Crop Marketing

A grain marketer told me two weeks ago they were glad “... prices are finally getting exciting!” No argument that strong $4 corn and stronger $10 soybeans are better than what we had the five months following harvest. However, for old crops remember to subtract storage costs and interest expense from the final sales price, and new crop prices only count if you actually commit bushels.

 

With wet weather some producers may be slightly behind their ideal schedule for getting acres planted. If this is the case we have at least a couple decisions to consider. One decision involves late season adjustment to our corn/soybean acres mix and the second decision has to do with crop insurance and prevented planting. As we progress with spring crops planting, this article provides a summary of take away messages out of a recent crop marketing article from Gary Schnitkey, Department of Agricultural and Consumer Economics, University of Illinois.

 

Cash bids for fall delivery of corn are $4.00+ locally and the cash bids for harvest soybeans want to be at $10.20. If I were to predict average yields, beans look to offer more opportunity than corn by roughly $50 per acre. Of course this only holds true at today’s price. If I actually want to be certain of this revenue advantage I would need to price now. Prices later could be different. The current price for soybeans is well above the projected crop insurance price with the opportunity for lower prices more significant than the opportunity for higher prices.

 

 

For Pennsylvania producers, the final planting dates are June 10th for corn and June 10th or June 20th for soybeans. See a crop insurance agent or view the information available in the Actuarial Information Browser for the specific date in each county.

 

Once the final planting date has been reached, farmers have three options:

 

Unless an additional coverage option was selected at crop insurance signup, prevented planting payments equal 60% of the spring-time guarantee. As an example, take a grain corn Revenue Protection (RP) policy with a 160 bushel per acre average yield. If this policy is insured at the 75% coverage level, the guaranteed yield per acre would be 120 bushels. If the 2016 projected price is $3.86, the guarantee would be $463.20 per acre. In this case, the prevented planting payment would be $277.92 per acre. Even though RP's guarantee equals the higher of the projected or harvest price, the prevented planting payment is based only on the projected price.

 

If a prevented planting payment is taken, a farmer cannot plant another crop during the late planting period which is 25 days following the final planting date. Planting another crop during this 25 day period will eliminate the prevented planting payment. After 25 days, another crop can be planted, usually resulting in a reduction in prevented planting payments to 35% of the original guarantee.

 

 

Farmers can still plant corn after the final planting date. If they do, they will not receive a prevented planting payment. Also, the guarantee will be reduced by 1% per day for each day up to 25 days after the final planting date. After 25 days, the guarantee will be 60% of the original guarantee for any corn that is planted.

 

 

Soybeans can be planted on acres intended to be planted to corn. If soybeans are planted on any intended acres for corn before the end of the late planting period for corn, there will not be a prevented planting payment for corn. The soybeans will be insured if the farmer has elected to insure soybeans. This will be a "normal" soybean policy, unless soybeans are planted after the final planting date for soybeans and the final planting date has not passed. In this case, the guarantee is reduced, similar to that in the example for corn described earlier in this article.

 

As a reminder, always consult with your crop insurance agent to make the best crop insurance decisions for your operation.