It’s been a few years since the spring crop insurance price has been this high. The average price for December corn futures last month was $4.58 a bushel and it was $11.87 for November soybeans. Those are the starting prices for crop insurance and they’re good ones says University of Minnesota’s Ed Usset.
“Well, first of all, it is wonderful. The crop insurance levels are very high. That’s a great thing to start with and you’ve got to have crop insurance. You’ve got to have that. Then I’m telling producers that the market can go lower if we can assume a normal year. If we can assume some sort of non-drought year, just a normal year in the corn belt, we are going to go lower by harvest,” Usset said.
The University of Illinois agrees with that assessment and it has Gary Schnitkey telling farmers to take the highest Revenue Protection (RP) policies they’re comfortable with and to use the Enhanced Coverage Option (ECO), too, if they are willing to pay the premium. So, for highly productive soils 80 or 85% RP plus the ECO to 90% because he says it is worth it.
“First off, I would say it is probably worth it because you are going to be protecting a higher revenue level. So, if at all possible think about that but many farmers have a budget in mind. If you want to keep in that twelve to eighteen dollar area they’ll have to drop down from 85 percent to 80 percent or roughly five percent and that’s likely the case if you did 80 percent last year you are going to have to drop down to 75 percent to keep your premium about the same,” Schnitkey went on to say, “Again, the good thing about dropping from 85 to 80 is you are probably still going to have a higher guarantee this year than last year because of the higher prices.”
Farmers on less productive soils say that they may have tougher decisions to make as it’s related to ECO even if they’re wanting to stick with the RP policies. At least that’s how Dan O’Brien from Kansas State sees it.
“Is it an option? Yes. Is it costly? Yeah. So, we need to balance the marginal costs, the marginal benefits, of going to those higher coverage levels is maybe the most judicious thing I can say,” O’Brien said.
For those wanting to see how different coverage levels and options might work on their farms, the University of Illinois has a downloadable crop insurance decision tool.
