Coverages

Coverages | AGR | What is AGR?

What Is AGR? What Are Its Benefits?

Adjusted Gross Revenue (AGR) provides comprehensive protection against weather and unavoidable price related causes of loss.
The basic coverage available to all AGR policyholders is the 65% coverage level at a 75% payment rate (65/75). Additional coverage levels and payment rates of 65/90, 75/75, 75/90, 80/75 and 80/90 are also available if additional eligibility and reporting requirements are met.
Coverage is expressed as a revenue guarantee and is based on the lower of projected income for the insurance year or a 5-year average of allowable Schedule F income (including applicable adjustments) on a calendar or fiscal year basis.

Revenue Guarantee

The revenue guarantee is calculated by multiplying the elected coverage level by the lower of the simple average of the AGR income history or the projected income for the insurance period as reported on the Annual Farm Report. AGR historical average income may be indexed upward for expanding operations if policy requirements are met.

Revenue to Count

Revenue to count will include:

The sales of animals and other agricultural commodities purchased for resale less the cost or other basis of such animals or other commodities (For example, apples were purchased for $400 and sold for $500. Revenue to count equals $100.)
The sales of animals, produce, grains and other agricultural commodities raised
The taxable amount of total cooperative distributions
Commodity Credit Corporation loans reported under election
The taxable amount of Commodity Credit Corporation loans forfeited
Crop insurance proceeds
Other income, including income from bartering, payments from buyers of agricultural commodities for bypassed acreage, and diversion payments
The value of changes to commodity inventories and receivables (accrual adjustments).

Loss Payment

If a loss of revenue occurs due to an eligible, unavoidable peril which occurred during the insurance year, the loss payment is calculated by multiplying approved AGR (adjusted if allowable expenses fall below 70% of average allowable expenses) by the level of coverage selected; subtracting the revenue to count (including applicable accrual adjustments), and multiplying this result by the payment rate.

Units

The whole farm is considered the insurance unit.

Eligibility Requirements

To be eligible for AGR coverage growers must:

Farm and derive income from agricultural commodities primarily within pilot counties
Be a U.S. citizen/resident
Be permanently established in the U.S. and file specified tax forms if a corporation/partnership/trust
Have filed a tax return for each year (fiscal or calendar tax year) of AGR income and expense history
Have supporting records
Not have more than 50% of allowable income for the insurance year derived from agricultural commodities purchased for resale
Not have more than 50% of allowable income for the insurance year derived from a combination of production of insurable crops, animals, and animal products unless such commodities are insured under other available insurance offered under authority of Federal Crop Insurance Act; and
Not have more than 35% of allowable income for the insurance year derived from animals and animal products.

How It Works

Projected income from the Annual Farm Report		$270,000
5-year average of allowable Schedule F income		$250,000
5-year average of allowable Schedule F expenses		$190,000
Coverage Level and Payment Rate Selected		80%/75%
Insurance Year Schedule F
	Allowable Income	$130,000
	Accrual Adjustment (1)	$2,000
	Allowable Expenses	$130,000

Approved AGR (2)		$250,000
Adjusted AGR (3)		$245,000
Revenue Guarantee (4)		$196,000
Revenue to Count (5)		$132,000
Loss		$ 64,000
Loss Payment (6)		$ 48,000

1 Value of change in inventory and receivables. 2 Lower of projected income or 5-year average income. 3 $250,00 × [1 - [.70 - ($130,000/$190,000)]] 4 $245,000 × 80% 5 $130,000 + $2,000 6 $64,000 × 75%

Application and Reports

An application and supporting documentation must be submitted on or before the sales closing date that includes:

Identification of the person applying for insurance;
Coverage level elected; and
A farm report that includes:
1. AGR income and expense history;
2. Copies of Schedule F tax forms for the 5 years that were used to determine AGR history;
3. An accounting of the allowable income expected to be received on a commodity basis for the covered insurance year; and
4. Any changes in the ag commodities intended to be produced, or changes in the size of the farming operation, share, market conditions or any other changes that may reduce expected allowable income from previous levels.

For the first year of AGR coverage at the 75 or 80 percent levels of coverage (with either price election), a producer must submit:An accounting on a commodity basis of acres planted (or quantity produced for ag commodities other than crops)

The location of ag commodities

Production practices and marketing methods for each year of AGR history must be submitted.

11/25/02, 08/03/05