Quality Coverage Example

To determine the amount of compensation for quality loss, SCIC uses a formula that makes up the difference between the value of the harvested production and the value of the base grade for the insured crop. The difference is known as a quality factor and this factor is applied to the harvested production to calculate the final indemnity. The quality factors SCIC uses are based on a survey of market prices across the province for all types of crops; however, the quality factors are not set until December when the majority of the crop is harvested and grain buyers establish crop prices.

 

 

The producer has 70 per cent coverage on 100 acres of durum and the long-term individual yield is 25 bushels per acre. This provides the producer with a production guarantee of 1,750 bushels or 17.5 bushels per acre.

25 bu/acre x 70 per cent x 100 acres = 1,750 production guarantee

The producer harvests 1,000 bushels of durum on the 100 acres and the base grade is a #2. The quality of the harvested durum is downgraded to a #5. To determine the quality factor for the #5 durum, the price of the #5 durum is divided by the price for the base grade #2 durum:

$141.45/tonne (#5 CWAD) / $195.07/tonne (#2 CWAD) = Quality factor 0.73

(values are for example purposes only)

To determine the impact of the quality loss on the harvested production, the quality factor is multiplied by the harvested production:

Quality factor 0.73 x 1,000 bushels of production = 730 bushels of production

To calculate the claim, subtract the harvested production, including the adjustment for quality, from the individual production guarantee:

1,750 bushels – 730 bushels = 1,020 bushels production shortfall

The producer is now eligible for compensation for the 1,020 bushels below their production guarantee.