Can Crop Insurance Keep Record Streak Alive?
More than 75% of federally subsidized crop insurance policies sold today include some form of revenue protection, enabling growers to insure against loss of revenue caused by low prices, low yields or a combination of both. The buy-in from corn and soybean growers is even higher: around 90%.
During the past two growing seasons, the revenue guarantees have been among the highest in more than a decade. Last year, the soybean projected price set a record at $14.33 per bushel. For growers, revenue protection essentially functions as a price floor, and when combined with either a county yield or the farm's actual production history, it establishes a minimum guaranteed revenue per acre.
February is a critical time for crop insurance, because that's when the price component of the revenue guarantee is set for spring crops. The spring guaranteed prices are computed by averaging the daily closing price of the December corn, November soybean and September spring wheat contracts throughout February.
As of this writing, December corn was trading just below $6 per bushel, November soybeans near $13.50 per bushel and September wheat around $8.75 per bushel.
For corn and soybeans, these numbers are in the same ballpark as 2022 -- a year marked by record net farm income but also shocking increases in expenses. Crop insurance gave farmers the confidence to plant every acre they could because they knew they'd, at a minimum, be able to cover their costs of production.
The stakes are higher this year. Unlike 2022, there's been little to no opportunity to lock in price savings on fertilizer, fuel or other input prices by buying early. Many farmers will need to sell corn at or above $5.30 and soybeans at $12.50 per bushel just to break even. Last year, commodity price risk was to the upside; this year, the risk appears to be on the downside.
Revenue protection crop insurance is made for this environment, but the strength of farmers' backstop depends on what happens in the new-crop futures markets this month. I hope it gives you the confidence to go forth, plant and prosper.
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