South Dakota Crop Insurance Practice Exam

How is the price election determined under RP and RPHPE plans?

1. By the market value

2. By state regulations

3. 100 percent, determined by the CEPP

4. Through local partnerships

The correct answer is: 100 percent, determined by the CEPP

The price election under Revenue Protection (RP) and Revenue Protection with Harvest Price Exclusion (RPHPE) plans is determined based on the causal economic principles and the insurance framework established by the Federal Crop Insurance Corporation (FCIC). Specifically for these plans, the price election is typically set at 100 percent of the projected price, which is determined by the Commodity Exchange Price Provisions (CEPP). This indicates that the price used when insuring the crop is reflective of the anticipated market, providing a standardized basis for calculating the coverage amounts. The CEPP utilizes market data to establish the projected price, which is crucial for ensuring that the insurance plans are aligned with current economic conditions and variability in commodity prices. This ensures that producers have an adequate safety net in terms of coverage depending on the crops they plant. Subsequently, this selection mechanism is vital as crops may face risks like weather and market fluctuations, thus having a predetermined projected price helps stabilize the insurance framework and offers reliable coverage to farmers. The other methods mentioned, such as market value, state regulations, or local partnerships, do not accurately capture the structured and systematic approach employed through the CEPP for determining price elections under these specific crop insurance plans.