0.028 0.388

2008 1,828,314 132,652 108,605 0.059 0.819

2009 2,195,281 152,670 66,407 0.030 0.435

Totals 5,626,696 400,038 219,492 0.0390 0.549

Percent Change Relative to Normalized Data -1.0 -2.7 -1.0 0.0 1.7

Acre Weighted PTY 

2007 1,582,513 113,279 42,661 0.027 0.377

2008 1,804,038 130,844 104,314 0.058 0.797

2009 2,164,095 150,473 62,203 0.029 0.413

Totals 5,550,646 394,596 209,178 0.038 0.530

Percent Change Relative to Normalized Data -2.4 -4.0 -5.7 -3.4 -1.7
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

29

In one respect, the impact of any of the PTY weighting options with respect to the crops eligible 

for master yields is similar to the impact for all Category B crops: the aggregate impact is 

relatively small. Two differences exist: first, the behavior of the acreage weighted PTY does not 

substantively resemble the simple average PTY. In the aggregated data, the outcomes of these 

alternatives were very similar. The Contractor did note that the relatively larger difference in the 

loss cost ratio for the acre weighted PTY (-3.4 percent) compared to the difference in the loss 

cost ratio for simple average PTY (-1.9 percent) is mostly a function of the low level of the 

actual loss cost. If taken to four decimal places, the data for loss cost ratio would show 3.90 

percent (normalized data), 3.83 percent (simple average), and 3.77 percent (acre weighted). 

Second, the impact of the production weighted PTY is smaller than observed for the aggregated 

data. Regardless of the specific, but relatively minor differences in the aggregate results among 

the alternatives, the impact of PTY relative to the aggregate of master yield crops is not great.

Table 40 compares the impacts of alternative PTY approaches for units on policies that elected to 

follow standard APH procedures rather than select the master yield option. These units utilized 

T-yields, either to complete a database, to set a floor value, or to perform a yield substitution. 

These units represent over 40 percent of the total acres and slightly more than 30 percent of the 

liability of crops eligible for master yields. The changes mirror those for all units but have 

greater magnitude. The simple average has the greatest impact in terms of reducing the loss cost 

ratio and loss ratio.

Table 40. Normalized Experience Data for Crops Eligible for Master Yield but that Used 

T-yields, and Alternative PTY Computations, 2007-2009

Year Units 

Insured

Units 

Indemnified

Net 

Acres

Liability Total 

Premium Indemnity

Loss 

Cost 

Ratio

Loss 

Ratio

Normalized Data 

2007 17,463 3,417 1,156 466,454 42,200 19,503 0.042 0.462

2008 16,241 3,513 1,101 567,973 51,219 46,795 0.082 0.914

2009 17,948 2,430 1,251 703,056 61,335 39,445 0.056 0.643

Totals 51,652 9,360 3,508 1,737,483 154,754 105,743 0.061 0.683

Simple Average PTY 

2007 475,046 42,363 18,718 0.039 0.442

2008 581,678 51,755 46,337 0.080 0.895

2009 719,411 61,640 38,741 0.054 0.629

Totals 1,776,135 155,758 103,796 0.058 0.666

Percent Change Relative to Normalized Data 2.2 0.6 -1.8 -4.0 -2.5

Production Weighted PTY 

2007 438,996 38,195 18,622 0.042 0.488

2008 544,853 47,369 45,225 0.083 0.955

2009 675,727 56,710 37,811 0.056 0.667

Totals 1,659,576 142,274 101,658 0.061 0.715

Percent Change Relative to Normalized Data -4.5 -8.1 -3.9 0.6 4.6
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

30

Table 40. Normalized Experience Data for Crops Eligible for Master Yield but that Used 

T-yields, and Alternative PTY Computations, 2007-2009 (continued)

Acre Weighted PTY 

2007 423,252 37,114 17,245 0.041 0.465

2008 526,033 45,980 41,941 0.080 0.912

2009 650,574 54,932 34,582 0.053 0.630

Totals 1,599,859 138,026 93,768 0.059 0.679

Percent Change Relative to Normalized Data -7.9 -10.8 -11.3 -3.7 -0.6

Tables 41 and 42 contain data by crop which corresponds to Tables 39 and 40, respectively.

