Special Market Update
Grain Market Commentary
Monday, February 19, 2018
By Greg Johnson, Executive Account Representative, The Andersons
FEBRUARY – IT’S TIME TO REVIEW YOUR CROP INSURANCE PLAN
February is the month when we set the spring guarantee price. By taking the average closing price of December corn futures and November soybean futures each trading day during the month of February, we obtain the spring guarantee price for corn and soybeans. In October, we will take the average of December corn futures and November bean futures, and use whichever month is higher to calculate our guarantee price.
Last year, December corn averaged $3.96 in February 2017. In October 2017, December corn futures averaged $3.49, which was a decline in price of 47 cents per bushel, or 11.9%. A producer that took an 85% RP policy would have had a claim if his yield was less than 96.9% of their APH. For a producer with an APH of 200 bpa, he would have had a claim on any yield lower than 193.8 bpa.
This year, 12 of the 19 trading days are in the books (63% of the month). Thus far, December corn is averaging $3.95, which is just about the same as last year. However, this year we are carrying in 2.48 billion bushels of corn this year, which is 130 million bushels more than a year ago. So unless we have a production shortfall or an increase in demand, we could be looking at an October price similar to last year.
Last year, November soybeans averaged $10.19 in February 2017. In October 2017, November beans averaged $9.75, which was a decline of 44 cents per bushel, or 4.3%. A producer with an 85% RP policy would have had a claim if his yield was less than 89.3% of their APH. For a producer with an APH of 55 bpa, he would have had a claim if his yield was less than 49.1 bpa.
Thus far this year, November futures are averaging $10.09, about a dime lower than last year’s February average. However, we are carrying in a lot more soybeans than we were a year ago (530 million bushels this year vs. 302 million bushels last year). Again, unless we have a big shortfall (either in South America or the United States), prices in October could be even lower than they were last October.
In addition to the standard policies (Yield Protection, Revenue Protection, Revenue Protection with the Harvest Price Exclusion, Area Yield Protection, and Area Revenue Protection), there are several additions that you can attach to your policy. Some examples are:
- TA (trend yield adjustment) : attaches greater weight to recent yields vs yields from longer ago.
- YE (yield exclusion) : allows you to drop a bad year from your APH calculation.
- WIND/HAIL: protects you against wind, fire, or hail damage.
- MPD (multiple price discovery) : allows you to select a month other than February for your guarantee.
- MP (margin protection) : allows you to protect the difference between revenue and expenses for the county).
- APH (protection from 3rd parties) : protection from chemical drift, the neighbor’s cattle, etc.
If you are not up to speed on all of these terms, contact your Andersons crop insurance agent. We don’t sell home, health, life, or auto insurance – only crop insurance. We specialize in crop insurance, and stay up to date on all new policies and changes, so that we can help you make the best decision for your operation.