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Crop Insurance, ARC PLC, Election · 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 November 1st.
• 0:25
  SPEAKER_01: Lucas, October is behind us.
• 0:27
  SPEAKER_01: How's it going?
• 0:28
  SPEAKER_00: It's going well, Mike.
• 0:29
  SPEAKER_00: Good to be back with you in the podcast studios.
• 0:32
  SPEAKER_01: Well, just a quick recap on the old commodities here.
• 0:35
  SPEAKER_01: It was a heck of a month for these commodity prices.
• 0:38
  SPEAKER_01: We saw some really cool things.
• 0:39
  SPEAKER_01: Hog Market, for example, we rallied over 14%.
• 0:42
  SPEAKER_01: It was one of the better performing commodities in the month of October.
• 0:46
  SPEAKER_01: Soybean meal down over 12%.
• 0:48
  SPEAKER_01: That was one of the poor trades, I guess, through the month of October for commodity markets.
• 0:53
  SPEAKER_01: So a few things to really talk about there, I think, uh, to get us started.
• 0:57
  SPEAKER_01: But today, Lucas, you are going to talk about crop insurance for one.
• 1:01
  SPEAKER_01: And then we're going to talk about uh ARC PLC a little bit.
• 1:05
  SPEAKER_01: Then we're going to talk about the Farm Bill, maybe Farm Act.
• 1:09
  SPEAKER_01: We'll see where things go to.
• 1:10
  SPEAKER_00: Hey, that sounds like a good idea.
• 1:12
  SPEAKER_00: Um and so, yeah, you invited me up today.
• 1:15
  SPEAKER_00: Let's kick it off with uh the crop insurance, and we set the harvest price here.
• 1:20
  SPEAKER_00: Well, yesterday was the last day of October on setting the averages.
• 1:25
  SPEAKER_00: Um, and so corn came in at 416 uh for the harvest price.
• 1:31
  SPEAKER_00: Uh, that had a spring price or a base price of 466, uh, so a 10.7% drop uh on the corn through the year.
• 1:41
  SPEAKER_00: And soybeans came in at 1003.
• 1:44
  SPEAKER_00: Uh they started the spring at 11.55, a 13.2% uh drop there.
• 1:51
  SPEAKER_00: Uh kind of similar to what you were talking there on the performance in October for commodities.
• 1:55
  SPEAKER_00: I just I find it interesting sometimes, you know, for the corn and beans for crop insurance, we average it during the month of October.
• 2:03
  SPEAKER_00: Uh so the first of October was the first day we started.
• 2:07
  SPEAKER_00: Corn was at 429.
• 2:10
  SPEAKER_00: It ended on the 31st at 411.
• 2:13
  SPEAKER_00: Okay, so we uh we went down through the month, averaged 416.
• 2:17
  SPEAKER_00: Soybeans uh started the month at 1057, uh ended at 982.50.
• 2:24
  SPEAKER_00: That one had a little bit more of a range to it, didn't it?
• 2:27
  SPEAKER_00: It did there was a lot of a lot of movement.
• 2:29
  SPEAKER_00: Uh unfortunately, most of the movement was down uh during the month.
• 2:33
  SPEAKER_00: Um and yeah, again, came in at a 1003 average.
• 2:36
  SPEAKER_01: So uh so given those levels, I mean 10 and 13 percent there, you're gonna be somewhat close to some claims, or where do you want to start with?
• 2:44
  SPEAKER_01: Maybe the highest of the claims?
• 2:46
  SPEAKER_00: Yep.
• 2:47
  SPEAKER_00: So uh so let's first talk on the fact that prices went down and these revenue losses.
• 2:52
  SPEAKER_00: And yes, we are going to see uh uh especially southern Minnesota, South Dakota, um, we're going to see a lot of small claims, would be my guess, especially on soybeans.
• 3:06
  SPEAKER_00: And most of it driven from the price loss.
• 3:08
  SPEAKER_00: And one thing uh I want our farmers listeners to consider here is since the price went down, now in the fall, we need more bushels to get back to our revenue guarantee.
• 3:22
  SPEAKER_00: Okay, so I'm gonna try to go through a little equation, which I know is hard on a podcast because it's talking numbers, but uh, I do want to drive this home this point home uh so that if you have wrapped up with harvest and you're getting your production pulled together to report, uh, it's important to report it early to determine if there's a loss.