Although only the simple average PTY results are displayed, a similar effect would result from 

the alternative PTY calculation methods. The amounts of change by crop are relatively small 

with outliers in percentage terms being due at least in part to the small magnitude of premium 

and indemnity for certain crops. Table 43 compares the total changes in liability, premium, and 

indemnity by crop to the changes in these variables on units that used the T-yield in lieu of 

electing the master yield for the policy. Virtually all of the change in these variables was due to 

replacing T-yields with a simple average PTY. Stated another way, the liability, premium, and 

indemnity for the crops eligible for master yield changed very little in the aggregate on the 60 

percent of acres and 70 percent of liability that elected to use the master yield procedures or that 

had four or more actual yields and did not elect yield substitution or qualify for a floor. 
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

31

Table 41. Normalized Data and Impact of Simple Average PTY Substitution, Crops 

Eligible for Master Yields, 2007-2009

Crop Units 

Insured

Units 

Indemnified

Net 

Acres Liability Total Premium Indemnity Loss Cost Ratio

Loss 

Ratio

Normalized Data 

Onions 3,644 1,076 117 266,580 40,305 37,856 0.142 0.939

Canola 2,010 845 173 30,292 3,544 6,027 0.199 1.701

Sugar Beets 33,678 4,700 2,281 1,471,907 88,040 54,868 0.037 0.623

Sweet Corn, C&P 9,730 758 637 261,526 14,658 9,825 0.038 0.670

Beans, Processing 4,724 886 261 105,230 10,961 5,356 0.051 0.489

Beans, Dry 30,601 4,662 1,666 580,987 67,786 33,068 0.057 0.488

Peas, Green 8,138 1,580 454 180,320 21,267 10,393 0.058 0.489

Peas, Dry 11,986 2,947 1,260 179,422 20,963 19,325 0.108 0.922

Potatoes 13,954 1,517 1,076 1,595,406 113,805 34,573 0.022 0.304

Tomatoes, Fresh Market & GP 122 14 4 15,688 1,128 1,145 0.073 1.015

Tomatoes, Processing 8,136 370 646 997,270 28,639 9,326 0.009 0.326

Grand Total 126,723 19,355 8,575 5,684,628 411,096 221,762 0.039 0.539

Simple Average PTY 

Onions 268,620 40,240 35,812 0.133 0.890

Canola 30,145 3,588 5,878 0.195 1.638

Sugar Beets 1,483,233 88,397 55,039 0.037 0.623

Sweet Corn, C&P 266,423 14,792 10,050 0.038 0.679

Beans, Processing 108,923 11,303 5,434 0.050 0.481

Beans, Dry 590,799 67,904 34,221 0.058 0.504

Peas, Green 180,524 21,235 10,098 0.056 0.476

Peas, Dry 174,011 21,037 18,546 0.107 0.882

Potatoes 1,599,160 114,029 33,677 0.021 0.295

Tomatoes, Fresh Market & GP 15,085 1,148 1,028 0.068 0.895

Tomatoes, Processing 1,009,220 28,664 9,461 0.009 0.330

Grand Total 5,726,143 412,337 219,244 0.038 0.532

Percent Change 

Onions 0.8 -0.2 -5.4 -6.1 -5.2

Canola -0.5 1.2 -2.5 -2.0 -3.7

Sugar Beets 0.8 0.4 0.3 -0.5 -0.1

Sweet Corn, C&P 1.9 0.9 2.3 0.4 1.4

Beans, Processing 3.5 3.1 1.5 -2.0 -1.6

Beans, Dry 1.7 0.2 3.5 1.8 3.3

Peas, Green 0.1 -0.2 -2.8 -2.9 -2.7

Peas, Dry -3.0 0.4 -4.0 -1.0 -4.4

Potatoes 0.2 0.2 -2.6 -2.8 -2.8

Tomatoes, Fresh Market & GP -3.8 1.8 -10.2 -6.6 -11.8

Tomatoes, Processing 1.2 0.1 1.4 0.2 1.4

Grand Total 0.7 0.3 -1.1 -1.9 -1.4
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

