Corn growers will notice a couple of major changes in crop insurance for 2014.
The lower price of corn and lower volatility in the market will combine to make crop insurance premiums lower for the 2014 crop, said Matthew Diersen, South Dakota State University Extension risk/business management specialist.
Diersen added that another change is insurance will now be available for non-irrigated corn for grain in several more western counties.
"Growers in those counties now have the ability to directly insure corn using either Yield Protection (YP) or Revenue Protection (RP)," Diersen said. "Growers and insurance agents are likely aware of the general way those products work, as they have been available for wheat in those counties."
The price level for corn insurance in South Dakota is the average of the December 2014 futures contract price during the month of February. At the end of January, Diersen said that price was $4.50 per bushel, down sharply from last year.
"That lower price level means that the cost of insurance will also decline," he said.
Volatility in the futures market is the other cost driver, Diersen explained.
"The volatility factor has averaged 0.27 over the past five years. The volatility is currently projected to be about 0.17 - a level not seen since 2002. That low volatility, should it continue, will mean that insurance premiums will be lower in 2014," he said.
For a longer history and factors for soybeans and spring wheat visit, http://igrow.org/up/resources/03-2006-2013.pdf.
As growers make corn marketing decisions, Diersen said it is helpful to remember that the crop insurance settles to the average of the December 2014 futures contract price during October.
"Thus, for growers hedging with futures or options, it would reduce the basis risk to use the December contract and plan to lift or roll hedges in October," he said.
The basis, cash price in South Dakota minus the futures during October, has averaged -$0.71 the past five years. Thus, the futures price of $4.50 per bushel suggests a cash price at harvest of $3.79 per bushel.
Non-irrigated grain coverage: South Dakota counties which added non-irrigated grain coverage are: Bennett, Jones, Stanley, Haaken, Dewey, Corson, and Ziebach. Several counties in western South Dakota remain silage-only for non-irrigated ground (see map).
"Growers with grain coverage will now be able to more effectively hedge any corn sales. If doing so, it would likely be Revenue Protection (RP). RP that provides the best coverage," Diersen said.
Those who raise corn for feed use (as grain) may also consider RP. Examples of how crop insurance coverage works are available by visiting, http://igrow.org/up/resources/03-2005-2013.pdf.