Cotton STAX - Deadline March 15 March 3, 2015 Simplest way to look at STAX is that it provides a way to “buy up” revenue coverage up to 90% as an insurance tool. It ends at 70% or wherever your regular insurance stops, whichever is higher. It uses county yields instead of farm yields based on an Olympic average so it will change every year. It has a signup spring price and a fall price just like we are used to with revenue insurance and adjustments will work the same way. Every acre of cotton is eligible and regular crop insurance is not required in order to purchase STAX. Another way of looking at it is it is the next level up for Revenue Insurance only Enterprise units at a county level. Because payments are triggered at only 10% loss of Revenue, it will not take much price reduction or yield loss to trigger a payment and this is why I believe it represents a good value. I don’t look at this benefit as replacing individual crop insurance but more as a low cost way of reducing even more risk at a very affordable rate. Payments would have been triggered more than 50% of the time on a historical basis if this tool had been in place for the last 6 years. It will be a huge help if we have either a price or a yield drop and certainly if both happen. If price increases at harvest, which occurs a third of the time, then our overall coverage will also increase. This new Insurance Product looks like a very good safety net to me for cotton farmers. At current price levels it is not quite as good as Peanuts but better than grains.
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