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Crop Insurance · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_01: Welcome to the Professional Ag Marketing Podcast.
• 0:04
  SPEAKER_01: If you want a deep dive into the ag markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_01: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_01: This is your host, Mike Minor.
• 0:22
  SPEAKER_01: Let's get started.
• 0:23
  SPEAKER_01: Today is February 28th.
• 0:25
  SPEAKER_01: I've got Lucas Peters here with us.
• 0:27
  SPEAKER_01: How's it going, Lucas?
• 0:28
  SPEAKER_01: It's going well, Michael.
• 0:29
  SPEAKER_01: How are you today?
• 0:30
  SPEAKER_01: Oh, pretty good.
• 0:31
  SPEAKER_01: Besides, you're here to talk crop insurance.
• 0:34
  SPEAKER_00: We have two weeks left for the crop insurance guy.
• 0:37
  SPEAKER_01: Then you don't have to listen to Lucas anymore, guys.
• 0:40
  SPEAKER_01: But honestly, you might want to listen to Lucas after this week.
• 0:44
  SPEAKER_01: On the grain side, we took another tumble here, down 11 cents on the March corn here today.
• 0:50
  SPEAKER_01: The uh soybeans down 11 cents on the soybeans at uh 10, 11 here to close out in delivery now on March corn and uh soybeans.
• 1:00
  SPEAKER_01: Very rough week.
• 1:02
  SPEAKER_01: For example, May corn here lost about 49 cents off the high from high to low here this week.
• 1:08
  SPEAKER_01: So that was a big doozy after last week's uh nice little uh high we've had in for quite a while in the in the corn market.
• 1:16
  SPEAKER_01: So part of this week's trade action lower, Lucas, I'm gonna contribute to a few different items.
• 1:22
  SPEAKER_01: One, we're gonna be looking at uh trade.
• 1:26
  SPEAKER_01: Tariffs were definitely getting traded this week in a lot of these commodities.
• 1:30
  SPEAKER_01: One being the fact that earlier in the week we saw that kind of looked like we were maybe supposed to push off the uh the tariff hike for Mexico and Canada till April.
• 1:42
  SPEAKER_01: And then Trump came out yesterday, said that's not true, March 4th, and by the way, here's 10% on you again, China.
• 1:48
  SPEAKER_01: So that was not fantastic news for the commodities on the tariffs.
• 1:53
  SPEAKER_01: The other thing was an egg outlook for him that came out.
• 1:56
  SPEAKER_01: 94 million acres on corn, 84 million acres on soybeans.
• 2:00
  SPEAKER_01: It probably shouldn't be traded because it was pretty much expected, but by the end of the day, I do believe corn was getting traded with closer to 95 million acres, probably expected, Lucas.
• 2:12
  SPEAKER_01: And then when you're looking forward, it was just a good excuse to look at next year's balance sheet, which two billion bushels of corn is just too much still.
• 2:20
  SPEAKER_01: So a reminder to look at that isn't always the best reminder.
• 2:24
  SPEAKER_00: And that's and it probably comes out of, you know, the outlet came out a little higher than expectations, right?
• 2:32
  SPEAKER_00: And the other trend that you usually see is when outlook comes out a lot higher, the March report tends to be even higher.
• 2:40
  SPEAKER_00: So you're right, of of you know, that we might be trading ninety-five million acres, even though the report this week says ninety-four million acres.
• 2:48
  SPEAKER_00: Um and and the interesting thing is like uh going back to the the tariff talk, um you know, it felt like after we got through the first part of February and we pushed these off, that we you know had a little positive news and we kind of went back to, you know what, maybe this isn't gonna be that big a deal.
• 3:06
  SPEAKER_00: Like we know they're coming, but almost we have to wait and see based on the previous action of the administration and and kind of the news the way it comes out.
• 3:15
  SPEAKER_00: And then this week when they went from April one day to March 4th the next day, um, it didn't seem like the markets really liked that.
• 3:22
  SPEAKER_01: It no, the un it it created uncertainty, and the markets don't like uncertainty, and this week really proved that.
• 3:29
  SPEAKER_01: I mean, when you go look at the way we traded corn and the hog market, they traded uncertainty, and that is not their friend uh when it comes to a marketing perspective.
• 3:39
  SPEAKER_01: So, anyways, a lot of volatility, a lot of news.
• 3:43
  SPEAKER_01: We could have talked about tariffs and trade and the corn market all day today, but I do want to touch on something because corn producers got a little bit more short corn this week, didn't they?
• 3:55
  SPEAKER_00: Yep.
• 3:55
  SPEAKER_00: So the uh uh the the February averaging period for our spring crops for crop insurance.
• 4:01
  SPEAKER_00: So mainly corn and beans is what we'll talk about here today, but a lot of drum roll.
• 4:05
  SPEAKER_00: Yeah, a lot of other crops as well.
• 4:06
  SPEAKER_00: So um we uh came in with an average of 470 on corn.
• 4:12
  SPEAKER_00: So four cents higher than last year.
• 4:13
  SPEAKER_00: Correct.
