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 Endorsem*nt 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 Endorsem*nt 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.