32

Table 42. Normalized Data and Impact of Simple Average PTY Substitution, Crops 

Eligible for Master Yields that Used T-yields, 2007-2009

Crop Units 

Insured

Units 

Indemnified

Net 

Acres

Liability Total 

Premium Indemnity Loss Cost Ratio

Loss 

Ratio

Normalized Data 

Onions 2,226 787 61 138,307 22,599 26,873 0.194 1.189

Canola 1,486 648 115 19,447 1,873 4,347 0.224 2.321

Sugar Beets 6,904 1,168 436 254,802 17,368 13,189 0.052 0.759

Sweet Corn, C&P 5,035 434 337 135,467 7,929 5,644 0.042 0.712

Beans, Processing 2,865 488 157 60,625 6,247 2,837 0.047 0.454

Beans, Dry 14,674 2,318 858 281,795 35,422 17,718 0.063 0.500

Peas, Green 4,761 902 271 104,254 13,032 6,727 0.065 0.516

Peas, Dry 7,498 1,964 834 103,854 14,270 13,908 0.134 0.975

Potatoes 4,370 572 247 341,689 27,014 11,933 0.035 0.442

Tomatoes, Fresh Market & GP 29 7 0 5,739 387 761 0.133 1.966

Tomatoes, Processing 1,804 72 180 291,490 8,594 1,792 0.006 0.209

Grand Total 51,652 9,360 3,496 1,737,469 154,735 105,729 0.061 0.683

Simple Average PTY 

Onions 140,242 22,611 25,144 0.179 1.112

Canola 19,234 1,912 4,204 0.219 2.199

Sugar Beets 265,008 17,474 13,465 0.051 0.771

Sweet Corn, C&P 139,781 8,017 5,876 0.042 0.733

Beans, Processing 63,587 6,518 2,939 0.046 0.451

Beans, Dry 292,822 35,739 18,811 0.064 0.526

Peas, Green 104,138 12,962 6,447 0.062 0.497

Peas, Dry 100,233 14,438 13,149 0.131 0.911

Potatoes 344,338 27,072 11,226 0.033 0.415

Tomatoes, Fresh Market & GP 5,086 408 641 0.126 1.571

Tomatoes, Processing 301,651 8,590 1,882 0.006 0.219

Grand Total 1,776,120 155,741 103,784 0.058 0.666

Percent Change 

Onions 1.4 0.1 -6.4 -7.7 -6.5

Canola -1.1 2.1 -3.3 -2.2 -5.3

Sugar Beets 4.0 0.6 2.1 -1.8 1.5

Sweet Corn, C&P 3.2 1.1 4.1 0.9 3.0

Beans, Processing 4.9 4.3 3.6 -1.2 -0.7

Beans, Dry 3.9 0.9 6.2 2.2 5.2

Peas, Green -0.1 -0.5 -4.2 -4.1 -3.6

Peas, Dry -3.5 1.2 -5.5 -2.0 -6.6

Potatoes 0.8 0.2 -5.9 -6.6 -6.1

Tomatoes, Fresh Market & GP -11.4 5.4 -15.8 -5.0 -20.1

Tomatoes, Processing 3.5 0.0 5.0 1.5 5.1

Grand Total 2.2 0.7 -1.8 -4.0 -2.5
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

33

Table 43. Source of Change in Liability, Premium, and Indemnity for Crops Eligible for 

Master Yield, 2007-2009

Crop All Units T-yield Units Difference

Liability Premium Indemnity Liability Premium Indemnity Liability Premium Indemnity 

Onions 2,040 (65) (2,044) 1,935 12 (1,729) 105 (77) (315)

Canola (147) 44 (149) (213) 39 (143) 66 5 (6)

Sugar Beets 11,326 357 171 10,206 106 276 1,120 251 (105)

Sweet Corn, C&P 4,897 134 225 4,314 88 232 583 46 (7)

Beans, Processing 3,693 342 78 2,962 271 102 731 71 (24)

Beans, Dry 9,812 118 1,153 11,027 317 1,093 (1,215) (199) 60 

Peas, Green 204 (32) (295) (116) (70) (280) 320 38 (15)

Peas, Dry (5,411) 74 (779) (3,621) 168 (759) (1,790) (94) (20)

Potatoes 3,754 224 (896) 2,649 58 (707) 1,105 166 (189)

Tomatoes, Fresh Market & GP (603) 20 (117) (653) 21 (120) 50 (1) 3 

Tomatoes, Processing 11,950 25 135 10,161 (4) 90 1,789 29 45 

Grand Total 41,515 1,241 (2,518) 38,651 1,006 (1,945) 2,864 235 (573)

Data regarding substitution of alternative PTY calculations by crop are not included in the 

written report since the results are similar to the information contained in Tables 41 and 42 

relative to Tables 39 and 40 for the simple average PTY. The data for the alternative 

calculations are included on a data disk included with this report.

