Economist: Soybean, Corn Prices Suggest Similar Crop Insurance Protection as 2012

February 20, 2013 03:21 AM
 

University of Illinois ag economist and crop insurance specialist Gary Schnitkey says settlement prices during the first half of February suggest the 2013 projection price for corn will be near 2012 levels and the projected price for soybeans will be around 46 cents higher than last year. But he says overall, crop insurance products will provide "roughly the same risk protection in 2013 as they did in 2012."

Schnitkey says based on settlement prices during the first half of February, the projected price for corn will be $5.73 corn ($5.68 in 2012) and $13.01 for soybeans ($12.55 in 2012), giving a soybean-to-corn price ratio of 2.27 (2.2 in 2012). "Compared to 2012 prices, 2013 prices are slightly more favorable to soybean production. The soybean-to-corn price ratio in 2013 is projected to be higher than in 2012. Large corn plantings are projected. It will remain to be seen if farmers react by planting as much corn as is projected," he says.

"Higher soybean-to-corn price ratios tend to indicate that soybeans are more profitable to plant than corn, and vice versa," says Schnitkey.

Reminder: Projected prices are used to set crop insurance guarantees. These prices are based on settlement prices of Chicago Mercantile Exchange (CME) contracts during the entire month of February. The December contract is used for corn and the November contract is used for soybeans. These projected prices will have large impacts on risks farmers face during 2013. Higher projected prices will cause crop insurance products to offer more downside risk protection.

More details are available from the University of Illinois at this link.


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