Agriculture & Natural Resources
2019 revenue protection insurance safety net for corn and soybeans
Source: Dr. Todd Davis, UK Grain Marketing Specialist As we move into March, crop insurance deadlines are nearing. The closing prices of the December 2019 corn and November 2019 soybeans futures contract during February provide the initial price guarantee used in crop insurance. As of Feb. 19, the projected prices for corn and soybeans are $4.01 and $9.55 per bushel, respectively. If realized, the 2019 price guarantees are $0.05 higher and $0.61 lower from the 2018 price guarantees for corn and soybeans, respectively.
Figure 1 compares the expected crop insurance guarantees for corn and soybeans compared to the budgeted total variable costs and cash rent for each crop. Unlike 2017 and 2018, corn will likely have a better safety net than soybeans this year. Given the budget assumptions, corn revenue protection insurance guarantee at the 75 percent coverage would have a deficit of $44/acre while coverage at the 80 percent level would be $13/acre below budgeted variable costs and cash rent.
As managers consider the coverage levels purchased for 2019, first take stock of the farm business’s financial strength and the availability of working capital to absorb a loss. If the farm’s working capital is limited, managers may want to consider increasing coverage to protect the farm’s ability to cash flow this fall, if there is a yield loss or lower prices. Managers planning to sell grain at harvest should consider risk management tools to lock in a price before harvest. Another large U.S. corn and soybean crop in 2019 will contribute to lower fall prices and create profitability and cash flow challenges. The analysis in Figure 1 assumes APH yields of 185 and 55 bushels, respectively, for corn and soybeans. Total variable costs are budgeted at $409 per acre for corn and $267 per acre for soybeans. Rent is assumed to be $185 per acre for both crops.