Your crop insurance decision has just paid off
Did you see what happened with new crop December corn prices Wednesday? After a nearly 5 cent rise, they closed at $5.67. While that is a long way from the $8 corn from last August, it represents a two cent rise above the crop insurance guarantee of $5.65. And that is what you were waiting for to justify your investment in crop insurance. The same faith that you have in burying seed hoping it will grow, has again paid off with your crop insurance decision. So what do you do with that now?
The small rally in December corn futures on March 20 took futures to $5.67, only three trading days after the crop insurance enrollment period ended. Those who signed up for revenue protection—about 80% of Cornbelt farmers who signed up for crop insurance—have seen a quick and positive reaction from the commodity market. It allows a crop insurance policy holder to begin implementation of a marketing plan that will allow bushels of corn to be marketed without waiting until September to see if they will actually be produced.
The holder of a policy can market his crop with confidence in a time of the year when prices generally rise, and not be afraid of repercussions from a failed crop like 2012. From March 15 to harvest, your policy underwrites your marketing plan, but after harvest, your revenue protection policy no longer is responsible for your marketing decisions. This should not be taken as a recommendation to sell all of your protected corn at $5.67. It is only an observation that good things do happen to good people. Instead of selling $4 corn and being guaranteed only $5.65, you are still guaranteed $5.65 on those 80%-85% of your crop and you can actually market the grain for a higher amount.
No, 2 cents is not worth a call to the elevator, but it indicates your marketing plan for the 2013 crop is now in effect and will need monitoring and management. Iowa State University ag economist Steven Johnson says it is time for the “tractor seat bounce” in the market, “A rally in the new crop December corn futures price happens nearly every year in March and April. The December futures contract tends to move higher, and remains relatively high until at least mid-June when more is known about the planted acreage and yield prospects.”
Johnson is a big advocate of using your crop insurance—not as a yield guarantee—but as an opportunity to manage your revenue by taking advantage of price rallies to bolster income, “The key to RP is that if the Harvest Price increases (October average for December futures contracts); the revenue guarantee reflects the higher of these two prices. That’s a real advantage if there’s a shortfall of contracted insurance bushels since that higher harvest price will be reflected in the final indemnity payment.”
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