• 3:42
  SPEAKER_00: So uh let's look at corn for example quick.
• 3:46
  SPEAKER_00: Let's say we have a 200 bushel APH and we're buying 80% crop insurance.
• 3:50
  SPEAKER_00: Okay, that's a 160 bushel guarantee, right, Mike?
• 3:54
  SPEAKER_00: Uh in the spring, we took that 160 bushels, we multiply it by$4.66, the spring price.
• 4:02
  SPEAKER_00: That gives us a revenue guarantee of$745.60 per acre.
• 4:09
  SPEAKER_00: All right, so now we got the harvest price, and we probably got a harvested bushel.
• 4:14
  SPEAKER_00: Okay.
• 4:15
  SPEAKER_00: Okay, so let's go through a quick example here.
• 4:18
  SPEAKER_00: So now that we got the harvested bushel, let's say it yielded 170 bushels per acre.
• 4:24
  SPEAKER_00: Now you might be sitting here as a farmer saying, well, 170 bushel is higher than the 160 uh that we talked about was my guarantee in the spring, which it is.
• 4:34
  SPEAKER_00: But because the price went down, we take that 170 bushels that you harvested times the fall price, the harvest price of 416.
• 4:44
  SPEAKER_00: That only gives us a revenue of$707.20 per acre.
• 4:49
  SPEAKER_00: Okay, so we're short because we were guaranteed$745.
• 4:53
  SPEAKER_00: And the point is we can have we might have harvested over what we considered our bushel guarantee, but because the price went down, we still might have a revenue loss.
• 5:04
  SPEAKER_00: And so that's just stressed the importance of get your production pulled together, talk to your agent, uh, get the production reported, determine if there's a loss, because there is some rules on how soon or how late we can turn in these losses.
• 5:20
  SPEAKER_00: And about the middle of December is the deadline.
• 5:23
  SPEAKER_00: Uh man, it's been a pretty nice fall, Mike.
• 5:26
  SPEAKER_00: Harvest went really fast, tillage is kind of wrapped up, fertilizer is getting there.
• 5:32
  SPEAKER_00: Take a day, get your bushels reported, determine if there's a loss to make sure you don't miss out on any potential claims uh that are out there.
• 5:41
  SPEAKER_01: What did you see for claims you think from a broad perspective?
• 5:45
  SPEAKER_01: Most people had this insurance, they're probably gonna or not gonna give me that breakdown of each style of insurance.
• 5:53
  SPEAKER_00: Yep.
• 5:53
  SPEAKER_00: So so one thing, you know, first let's talk about claims.
• 5:57
  SPEAKER_00: And I would say what we're seeing uh in our agency, and then just talking to farmers around the area, um, the soybeans are gonna have a lot of small claims in a lot of areas because that when that rain shut off in August and how dry we got in September, um, and we saw it even on the yield monitor, right?
• 6:19
  SPEAKER_00: Of the moisture levels were significantly lower uh in the on the beans when you're combining them.
• 6:25
  SPEAKER_00: Um, that moisture stress late probably robbed us of a few bushels, and that's what's triggering some claims with the revenue losses.
• 6:34
  SPEAKER_00: So a lot of times if you're at 85%, uh maybe 80%, you're triggering uh small claims if if your soybean yields were below your APH.
• 6:44
  SPEAKER_00: On the corn side, maybe a little bit opposite, not seeing many corn claims come in because yields were were pretty good all over the place, uh, with the exception of southern Minnesota, right?
• 6:56
  SPEAKER_00: We talked about this really all growing season, Mike, ever since June when those rains are coming and planting went late in that area, uh, you know, along that I-90 belt in Minnesota.
• 7:06
  SPEAKER_00: There are going to be some claims.
• 7:08
  SPEAKER_00: One because the price went down, there's revenue loss, but also because we didn't get the bushels uh in those areas.
• 7:14
  SPEAKER_00: So that's kind of the general uh claim scenario that we're seeing.
• 7:19
  SPEAKER_00: As we look at you know, some of these other products, uh, let's talk quickly on ECO.
• 7:25
  SPEAKER_00: And now ECO is a 95% coverage, it's county-based though.
• 7:30
  SPEAKER_00: Okay, so now we've set the price for ECO.
• 7:32
  SPEAKER_00: So we know uh on the price side we're lower, and since we're 10% lower on corn, 13% lower on beans, well, since I bought a 95% level protection, uh, I'm essentially in the money on my ECO from a price side.