IV.B. Simple Average T-yield (SA T-yield) Procedures for Added Land

Normalized data and the impacts of simple average PTY substitution for SA T-yields are 

included in Table 44. The units included in this table represent about nine percent of units 

earning premium, eight percent of net insured acres, and nine percent of liability for category B 

crops. The results are substantially the same as those reported for all category B crops –

increases in liability and premium with decreases in indemnity, loss cost ratio, and loss ratio. 

With the exception of liability, the percentage changes are smaller than category B crops 

considered as a whole. The data represent 36 crops, with corn (41.6 percent of acres), soybeans 

(32.0 percent), wheat (16.3 percent), cotton (3.8 percent), and grain sorghum (2.4 percent) 

accounting for the bulk of the acreage. SA T-yield Procedures for added land for no other crop 

accounted for more than 0.8 percent of the total acres. Detailed data are located on the data disk

if more information is desired.
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

34

Table 44. Normalized Experience Data for Units Using Simple Average T-yield for Added 

Land and Simple Average PTY Computation, 2007-2009 

Year Units 

Insured

Units 

Indemnified

Net 

Acres

Liability Total 

Premium Indemnity

Loss 

Cost 

Ratio

Loss 

Ratio

Normalized Data 

2007 199,573 46,989 11,921 3,576,437 304,239 244,437 0.068 0.803

2008 222,976 91,551 13,269 5,470,170 449,998 366,243 0.067 0.814

2009 213,069 28,371 14,266 4,853,536 442,635 167,083 0.034 0.377

Total 635,618 166,911 39,456 13,900,143 1,196,872 777,763 0.056 0.650

Simple Average PTY

2007 3,623,257 306,174 245,069 0.068 0.800

2008 5,542,649 453,255 365,024 0.066 0.805

2009 4,897,400 446,300 164,334 0.034 0.368

Total 14,063,306 1,205,729 774,427 0.055 0.642

Percent Change from Normalized Data 1.17 0.74 -0.43 -1.58 -1.16

Percent Change for all Category B crops 0.60 1.68 -1.62 -2.23 -3.36

SA T-yield usage occurred in 46 states, with Minnesota (12.5 percent), Iowa (12.2 percent), 

South Dakota (10.2 percent), Nebraska (10.1 percent), Kansas (8.7 percent), and Illinois (6.6 

percent) accounting for over one-half of the acreage. All the remaining states had less than five 

percent of the acres included in this category. Detailed data are available on the data disk. 

The alternative weighted indices are not reported since no previous analysis demonstrated large 

differences when these alternatives were substituted.

IV.C. Distributional Effects of Simple Average PTY Substitution

The information in this section was presented at the second oral report on this contract. It is 

included herein for completeness of written results.5 

The Contractor calculated a percentage change in the approved yield. These changes were 

ranked, and then divided into ten equal segments, or deciles. For example, if the range of 

changes was -60 percent to +40 percent, the size of each segment would have been 10 points. 

The associated change in liability, premium, and indemnity within each segment was summed. 

Table 45 reports these results.