• 4:14
  SPEAKER_00: So last year we were at 466.
• 4:16
  SPEAKER_00: This year we were at 470, and on the soybeans we came in at 1054, um, 1155 last year.
• 4:24
  SPEAKER_00: So just over a buck.
• 4:25
  SPEAKER_00: Just over a buck lower on the soybeans uh on price.
• 4:29
  SPEAKER_00: Volatility factors also set here at the last five trading days, and uh corn volatility.
• 4:36
  SPEAKER_00: Um can I laugh at that?
• 4:38
  SPEAKER_00: Well, it's it's actually it's not as bad as news as you would think, bike.
• 4:41
  SPEAKER_00: So uh bean volatility is down from last year and corn is is pretty flat.
• 4:47
  SPEAKER_01: So interesting.
• 4:48
  SPEAKER_00: Um, and and the reason why all that's important is of course that plays into our premiums when and our coverages as we're trying to make our decisions before uh March 17th this year, since March 15th falls on a Saturday.
• 5:02
  SPEAKER_00: Um, you know, that price times our yield is what's giving us our revenue guarantees.
• 5:07
  SPEAKER_00: And so it's kind of as we expected here, the soybeans are being a dollar lower.
• 5:12
  SPEAKER_00: A lot of guys are gonna lose 40 to 45, 50 dollars of coverage depending on where your APHs are at.
• 5:19
  SPEAKER_00: And so we're getting a lot of questions.
• 5:20
  SPEAKER_00: How do we uh make up for that difference?
• 5:23
  SPEAKER_00: Um on the corn side, you know, almost the same as last year.
• 5:27
  SPEAKER_00: Unfortunately, our our expenses are are probably almost uh slightly higher depending on where you're at.
• 5:34
  SPEAKER_00: Uh, you know, seed chem um seemed to be up slightly.
• 5:38
  SPEAKER_00: Seems like a toss-up, doesn't it?
• 5:40
  SPEAKER_00: Yep, and fertilizer might be down a little bit, but not uh That's pretty much where Iowa State said this year was lower, it seemed like was just the fertilizer.
• 5:49
  SPEAKER_00: Unless you gotta go buy it now.
• 5:50
  SPEAKER_00: Yeah.
• 5:50
  SPEAKER_00: Right?
• 5:51
  SPEAKER_00: And and fertilizers kind of come up, especially nitrogen.
• 5:54
  SPEAKER_00: And so as we're making these decisions right now, of maybe you know, uh if you're thinking you're gonna plant a little more corn on corn because of the ratio and where prices are at, um now you gotta factor that in of your expenses might be higher than last year or very similar, even though we got a similar price.
• 6:10
  SPEAKER_00: So um, so what's all that mean?
• 6:11
  SPEAKER_00: We've kind of known this uh for a while.
• 6:13
  SPEAKER_00: We've been using our estimates and our quotes uh pretty close to this.
• 6:17
  SPEAKER_00: Although, like you said, Mike, this week was pretty tough.
• 6:20
  SPEAKER_00: Uh a week ago, um, you know, we on February 20th during the averaging period, we're at 479 uh and a half on corn, and we end the averaging period below 460 with a 470 average.
• 6:34
  SPEAKER_00: So uh kind of a a little bit uh of the wrong trend to be on on that side of it.
• 6:40
  SPEAKER_00: And so as we look at what should we do for crop insurance coverage this year, uh one thing that we've been talking a lot about, and we talked a lot about for a while, is the increased subsidy on ECO coverage, right?
• 6:52
  SPEAKER_00: And so ECO 86 to 95% banded coverage uh follows the county yield to the determined payout.
• 7:01
  SPEAKER_00: But uh, you know, premiums for a lot of guys are 15-16 bucks an acre.
• 7:06
  SPEAKER_00: Really good coverage, really uh small uh deductible on there, uh easy to trigger uh a claim.
• 7:13
  SPEAKER_00: I don't get too worried on the county aspect of it because a lot of farms are following the uh county average anyway.
• 7:21
  SPEAKER_00: But we're kind of in a unique spot right now where what you were just talking about, Mike, of the market does not like uncertainty.
• 7:28
  SPEAKER_00: Well, if you're a farmer and don't like uncertainty and you're looking at your crop insurance price of 470, but futures are already below that, if you want to protect yourself, uh now's the time you can do it.
• 7:40
  SPEAKER_00: You got two weeks to look at your crop insurance coverage, and one way you can really uh set yourself up, protect some more dollars, get back the money you lost on soybeans because of uh coverage you lost on soybeans because it the price is lower, is go ahead and add the ECO coverage.
• 7:58
  SPEAKER_00: Um that way you're gonna uh you're gonna have a basically a floor at about 448 at 95% if our yield is is flat.
• 8:07
  SPEAKER_00: Um and I I think that puts a lot of guys in a good position if prices uh were to go down uh continually here.
• 8:15
  SPEAKER_01: So all right.
• 8:16
  SPEAKER_01: Well, we've got a s another special guest in the audience today, Pat.
• 8:20
  SPEAKER_01: What do you got to say today about crop insurance wrapping up and volatility?
