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Crop Insurance Covers Quality Loss

The Saskatchewan Crop Insurance Corporation (SCIC) provides coverage against crop damage caused by varying growing and weather conditions. Under the Crop Insurance Multi-Peril Insurance Program, customers are covered against both yield and quality loss.

Quality coverage insures crops against causes of loss which could impact a producer’s crop grade. When quality loss occurs, a producer’s yields are adjusted to reflect the lower value of the harvested crop. All crops have an insured base grade. SCIC uses provincial price information of different grades to determine a price between the base grade and lower grades. When the crop grade is below the base grade, the production is adjusted by a quality factor. If a harvested crop grade is equal or above the insured base grade, producers will not receive a quality adjustment.

Quality factors are determined yearly, using late fall average provincial market prices for all crop grades. Late fall averages are used to best track movement in the market and are more reflective of yearly conditions. If there is no movement of a certain grade when setting quality factors, SCIC will wait until a market is established to receive a reflective value. To determine the quality factor, the base grade price is compared to the lower quality price.

A Crop Insurance contract guarantees a total production based on what a producer has grown long term and the coverage option selected. After a quality factor is determined, a producer’s production is reduced by that factor to account for the fact that the harvested grain does not have the same value as their guarantee. If the producer is below their guarantee, they will be paid using their insured price.

Producers in a claim position, due to quality loss, are encouraged to contact their local SCIC office and register a claim as soon as harvest is complete. SCIC may conduct an inspection to verify crop production and obtain a sample to determine quality. Claim payments will be finalized once quality factors are set. All commercial quality factors can be found on SCIC's website.

Quality Factor Example

(Prices and grades shown are for example purposes only.)

Acres x % coverage = Production Guarantee

For example, a producer has 70 per cent coverage on 100 acres of durum and the long-term individual yield is 50 bushels per acre. This provides the producer with a production guarantee of 3,500 bushels or 35 bushels per acre: 50 bu/acre × 100 acres × 70% = 3,500 production guarantee.

Harvested grade price / base grade price = Quality Factor

The producer harvests 1,000 bushels of durum on the 100 acres and the base grade is #2. The quality of the harvested durum is downgraded to #5 due to damage caused by “insurable causes of loss” recognized by the Crop Insurance Program. To determine the quality factor for the downgraded #5 durum, the price of #5 durum is divided by the price for the base grade #2 durum: $593/tonne (example #5 CWAD) ÷ $649/tonne (example #2 CWAD) = quality factor 0.91.

Harvested bushels x quality factor = Harvested Production

To determine the impact of the quality loss on the producer’s harvested production, the quality factor is multiplied by the harvested production: quality factor 0.91 x 1,000 bushels of production = 910 bushels of harvested production.

Production guarantee - harvested production = Eligible Compensation

To calculate the producer’s claim, the harvested production with the adjustment for quality is subtracted from the individual production guarantee: 3,500 bushels - 910 bushels = 2,590 bushels production shortfall.

Eligible compensation x insured rate = Payment

Based on the above example, the producer is eligible for compensation for the 2,590 bushels below their production guarantee.

Contact SCIC

Producers who think they may have a claim due to loss in quality should contact SCIC and register the claim before November 15.

Saskatchewan producers want more than just insurance for their operation. They want complete coverage against risks impacting their bottom line. Whether it is changes in the weather, unfavourable growing conditions or fluctuations in the markets, producers learn to expect the unexpected. SCIC understands and has been a trusted partner in Saskatchewan agriculture for over 60 years, helping producers get personalized coverage for their farms and offering a suite of business risk management programs such as Crop Insurance, AgriStability and Livestock Price Insurance. With service producers can count on, SCIC provides helpful answers to questions and quick action on claims.

Learn more about SCIC programs by contacting your local SCIC office, visiting SCIC's Contact Us page or calling 1-888-935-0000.

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