AgDM newsletter article, February 2001

Crop insurance prices for 2001

By William Edwards, extension economist, 515 294-6161, wedwards@iastate.edu

The prices that will be used to calculate revenue insurance guarantees for 2001 crops have been announced. The average futures prices in February were $2.46 per bushel for corn and $4.66 per bushel for soybeans. These are based on the closing Chicago Board of Trade prices for December corn and November soybeans. This compares to $2.51 for corn and $5.32 for soybeans last year.

Farmers who purchase either Crop Revenue Coverage or Revenue Assurance can choose to guarantee up to 85 percent of their expected gross revenue, based on their proven yield for each insurance unit and the corresponding futures price. If their actual revenue, which is determined by their actual yield and the average futures price in October for soybeans or November for corn, is below the guarantee they will receive a payment for the difference.

The indemnity prices for multiple peril yield insurance this year are $2.05 and $5.26 for corn and soybeans, respectively. After subtracting the basis, corn guarantee levels for MPCI and revenue insurance are pretty similar, but for soybeans the MPCI price is quite a bit higher. More importantly, most counties are looking at a USDA loan rate of $5.10 to $5.20 for soybeans, so there is already higher price protection available at no cost. If moisture is a concern, MPCI probably offers more protection for the premium money than RA or CRC on soybeans. This assumes that low yields are a bigger risk than lower prices.

However, producers who want to be in a position to aggressively pursue forward pricing opportunities in the event of a weather rally may prefer CRC or Revenue Assurance with the increasing coverage option, to protect against the possibility of yields falling below the level that is forward contracted. The same philosophy applies to producers who want to guarantee their raised feed supply for next year.

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