• 7:50
  SPEAKER_00: Okay, now the important part of ECO on whether those claims are going to pay or not is what are the yields in the county.
• 7:57
  SPEAKER_00: And if you're sitting in a county that um the the general feeling in the county is the yields are low, especially on soybeans, you're gonna probably trigger a claim.
• 8:07
  SPEAKER_00: Corn, you're gonna trigger a claim as well, and especially these southern Minnesota counties.
• 8:11
  SPEAKER_00: I'll pick on that high high expected yields, uh, maybe some late planning, some drowned out areas.
• 8:18
  SPEAKER_00: Uh, I don't think the county yields, the final county yields are gonna meet the expected.
• 8:22
  SPEAKER_00: So we're gonna have some good ECO claims on those counties.
• 8:26
  SPEAKER_00: In other areas, even though the price was lower, the county yields are pretty good.
• 8:31
  SPEAKER_00: I mean, you talk about some of these corn yields in northwest Iowa, southeast South Dakota, really eastern South Dakota.
• 8:36
  SPEAKER_01: Eastern Iowa is a fantastic example.
• 8:39
  SPEAKER_01: There's no I mean 40 above.
• 8:41
  SPEAKER_00: I mean, when you're 40 bushel above record, yeah, uh, you're probably gonna be above your expected county yield uh for the ECO.
• 8:50
  SPEAKER_00: So even with the price loss, it's gonna be hard to trigger much of a claim in those areas.
• 8:55
  SPEAKER_00: Yep.
• 8:55
  SPEAKER_00: Now, the important part to remember on all that ECO coverage is even though we have the price, we won't get the final county yields until middle of June of 25.
• 9:05
  SPEAKER_01: Takes a bit.
• 9:06
  SPEAKER_00: It takes a little bit because of the the way the uh the RMA does the yield calculation, it incorporates all the other uh yields from uh all the crop insurance uh yields reported in the county.
• 9:17
  SPEAKER_00: So it takes a while to get that in.
• 9:19
  SPEAKER_00: But it will be a uh in those areas that have claims, it will be a nice check to get next summer.
• 9:26
  SPEAKER_00: Um, another one of those coverages we talked a little bit about is SCO.
• 9:30
  SPEAKER_00: Uh, you know, this past year we didn't promote the SCO much.
• 9:33
  SPEAKER_00: We pushed guys to do our county.
• 9:36
  SPEAKER_00: Uh SEO is probably definitely not gonna pay as much as often because it starts at 86%, right?
• 9:42
  SPEAKER_00: Yeah, the ECO you're gonna see a lot of.
• 9:44
  SPEAKER_00: ECO, you're gonna see a lot more uh claims hitting more often.
• 9:48
  SPEAKER_00: Uh especially this year.
• 9:50
  SPEAKER_00: Especially this year.
• 9:51
  SPEAKER_00: The SEO, I really don't think that's gonna trigger much uh unless you are in an area, again, that was affected by the heavy rains uh or had a a really significant yield loss.
• 10:01
  SPEAKER_00: Uh, I don't suspect SCO could trigger many claims.
• 10:05
  SPEAKER_01: So you put multi-parel underneath of that and yep.
• 10:09
  SPEAKER_00: So that's how you would do it.
• 10:10
  SPEAKER_00: Like if uh uh if you are in an in bought ECO, for example, uh and maybe we signed up for Art County in between, and then we have our multi-parel underneath of it.
• 10:20
  SPEAKER_00: That's kind of our total risk management package uh to get up to 95% coverage.
• 10:25
  SPEAKER_00: Um, in some of these areas, you're gonna get your harvest, your your base multi-parole claim uh here, well, depending on how you want it.
• 10:34
  SPEAKER_01: Do you think there'll be a lot of those?
• 10:37
  SPEAKER_01: It'll be minimum this year.
• 10:38
  SPEAKER_00: There is definitely some claims out there.
• 10:40
  SPEAKER_00: Yeah.
• 10:40
  SPEAKER_00: So you'll get your claims paid here the either this year or next year, depending on your tax situation, I'm sure.
• 10:45
  SPEAKER_00: Uh, and then you'll get your ECO claims uh next June.
• 10:50
  SPEAKER_00: Uh, and let's transition quickly into the ARC PLC discussion.
• 10:53
  SPEAKER_00: Okay, yeah.
