Were excessive expected county yields responsible for the large GRIP losses in 2004 and 2005?
The GRIP losses for 2004 and 2005 were mainly due to decreases in price. GRIP uses the same expected county yields as GRP. Hence, if GRIP yield guarantees were systematically too high and leading to excess losses in 2004 and 2005, the loss experience for GRP should likewise be poor. However, as shown in Table 3, the loss experience of GRP corn and soybeans was highly favorable, with both crops experiencing loss ratios well below that of GRIP for both years. The states listed in Table 3 accounted for about 85 percent of total GRIP liability in 2006. The low loss ratios for GRP indicate that the yields established for the area plans are generally appropriate; certainly, excessive yield guarantees were not responsible for large GRIP indemnity payments in either 2004 or 2005.
