# Pricing Corn vs. InsurancePricing Corn vs. Insurance

Kevin Van Trump, Founder

July 23, 2013

Lots of questions as of late in regards to pricing bushels with such a good Spring insurance guarantee in place.  Just remember the \$5.65 Spring revenue price guarantee is NOT our floor.  Below are a few examples: Each scenario is figured off a 180 bushel aph and a revenue insurance price of \$5.65. (All numbers rounded to the nearest penny.)

Producer (A) has a 180aph with 85% coverage: 180aph x 85% = 153 bushel guarantee; or 153 bushels x \$5.65 revenue guarantee = \$864.45 per acre. If you produce your 180 bushel aph, then \$864.45 per acre divided by your 180 yield = \$4.80 per bushel. Meaning prices have to go below \$4.80 for you to collect a payment.  If you produce more than you aph, say 190 bushels, then you will have a \$4.55 floor; produce 200 bushels and your floor is \$4.32.

Producer (B) has a 180aph with 80% coverage: 180aph x 80% = 144 bushel guarantee; or 144 bushels x \$5.65 revenue guarantee = \$813.60 per acre. If you produce your 180 bushel aph, then \$813.60 per acre divided by your 180 yield = \$4.52 per bushel.  If you produce more than you aph, say 190 bushels, then you will have a \$4.28 floor; produce 200 bushels and your floor is \$4.07.

Producer (C) has a 180aph with 75% coverage: 180aph x 75% = 135 bushel guarantee; or 135 bushels x \$5.65 revenue guarantee = \$762.75 per acre. If you produce your 180 bushel aph, then \$762.75 per acre divided by your 180 yield = \$4.24 per bushel. If you produce more than you aph, say 190 bushels, then you will have a \$4.01 floor; produce 200 bushels and your floor is \$3.81.

Make sure you talk over the specifics with your crop insurance agent. I just want everyone to know and understand you do NOT have \$5.65 floor in place. As you can see a lot will hinge on your total production and percent of coverage. From where I sit, if you have 85% coverage and the crop isn't looking so hot I would be apprehensive to price any additional bushels at this time. From my math I see very little additional downside risk with DEC13 prices trading at sub-\$5.00 levels. On the other hand for those with less coverage and a good crop, you are looking at an entirely different scenario, and may have another \$1.00 of downside exposure. Moral of the story, it might be tougher than you think to collect on this so called revenue insurance "guarantee," unless you have some serious crop failures. Don't fall asleep at the wheel thinking you are covered. Make sure you are talking over specifics with your individual advisors.

Receive my free daily report.

## About the Author

Founder, Farmdirection.com

Kevin is a leading expert in Agricultural marketing and analysis, he also produces an award-winning and world-recognized daily industry Ag wire called "The Van Trump Report." With over 20 years of experience trading professionally at the CME, CBOT and KCBOT, Kevin is able to 'connect-the-dots' and simplify the complex moving parts associated with today's markets in a thought provoking yet easy to read format. With thousands of daily readers in over 40 countries, Kevin has become a sought after source for market direction, timing and macro views associated with the agricultural world. Kevin is a top featured guest on many farm radio programs and business news channels here in the United States. He also speaks internationally to hedge fund managers and industry leading agricultural executives about current market conditions and 'black swan' forecasting. Kevin is currently the acting Chairman of Farm Direction, an international organization assembled to bring the finest and most current agricultural thoughts and strategies directly to the world's top producers. The markets have dramatically changed and Kevin is trying to redefine how those in the agricultural world can better manage their risk and better understand the adversity that lies ahead.

Subscribe to receive top agriculture news
Be informed daily with these free e-newsletters

You May Also Like