Analyst sees only modest insurance claims on 2016 corn crop
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WASHINGTON, Aug. 25, 2016 - Revenue insurance claims on corn are likely to be modest this year except in eastern areas of the Corn Belt that have been hurt by dry weather, a leading analyst says.
The harvest price for corn is likely to be below what was projected for insurance coverage, but actual yields are expected to be better than average on most farms, suggesting that Revenue Protection policies “will not make payments on many farms," University of Illinois economist Gary Schnitkey writes in farmdocdaily.
Decreases in corn prices could increase the likelihood of corn payments, but payments for soybeans are unlikely, Schnitkey said.
The 2016 projected price for Midwest revenue was $3.86 per bushel for corn, while the December CME contract is now trading for about $3.40, or 88 percent of the projected price. At an 85-percent coverage level, farmers' actual yields would have to be below their guarantee yields for them to get a payment at a $3.40 harvest price.
The Agriculture Department projected this month that the average yield nationwide would be a record 175.1 bushels an acre, 6.7 bushels more than last year. But 21 percent of the corn in Ohio was rated in poor or very poor condition as of Aug. 21, versus an average of 7 percent across the 18 primary corn-growing states, according to USDA's latest weekly crop progress report.
Any corn growers receiving insurance payments this year are likely facing “very low incomes,” says Schnitkey. “The combination of low yields and low prices will result in low incomes. Crop insurance payments will provide relief, but incomes still likely will be low or negative on farms receiving crop insurance payments.”
USDA paid $1.67 billion in insurance indemnities last year on corn, down from $3.8 billion in 2014.
The projected soybean price this year on revenue policies was $8.85 per bushel, while the November CME contract is now trading near $10 per bushel and soybean yields are expected to be above average.
Soybean yields are expected to average a record 48.9 bushels per acre, or 0.9 bushel higher than last year, according to USDA.
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