 

5 These data were included on the data disc provided with the second written deliverable. The information in Table 45 was 

prepared to respond to questions raised at the first oral report.
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

35

Table 45. Distribution of Changes to Category B Crops with Simple Average PTY 

Substitution

Group

Acres Liability Premium Indemnity Loss Ratio Change in 

Liability

1,000 Indication $/Acre

10 17,108 (706,530) 34,501 (207,181) L (41.30)

20 21,127 (282,961) 8,983 (54,109) L (13.39)

30 36,790 (75,295) 2,058 (20,729) L (2.05)

40 37,847 23,686 1,717 (6,714) L 0.63 

50 38,471 167,028 1,331 14,901 H 4.34 

60 34,936 170,089 3,120 9,963 H 4.87 

70 34,510 229,476 5,776 17,326 H 6.65 

80 31,463 241,435 7,523 18,221 H 7.67 

90 29,634 258,394 10,296 17,457 H 8.72 

100 26,186 350,803 21,201 11,968 L 13.40 

Total 308,072 376,125 96,506 (198,897) L 1.22 

Groupings 10 to 30, representing almost 25 percent of the net acres, had a reduction in liability 

as a result of the simple average PTY substitution to complete a database, for a yield substitution, 

or to establish a yield floor. This is consistent with the data reported in Table 16 of the second 

written deliverable, which shows that the PTY was less than the T-yield in 20.3 percent of the 

cases for the Type 11 records reported for insurance during 2007-2009 when those Type 11 

records matched the Type 15 records. These three groups had significant decreases in indemnity. 

Since the indemnities decreased and premiums increased, the loss ratio necessarily would be 

lower for these groups under PTY. The last column of the table indicates the magnitude of the 

decreased liability in terms of a dollar amount per net insured acre included in the group.

All remaining groups, with the exception of group 40, had increases in liability, premium, and 

indemnity. Group 40 showed a decrease in indemnity. Loss ratios, with the exception of groups 

40 and 100, are indicated to increase since the indemnity increases more than the premium in 

groups 50 through 90. The magnitude of the loss ratio changes in any category, with the possible 

exception of groups 10 and 20, is likely to be small since these changes generally are ten to 

twenty millions of dollars as compared to about six billion dollars of indemnity and nine billion 

dollars of premium.

These data demonstrate that, although the aggregate changes from introducing PTY are likely to 

be small, some units will incur larger impacts. This is particularly true of units that currently use 

T-yields that are substantially higher than the expected yields implied by their own history (or 

PTY). 

SECTION V. OVERALL ASSESSMENT OF THE FINDINGS

The Solicitation requires the Contractor to refrain from making recommendations regarding the 

implementation of PTY, whether on a discretionary basis as it is with the North Dakota pilot or 

on a mandatory basis to replace the routine use of the T-yield. Nonetheless, it is obvious that 
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

36

some form of a proxy yield will be needed if PTY is introduced since some policies will not have 

even one actual or assigned yield for one or more P/T/V/TMA. 

Voluntary PTY Implications

The most obvious implication of a voluntary PTY can be deduced from Table 45. Producers 

with units that would have the greatest reductions in liability and potential indemnities (groups 

10 through 40) most likely would not elect PTY but instead would remain with the T-yield 

option. Thus, rather than a reduction of around $300 million in indemnities, an increase up to 

$100 million is more likely. The exact amount of increase cannot be estimated with certainty 

since all eligible policies that would receive a benefit may not elect to participate. It is more 

likely that the policies that would be adversely impacted will decline to participate in a voluntary 

PTY option.

A second implication is that under a voluntary PTY system, RMA must be constantly reviewing 

an appropriate loading of premiums. The effects are not evenly distributed, but will vary by 

P/T/V/TMA, by crop, by state, and by county. The surcharge will be affected by differences in 

participation in PTY among these variables. This adds to the workload for the rating processes.

A third implication is that agents would assess the option most advantageous to an individual 

producer and recommend that option. This creates additional workload for agents in particular. 

The Contractor notes that those agents who chose to participate in voluntary discussions about 

the PTY did not identify this matter as an issue. Since these responses were not from a random 

sample but instead represent a self-selected sample of persons with a specific interest, this 

position may not be universally acceptable among agents.

A fourth implication is that higher yielding producers will have an option to choose a proxy yield 

that may more accurately reflect their production capabilities. This potential depends upon 

recent weather and its impacts on crop production and the length of the producer’s experience for 

a P/T/V/TMA. A short history and bad production conditions will result in a relatively low PTY. 

Some of the issues that led to creation of the pilot program then do not disappear but may be 

exacerbated.

Mandatory PTY Implications

The most obvious implication of a mandatory PTY also can be deduced from Table 45. 

