Thinking 'oops' as corn prices drop and insurance set?
As of last Thursday, the October price discovery period for crop insurance on corn and soybeans will be complete, and the harvest price option will be known and in the history books. Will you benefit from that?
Yes, if your crop insurance coverage level is 80 percent or more, but not if it is less than 80 percent, and you are harvesting an equivalent to your APH yield.
But the critical factor is that the harvest price period is just about concluded and once the price has been set unpriced grain is at the will of the market, which may not be friendly.
Throughout the Corn Belt, piles of corn are stacking up beside grain elevators as an indication that yields were good and supplies are large. While the next USDA estimate of the size of the crop will not be released until Nov. 8, the market is satisfied that sufficient supplies exist and is awaiting confirmation of an expected 2 billion bushel carryover for 2014.
That could easily push cash corn below the $4 mark and move December futures rapidly in that direction. And the prospects for lower income from corn are getting higher. And once the crop insurance guarantee is set, you are not protected from any further drop in corn prices. It is lonely out there.
University of Illinois marketing specialist Darrel Good says, “Anecdotal reports suggest that a relatively small portion of the 2013 crop was forward priced and that producers are choosing to store a large portion of the newly harvested crop. If that characterization is correct, there is a lot riding on the direction of corn prices over the next several months. To avoid lower revenues, prices will have to increase more than the cost of owning and storing corn.”
Good says that corn prices will be dependent upon consumption. Yes, China is buying corn, but don’t depend on the Chinese being the key to success. Yes, ethanol is proving a stable demand, but don’t depend on ethanol to consume the surplus. And when Corn Belt planters are in the field next spring, Good says it will take high prices for soybeans to keep corn from going even lower.
That is then. This is now, and your harvest is in the final stretch with your yields and your father’s prices. If you have a revenue crop insurance policy, Illinois ag economist Gary Schnitkey says the way harvest prices have been shaping up for corn, you may get an indemnity check from the crop insurance company.
The spring guarantee was $5.65, which were the average closing prices of December corn futures during the month of February. The fall harvest price is nearly complete, and will be approximately $4.40 per bushel, which is 78 percent of the spring guarantee. A farm which produces a yield that equates to its actual production history will be getting a crop insurance check if your coverage level is 80 percent or more. At a 180 bu. APH, a 180 bushel average yield would get $22 per acre; and 85 percent coverage would gain a $72 payment. Lower yields would draw higher checks. Higher yields would see the check quickly diminish to zero.