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Corn+Soybean Digest

Chances for Insurable Margins Again for 2013


With the likelihood of lower premium rates and better overall coverage, federal revenue crop insurance should provide farmers with tools to potentially insure profit margins for 2013 crops, says Bruce Sherrick, a University of Illinois farmdoc farm management specialist. He stresses that with crop price protection levels likely in the $5.70/bu. range for corn and about $12.75/bu. for soybeans, “adequate margins may be insurable again this year.”

“Crop insurance is critical for most operations to manage revenue risk,” Sherrick says, emphasizing the importance of managing price risk. “Because of the 2012 drought, relatively high starting prices should remain.”

Prices for 2013 coverage will be established by Risk Management Agency in March, based off February Chicago Board of Trade corn and soybean futures prices. “The best guess is to always use current December corn and November soybean futures until we get to the price discovery month,” Sherrick says.

On Friday (Jan. 4) December corn closed at about $5.71. November beans closed at $15.77. Prices were down for last week. But for most growers, those ranges should provide solid floor prices. And with wider availability of Trend Adjusted (TA) Actual Production History (APH), Sherrick says growers have strong insurance risk management tools.

With TA, APH yield levels are increased based on assumptions that technology has generated stronger production. Sherrick says the TA feature enables growers to receive the same or higher coverage even with a lower percentage rate of coverage.

“Actual APH values will be down due to low yields in 2012 for many Corn Belt farmers,” he says. “It may be 4-5 bu. on the raw basis. So it’s much more important to that the TA provision.

“We didn’t see the activity (with TA in 2012) as was expected. There was some confusion. But the cost per bushel with TA can’t go up. It allows you take more coverage.”

Sherrick says revenue insurance rate revisions should continue, since RMA is working to better match loss experience with rate levels. “Much of the Corn Belt will have lower base rates,” he says. “Regions with higher historic losses could see increases in rates.”

The “harvest price option” paid off heavily for growers suffering from 2012 drought and other weather losses. Harvest Prices used in indemnity calculations reached $7.50 for corn and $15.39+ for soybeans. Expect it to remain popular for 2013.

“Because the impact in 2012 was so great, most will likely include the harvest price option going forward,” Sherrick says. “It is often a good idea to include the harvest price option if you want to benefit from potential price increases.”

He encourages growers to monitor futures prices leading up to the insurance signup period, as well as educational materials from sources including University Extension and outreach outlets like and the Risk Management Agency. 

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