• 8:24
  SPEAKER_02: Yeah, I just snuck in here in the middle of the podcast uh and Lucas did an awesome job uh uh not losing uh uh his train of thought there.
• 8:33
  SPEAKER_02: So uh nice work, Lucas.
• 8:35
  SPEAKER_02: Yeah, you know, I just to maybe just follow up a little bit on on uh on your your last comment there, I I uh and we'll we'll spend a little bit of time on this, Mike, and do some research, but but for us to be um 15 cents lower than the average price on the last averaging day, um, I suspect is a little bit unique.
• 8:56
  SPEAKER_02: And and we'll look through that a little bit here and and follow up um how many times or what's the biggest price um change from average in Feb to final pricing date decision, right?
• 9:10
  SPEAKER_02: But we've got to be we all know just logically it's gonna be um this is gonna be uh relatively extreme compared to history, of course.
• 9:18
  SPEAKER_02: And so um at least in my simple mind, that that creates the you know that that change or difference or uniqueness, if you will, just creates the opportunity, I think, just to think about, huh, that's interesting.
• 9:30
  SPEAKER_02: Is there anything that we can do like differently or better because of that um um relatively significant or rarer event, if you will?
• 9:39
  SPEAKER_02: And so I I appreciate your observations as it relates to ECO, that makes a ton of sense.
• 9:44
  SPEAKER_02: I also think that we should be thinking about um what opportunities that that um we might otherwise be able to make some adjustments to what we believe our crop insurance plan is and how some good sound risk management strategies and plans can work around all of that.
• 10:02
  SPEAKER_02: And so when we talk about the markets not um liking uncertainty, what I've learned through the years is I like volatility, right?
• 10:11
  SPEAKER_02: It creates nice opportunities for our producers.
• 10:14
  SPEAKER_02: And so, Mike, you know, earlier this week we were talking after you and Lucas got done with um, you know, hadn't had had the opportunity to go to go, you know, visit one of our um risk management crop insurance clients, you know, you know, you mentioned um how interesting we've been able to stack through the years the um increasingly um uh range of products from the crop insurance side of things and the increasing range of risk management alternatives that we have.
• 10:44
  SPEAKER_02: And it's not as simple as it used to be, right?
• 10:46
  SPEAKER_02: It used to be a relatively easy decision on what were what type of crop insurance inputs that we wanted to put in.
• 10:54
  SPEAKER_02: And I used to talk, you know, 20 years ago about how we should like uh merge our risk management and our crop insurance decisions together.
• 11:02
  SPEAKER_02: That wasn't really true 20 years ago.
• 11:05
  SPEAKER_02: There wasn't really that big a decision to make.
• 11:07
  SPEAKER_02: Today there's no question that that's true.
• 11:10
  SPEAKER_02: And so I would just encourage every anyone that's out there today and and listening to this podcast, and again, Lucas and Mike, I I uh have a tremendous amount of respect and appreciation for your guys' experience and insight and input on these things.
• 11:25
  SPEAKER_02: And I would just encourage row crop producers to keep that in mind when they're making these decisions over the next couple weeks.
• 11:32
  SPEAKER_02: These are some critical decisions to make in a really interesting time as it relates to um not just a corn market, right, that's in some type of a transition phase, right?
• 11:43
  SPEAKER_02: Like we we here we go again.
• 11:45
  SPEAKER_02: We saw an Outlook conference number um this week that said, hey, we're gonna have two billion bushels.
• 11:50
  SPEAKER_02: When's the last time we heard that?
• 11:52
  SPEAKER_02: Right?
• 11:53
  SPEAKER_02: July, right?
• 11:54
  SPEAKER_02: That's the last time we heard that.
• 11:55
  SPEAKER_02: Not that long ago, right?
• 11:57
  SPEAKER_02: So here we go again, right?
• 11:58
  SPEAKER_02: New crop corn's going down, we're projecting a 181 yield.
• 12:02
  SPEAKER_02: Yeah, why not?
• 12:03
  SPEAKER_02: Let's try it again.
• 12:04
  SPEAKER_02: We've tried it for six years and it hasn't happened, but maybe this year it will, kind of thing, right?
• 12:08
  SPEAKER_02: And so anyway, there's but there's an awful lot of stuff that's happening.
• 12:12
  SPEAKER_02: Um, just got done watching this little uh goofball press conference with Zelensky and Vance and Trump.
• 12:19
  SPEAKER_02: There's all kinds of volatility going on today.
• 12:21
  SPEAKER_02: And I and and so again, those val that volatility creates opportunity, but you have to know how to manage it.
• 12:28
  SPEAKER_02: And so we look for the opportunity to help you manage your volatility here at ProAg.
• 12:33
  SPEAKER_02: So thanks for that.
• 12:35
  SPEAKER_02: Thanks for letting me interrupt you guys, and uh everyone have a great weekend.
• 12:39
  SPEAKER_01: And thank you to all our listeners.
• 12:41
  SPEAKER_01: Please reach out to us at professionaleggmarketing.com.
• 12:44
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 12:49
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 12:56
  SPEAKER_01: See you next time.