• 10:54
  SPEAKER_00: So one thing I don't want to confuse is well, there was just a round of ARC payments made here, I think last week, actually, though the payments went out.
• 11:06
  SPEAKER_00: Those ARC payments are for the 2023 crop.
• 11:10
  SPEAKER_00: Okay.
• 11:10
  SPEAKER_00: Uh, and if you're listening and you're wondering, well, wait a minute, I don't think I got an ARC county payment last year.
• 11:16
  SPEAKER_00: You're probably right because there was not uh any in our local area for corn and soybeans uh because uh from the Arc County or PLC uh payments.
• 11:28
  SPEAKER_00: Um didn't expect one uh in 2023 either, so that wasn't a surprise.
• 11:33
  SPEAKER_00: The one exception is in southeast South Dakota.
• 11:38
  SPEAKER_00: There were some wheat arc county payments triggered.
• 11:42
  SPEAKER_00: Um, if you remember back to last uh 2023 spring, a lot of the winter wheat failed, and that's what triggered those arc county payments.
• 11:50
  SPEAKER_00: Um and even though you didn't plant wheat, maybe you had some wheat on your base acres because that's how the FSA pay programs work.
• 11:57
  SPEAKER_00: So maybe you did see a small claim there.
• 11:59
  SPEAKER_00: Uh, but again, any ARC payment that you hear in the news was from the 2023 uh year.
• 12:07
  SPEAKER_00: If we look forward to is there going to be a 2024 ARC County payment?
• 12:12
  SPEAKER_00: Again, if you're getting an ECO payment, you probably are gonna get an Arc County payment the way it looks to me.
• 12:19
  SPEAKER_00: Uh of course, we're a long ways from getting one.
• 12:22
  SPEAKER_00: We're also a long ways from figuring out exactly what prices we're using for our county.
• 12:27
  SPEAKER_00: Okay, we know our benchmark price was 485 on corn and 1112 on beans.
• 12:33
  SPEAKER_00: So pretty decent on both.
• 12:34
  SPEAKER_00: Decent price, but remember that's a marketing year average price, and so we won't finalize that until uh late next summer, uh, and then that will be used with the county yield, uh the same county yield that we pull for ECO to calculate the art county payments.
• 12:52
  SPEAKER_00: So that's why I say comfortably, if you're getting an ECO, your likelihood of getting an art county payment is pretty good.
• 13:00
  SPEAKER_00: Um, so something to look forward to.
• 13:02
  SPEAKER_00: Kind of also why this program of stacking a county product like ECO, slipping in an art county in between and buying your malt apparel underneath works pretty well because you got a nice stacked level protection and there isn't any overlap there, so you're not spending extra uh premium dollars on that.
• 13:22
  SPEAKER_00: So that's kind of the the wrap-up of you know harvest prices and claims and things.
• 13:28
  SPEAKER_00: Uh so I just yeah, last reminder here get your production pulled together, go talk to your crop insurance agent and uh get that uh production reported to see if you do have a claim.
• 13:39
  SPEAKER_00: Uh one thing I know we were talking about just before we started here, Mike, and I'll transition a little bit.
• 13:44
  SPEAKER_00: Uh I've gotten a lot of questions the last week or so about the Farm Act.
• 13:49
  SPEAKER_00: And a lot of questions actually have come from you, Mike, about this.
• 13:52
  SPEAKER_00: So you're getting it too much.
• 13:53
  SPEAKER_00: Oh, I'm very curious.
• 13:54
  SPEAKER_00: Yeah, I know.
• 13:55
  SPEAKER_00: So uh this is a an act that was introduced um by a representative of out of Mississippi uh into uh legislation.
• 14:04
  SPEAKER_00: It has not been voted on or uh really acted upon yet, so this is all uh a long ways off before it becomes reality.
• 14:14
  SPEAKER_00: But essentially it's a revenue loss um farm payment uh um I don't know what act, uh I guess is the best way to phrase it.
• 14:24
  SPEAKER_00: And it would provide a uh payment to growers on all crops nationwide that are what they call arc county crops.
• 14:35
  SPEAKER_00: Okay.
• 14:36
  SPEAKER_00: And in our area, that's corn, soybeans, wheat, right?
• 14:38
  SPEAKER_00: So all of our crops would qualify.
• 14:40
  SPEAKER_00: And it the calculation is based on some revenue uh numbers and some standards are using.