Producers that presently are in the groups that would have the greatest negative change in 

approved yields would incur a significant reduction in insurance guarantees and higher 

premiums. Theoretically, this should be the natural outcome of the APH system – as experience 

accrues, it is incorporated into APH databases and approved yields change accordingly. In this 

sense, a mandatory PTY program may only accelerate the natural process. This presupposes unit 

management under the present system is not possible and the actual yields will be built into the 

APH database relatively rapidly.

A second implication of mandatory PTY is lesser need to impose surcharges. Experience across 

the yield ratios for crops with this system for determining a premium rate will become integrated 

into the base premium rates and exponents. This also would occur if a surcharge is imposed in 

the interim, but the question then becomes one of determining when it no longer is necessary. 
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

37

For crops that do not use yield ratio to determine premium rates (crops that have a flat premium 

rate regardless of the unit’s yield relative to a reference yield), experience also ultimately will be 

reflected in that flat rate and thereby render a surcharge unnecessary.

A third implication of mandatory PTY relative to a voluntary approach is reduced complexity in 

the program. A single method for establishing the approved yield when fewer than four actual 

yields are available for a unit does reduce complexity. The Congress has identified program 

complexity as a matter of some concern. For example, section 508(k)(5) directs the Corporation 

to “... alter program procedures and administrative requirements ...” to reduce costs to reflect 

reductions in administrative and operating expense reimbursement mandated by the Act. A 

mandatory PTY rather than a voluntary approach is consistent with that mandate.

A fourth implication mirrors the fourth implication related to a voluntary PTY, except that it no 

longer is an option. Higher yielding producers will have a yield history that may more 

accurately reflect their production capabilities. However, this potential depends upon recent 

weather and its impacts on crop production and the length of the producer’s experience for a 

P/T/V/TMA. A short history and bad production conditions will result in a relatively low PTY. 

Some of the issues that led to creation of the pilot program then do not disappear but may be 

exacerbated.

A fifth implication of a mandatory PTY is that lower yielding producers no longer could depend 

on a relatively higher T-yield to provide an artificially higher guarantee or encourage them to 

seek ways to avoid full application of the APH procedures.

A sixth implication of a mandatory PTY, and to a lesser extent of a voluntary PTY, is the loss of 

relevance of the floor as a meaningful limitation to any erosion of yields that may occur. Since 

PTYs are the T-yields, a single unit at a P/T/V/TMA level on a policy can never qualify for the 

floor. The PTY is the average of all actual yields on that unit and cannot be both the approved 

yield and 60 percent of itself. Consideration of the continuing utility of a floor must be part of 

any decision. An alternative method to approach issues that require a floor may be necessary.

No PTY Implications

There most likely are enough defenders of the status quo that any attempt to introduce any 

change will be resisted. The relatively small aggregate gains from introducing PTY nationally 

may not convince some stakeholders in the crop insurance system that a change is needed. This 

is a problem arising from the results that demonstrate small aggregate changes. This could lead 

to an attitude that the system is not broken, so why is there a need to fix it?

A second implication is that PTY does not necessarily “fix” the issues that led to introduction of 

a pilot. A short production history for a P/T/V/TMA coupled with poor production conditions 

could result in a PTY lower than the T-yield (or whatever other proxy exists for situations where 

fewer than four actual or assigned yields are certified for a P/T/V/TMA). In this case, there 

could be dissatisfaction with the PTY with demands use of the T-yield be allowed. This

situation could exist if either voluntary or mandatory PTY were to be implemented.
Use or disclosure of information or data Risk Management Agency

contained on this sheet is subject to the Contract No: 1406-N10PC18078

restrictions on the title page of this report.

38

A third implication is that no change to the status quo means no training or other expenses 

associated with introduction of a new feature of the crop insurance program would be needed. 

The Contractor, in the foregoing discussion, has attempted to identify issues that may arise with 

regard to a decision regarding the future of PTY. The comments hopefully comply with the 

directives of the Solicitation by not providing specific recommendations, but instead “lay[ing]

out all the issues to consider and weigh regarding any decision to make the pilot program part of 

the program requirements.” This is a multi-faceted decision affecting a program feature that has 

been in place since the mid-1980s. There are pros and cons associated with any action taken by 

RMA.