Attention Wheat Farmers!
- Eric Wiles
- Aug 15, 2025
- 2 min read
The process of setting the base price and volatility factor for wheat MPCI insurance is about to get underway. Here's what you need to know:
What is the base price?
The base price is used to determine your crop insurance coverage on a MPCI Revenue Protection Policy (RP). It is based on regional market prices during a specific time of year.
Kansas: The price is based on the average of daily wheat prices from August 15th to September 14th on the Kansas City Board of Trade (KCBT), focusing on HRW wheat for July.
Missouri, Illinois, and Iowa: The price is based on the average of daily wheat prices from August 15th to September 14th, but using the Chicago Board of Trade (CBOT) and the SRW wheat contract for September.
What about the volatility factor?
A higher volatility factor indicates greater expected price fluctuations, which typically leads to higher insurance premiums. This is because the insurance needs to account for a wider range of possible future price outcomes, increasing the cost of coverage.
The volatility factor measures how much wheat prices are expected to fluctuate in the market. The USDA’s Risk Management Agency (RMA) uses a sophisticated method based on financial markets called the Black-Scholes Model. This model translates options prices—what the market charges to lock in a future price—into an implied volatility estimate, which reflects how unpredictable the market believes wheat prices will be.
RMA sources this implied volatility data from https://www.barchart.com/ during key periods, then adjusts these figures based on how far away the harvest price date is. To calculate the volatility factor, RMA averages the implied volatility over the last five days of the projected price discovery period. For each of those days, RMA follows this calculation process:
1. Determine how many days remain until the harvest price period begins.
2. Divide that number by 365 (or 366 for leap years).
3. Take the square root of that quotient.
4. Multiply that by the implied volatility for that day.
After doing this for the last five days, they take the simple average of those five calculations — and round it to two decimal places. This number helps adjust insurance premiums and coverage to reflect expected market fluctuations, ensuring you’re fairly protected.
Why does this matter?
These figures help create an accurate safety net, allowing you to plan your coverage and manage risk more effectively.
Stay tuned — these important numbers are being finalized soon! For questions, give us a call.
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