How U.S. durum revenue insurance works

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Published: February 18, 1999

The support price of $1.15 (U.S.) refers to the premium paid over the average Minneapolis spring wheat futures for February 1999: roughly $3.60 per bushel.

This represents a price guarantee of about $4.75 per bushel. Converted to Canadian currency, that is $7.07.

Farmers can buy between 50 and 85 percent price coverage. At the top end, this insurance costs almost $16 per acre.

Assuming a farmer buys the 85 percent coverage for an average yield of 30 bushels per acre at the $4.75 price guarantee, base revenue will be $121 per acre.

The program pays the difference between this base revenue and the harvest return. The harvest return is the average price for top quality durum in Minneapolis in August, expected to be about $3.70 per bu., multiplied by yield ($111 per acre in this example).

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Thus, the farmer would receive a payout of $10 per acre, on top of expected actual returns of $81 per acre, based on a local elevator price of $2.70 per bu.

Taking into account the $16 per acre cost, the farmer would net $2.50 per bu.

Current new crop bids at North Dakota elevators are in the $3.10 to $3.20 per bu. range.

Source: Canadian Wheat Board

All figures in U.S. dollars

About the author

Roberta Rampton

Western Producer

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