• 14:47
  SPEAKER_00: Bottom line is some people are coming out with projections of payments between 60 and 100 an acre on corn, uh,$30 to$60 an acre payments on soybeans, and that got all everybody all excited.
• 14:59
  SPEAKER_00: Yeah, I was gonna say I got excited.
• 15:01
  SPEAKER_00: Exactly.
• 15:01
  SPEAKER_00: So uh I don't want to temper any excitement because the calculations they're using and things, I it's hard to argue that.
• 15:09
  SPEAKER_00: What I do want to temper is how fast this comes, if it comes at all, because this needs to be voted on and approved and issued.
• 15:16
  SPEAKER_00: The likelihood of it going through as written originally, of course, is very, very low.
• 15:22
  SPEAKER_00: Uh, will there be a program?
• 15:24
  SPEAKER_00: Pro possibly.
• 15:25
  SPEAKER_00: Uh, you know, that's a nice thing about introducing something and making it aggressive up front, is it you can suspend a few changes and still come out pretty well in the end, but it is definitely something uh that we will have on our radar and uh keep you up to speed on here in the coming weeks or months uh as it takes to get passed.
• 15:45
  SPEAKER_00: And again, that was called the Farm Act.
• 15:47
  SPEAKER_00: Uh it's a little kind of a weird, I don't name uh it's a little confusing of Farm Act, and then we have the Farm Bill, uh, which is a total other discussion and uh not really much activity on the Farm Bill either.
• 16:01
  SPEAKER_01: Well, it'll be interesting with the next administration.
• 16:04
  SPEAKER_01: You know, for example, the elections coming up next Tuesday, we see some crazy market volatility surrounding that uh historically.
• 16:11
  SPEAKER_01: Now uh uh just something to remind folks is that you know when Trump was in office, he he gave out a lot of money after the trade war to the farm industry through subsidies.
• 16:23
  SPEAKER_01: I mean that was yeah.
• 16:24
  SPEAKER_01: So I don't know, has his game plan changed at all, you know, from that side of things in this next ad next role, you think, if he gets in?
• 16:33
  SPEAKER_00: I think trying to predict that would be a fool's errand, Mike.
• 16:37
  SPEAKER_01: Yeah, there you go.
• 16:37
  SPEAKER_01: Uh from Lucas himself, not wanting to stick his neck out.
• 16:41
  SPEAKER_01: All right.
• 16:41
  SPEAKER_01: So the second part of that is, you know, watch next Tuesday.
• 16:45
  SPEAKER_01: Uh uh like just from this perspective.
• 16:48
  SPEAKER_01: Um today Trump is uh expected or supposed to projected to win in in uh quite a few mm areas or uh projections, polls, whatever you want to look at.
• 17:00
  SPEAKER_01: So the market necessarily shouldn't be surprised.
• 17:04
  SPEAKER_01: Now in in the old school way of looking at it, if Trump wins, the soybean market, they're like, yeah, we knew this was gonna happen.
• 17:11
  SPEAKER_01: But today, around eighty percent of the soybean market volume is uh is controlled by algorithm trading.
• 17:20
  SPEAKER_01: Now, if you let that sink in, an algorithm doesn't handle that surprise as well.
• 17:27
  SPEAKER_01: They see Trump gets elected, the algorithm trades in a very different manner than what you or I would as a personality, for example.
• 17:34
  SPEAKER_01: So just be careful of that next week.
• 17:36
  SPEAKER_01: Be careful of these markets.
• 17:38
  SPEAKER_01: Um it'll be very interesting, nonetheless, no matter what happens.
• 17:42
  SPEAKER_01: I'm not trying to predict anything, obviously, but um I I think uh it's just something to watch out for.
• 17:47
  SPEAKER_01: And then the moment after that, you got the Fed meeting, then you got the WASD Airport.
• 17:51
  SPEAKER_01: Like, there's a lot of stuff coming out next week.
• 17:53
  SPEAKER_01: Just watch out.
• 17:54
  SPEAKER_00: So lots of stuff going on, probably a good reason to to manage risk and have a plan, huh, Mike?
• 17:59
  SPEAKER_00: Let's chat about it.
• 18:01
  SPEAKER_00: Thanks, Lucas.
• 18:02
  SPEAKER_01: And thank you to all our listeners.
• 18:03
  SPEAKER_01: Please reach out to us at professionaleggmarketing.com.
• 18:07
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 18:12
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 18:18
  SPEAKER_01: See you next time.