Stacked Income Protection Plan (STAX) for Upland Cotton National Fact Sheet (2024)

STAX provides coverage for up to 20 percent of the expected area revenue. Loss payments begin when area revenue falls below 90 percent of its expected level – although lower levels of coverage may be selected. Loss payments reach their maximum when area revenue falls to 70 percent of its expected level – unless your companion policy has a coverage level above 70 percent in which case payments end sooner. The amount of coverage may also be increased or decreased by selection of a protection factor.

The amount of STAX coverage depends on the expected yield, projected price, coverage level, and protection factor. STAX pays a loss on an area wide basis, and an indemnity is triggered when there is an area loss in revenue.

It is easiest to explain how STAX coverage is determined through an example shown in the tables below. We’ll use cotton with an expected crop value for the area of $538.20 per acre (690 pounds at $0.78 per pound). Assume the grower also purchases a Revenue Protection policy with a 75% coverage level – this is the ‘companion policy’. (The purchase of the Revenue Protection policy is not necessary to purchase STAX.)

The calculation of STAX coverage is described in the following table:

In this example, the STAX Endorsement begins to pay when area revenue falls below 90% of its expected level. The full amount of the STAX coverage is paid out when the area average revenue falls to 75%.

Step
STAX Coverage Calculation
A STAX begins to pay when area revenue falls below this percent of its expected level (grower may select from 90% down to 75%) 90%
B STAX Endorsement pays out its full amount (liability) when area revenue falls to this percent of its expected level (equal to the higher of 70% or the coverage level percentage of the companion policy. In this case the companion revenue policy brings this to 75%) 75%
C Coverage Range of STAX (A – B) 15%
D Protection factor (grower may change the amount of coverage by selecting a protection factor from 0.80 to 1.20) 1.20
E Amount of STAX Protection (C x D x $538.20) $96.88

The dollar amount of STAX coverage is based on the coverage range and protection factor selected. In this example there are 15 percentage points of coverage –

from 90% down to 75% -- and the protection factor selected is 1.20. Fifteen percent of the expected area revenue, times the selected protection factor of 1.20, is $96.88 (or 15% x 1.20 x $538.20). Thus, the STAX policy can cover up to $96.88 in addition to what is covered by the companion policy.

STAX payments are determined only by area average revenue or yield, and are not affected by whether a grower receives a payment on their companion policy (if purchased). So it is possible for a grower to experience an individual loss on his or her companion policy, but not trigger an area-based STAX payment (i.e. grower does poorly but the overall area does well), or vice-versa.

Stacked Income Protection Plan (STAX) for Upland Cotton National Fact Sheet (2024)

FAQs

How to calculate stax? ›

The full amount of the STAX coverage is paid out when the area average revenue falls to 75 percent. factor selected is 1.20. Therefore, 15 percent of the expected area revenue, multiplied by the selected protection factor of 1.20 equals $96.88 (or 15 percent x 1.20 x $538.20).

How does stax in cotton work? ›

How Does STAX Work? STAX provides coverage for up to 20 percent of the expected area revenue. Loss payments begin when area revenue falls below 90 percent of its expected level – although lower levels of coverage may be selected.

What is stax protection? ›

What is the Stacked Income Protection Plan? The Stacked Income Protection Plan (STAX) is a crop insurance product for upland cotton that provides coverage for a portion of the expected revenue for your area.

What is SCO crop insurance? ›

The Supplemental Coverage Option (SCO) is a county-level crop insurance option that provides additional coverage for a portion of a producer's underlying crop insurance policy deductible.

How does a cotton field work? ›

The seed is planted at uniform intervals in either small clumps (“hill-dropped”) or singularly (“drilled”). Machines called cultivators are used to uproot weeds and grass, which compete with the cotton plant for soil nutrients, sunlight and water. plants. In another three weeks, the blossoms open.

What is the difference between SCO and eco crop insurance? ›

Unlike SCO, ECO coverage is unaffected by participating in Agriculture Risk Coverage (ARC) for the same crop, on the same acres. You may elect ECO regardless of your farm program election. ECO cannot be elected if you have a Margin Protection or an Area Risk Protection Insurance policy.

How does crop insurance pay out? ›

The insurance provider agrees to indemnify (that is, to protect) the insured farmer against losses that occur during the crop year. In most cases, the insurance covers loss of yield exceeding a deductible amount. Losses must be due to unavoidable perils beyond the farmer's control.

How does revenue protection work? ›

Revenue Protection policies insure producers against yield losses due to natural causes such as drought, excessive moisture, hail, wind, frost, insects, and disease, and revenue losses caused by a change in the harvest price from the projected price.

What is SCO and ECO? ›

Federal law limits the authority for the Federal Crop Insurance Corporation (FCIC) to insure farm-based multi-peril products at more than an 85% coverage level. However, endorsements such as the Supplemental Coverage Option (SCO) and the Enhanced Coverage Option (ECO) products can be used to extend coverage beyond 85%.

Can you have SCO with ARC? ›

Q Does electing ARC or PLC affect my eligibility for SCO? Yes, SCO eligibility is linked to whether you have elected ARC for the farm and commodity. You may not participate in SCO on a farm if base acres for the crop have elected ARC.

What is the supplemental coverage endorsement? ›

The Supplemental Coverage Option (SCO) provides coverage for a portion of the deductible of your underlying crop insurance policy. This Endorsement does not provide payments for prevented planting or replanting.

What is the difference between crop hail insurance and multi peril crop insurance? ›

How is Crop-Hail Insurance Different from Multi Peril Crop Insurance? Crop-hail insurance is different than MPCI because it is not part of the federal crop insurance program. Instead, private crop insurance companies sell these policies, and the premiums are not subsidized.

References

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