As our offices get quiet while the tractors are rolling in the fields, I have an opportunity to sit back and reflect on what this last year has provided. One of the biggest positives for crop farmers I’ve seen in the last 12 months is this rally in our prices.
As we plant the 2021 crop, I’m looking at the new crop futures for corn and soybeans and see corn has rallied $2.81 while soybeans up as much as $6.23. Now, we’ve given some of this back to the market, but those are some nice gains. Unfortunately, we’ve also seen some of these gains eaten by increases in input costs that weren’t locked in.
All of this makes me think about the 2022 crop. We’ve seen this story before - a rally in the markets bringing increased expense. As fast as this market can move up, it can move down. Unfortunately, what doesn’t follow markets down as fast is our inputs. Could we be looking at lower market prices next year with these elevated input costs and negative margins? This scenario is a real concern.
Crop insurance has come a long way over my 20 years in the industry. Typically, our only pricing strategy for Revenue Insurance (RP) is waiting for the February average of the new crop month futures. Now we can start looking at 2022 crop insurance prices today. With products like RPowerD and PriceFlex, you have many options. Both are pricing products that look at alternative intervals that allows you to have the higher of the price available during your selected intervals, or the February average. These intervals started in April of 2021 for the 2022 crop year and will continue through August of 2022. This gives us more opportunities to get a higher price, helping us cover some of these increasing input costs.
After seeing some profit taking in the markets this last week, I have growing concerns on what our insurance guarantees will be for next year. The 2022 prices haven’t rallied to the extent of our 2021 crop, but they have moved a little. For some operations, I think looking at locking in a 2022 minimum price on your crop insurance now may be beneficial. There is additional premium for these policies, but knowing you have a minimum price locked in allows you to focus on other items you can impact. Locking in some inputs now, knowing you have the insurance to back you if needed, makes those decisions easier. Your loan officer may also feel better knowing you are managing your risk with the tools that are available and mitigating as much as you can.
For more information on how these products work and if they may be a fit for you, contact your local AgCountry insurance specialist. All our office contact information can be found by clicking here.