South Dakota Crop Insurance Practice Exam

What is one type of Area Revenue Protection insurance available to producers?

1. Area Yield Protection

2. Area Revenue Protection (ARP)

3. Crop Revenue Assurance

4. Whole Farm Revenue Protection

The correct answer is: Area Revenue Protection (ARP)

Area Revenue Protection (ARP) is specifically designed to protect producers in a designated area against revenue loss due to both yield loss and price declines. This type of insurance utilizes average historical data for a particular area, rather than based on the individual producer's yields or revenues. ARP covers losses that exceed a predetermined threshold, providing a safety net for farmers against widespread economic downturns affecting their crops. This type of insurance is especially useful in regions where crop outcomes are influenced by common factors such as weather events, market fluctuations, and other environmental or economic conditions affecting the area. By pooling risk at the regional level rather than focusing solely on individual farms, ARP can offer more reliable protection to farmers who might be vulnerable to external shocks. The other options differ in focus and structure. Area Yield Protection, for instance, concentrates solely on yield losses rather than addressing revenue losses, while Crop Revenue Assurance is designed for individual producers and protects revenue based on their specific yields and the market price for their crops. Whole Farm Revenue Protection covers a broader scope by safeguarding total farm revenue across multiple crops and commodities, rather than being limited to a specific area or types of crops.