Lowest Spring Crop Insurance Price in Last 10 Years?
February is the month for determining the final “spring” discovery price for crop insurance purposes. This year is shaping up to the be the lowest insurance price for the last 10 years. From 2007 to 2015, the lowest corn spring insurance price was $3.99 in 2014, $4.04 in 2009 and $4.06 in 2007. Last year the price was $4.15 which was not too far behind. So far for 2016, the average December corn futures price has been in the $3.92 range. If this is the final price, then 2016 will have the lowest corn insurance price in the last 10 years by almost 10 cents. We know that crop input costs are dramatically higher now than 10 years ago, so the amount of “insurance” farmers are receiving is also much lower in profit (or less loss) than in those years too.
For soybeans, 2016 is likely not to be the lowest price. In 2007, the spring discovery price for November soybeans was $8.09. Currently, the average futures price for November 2016 soybeans is about $8.90 which would be about 10 cents higher than 2009. Last year, the price was $9.73.
Let’s look at the differences in insurance values. For corn, assuming a farmer had APH in 2014 of 185 and 190 in 2016, he could insure about $725 of corn expenses at 85% in 2014 and only $633 in 2016. For soybeans, assuming APH of 50 in 2014 and 52 in 2016, the difference is almost the same. $483 of insurance in 2014 and only $393 in 2016. In each case, the farmer has lost about $90 of insured revenue. There is some reduction in premiums, but most farmers would rather have the option to insure higher levels with a slightly higher premium.
Paul Neiffer, CPA
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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