Despite record harvest, some farmers collecting on crop insurance

Despite record harvest, some farmers collecting on crop insurance

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From WATTAgNet:

Despite the record corn crop in 2014, some Iowa farmers will collect crop insurance indemnity payments.

Agricultural economists say crop insurance payments will be made because harvest prices are substantially lower than spring projected prices.

The 2014 projected prices, established in the spring by the federal Risk Management Agency, were $4.62 per bushel for corn and $11.36 per bushel for soybeans.

For crop insurance purposes, the harvest prices, determined by taking the average of settlement prices on Chicago Board of Trade futures contracts in October, were $3.49 per bushel for corn, a 24.5 percent drop from the spring price, and $9.65 per bushel for soybeans, 15 percent lower than the spring price.

In Illinois, yields were so good that payments will be much less common than in Iowa. Illinois’ average was 200 bushels of corn per acre, while Iowa’s average was 183 bushels per acre.

To illustrate how payouts are determined, for example, take a farmer with 85 percent coverage and an actual production history of 190 bushels per acre. That farmer’s guaranteed revenue would be derived by multiplying the historical yield (190 bushels per acre) by the level of coverage (0.85) by the fall price ($4.62), yielding a guaranteed revenue of $746.13 per acre.

Despite record harvest, some farmers will receive crop insurance payout

AMES — Despite a statewide record 2014 corn crop, some Iowa farmers will receive crop insurance indemnity payments this year, according to Iowa State University ag economist Bruce Babcock. “It illustrates that crop insurance is becoming more of a price instrument than a yield protection tool,” Babcock said.

Read more at Cedar Rapids Gazette

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