Now that crop insurance prices are set, it’s time to zero in on your marketing plans.
“If we can get an insurance price somewhere close to breakeven that’s like having a put option at breakeven on 85% or whatever percent of your crop has revenue protection,” says Farm Journal Economist Chip Flory. “Knowing your insurance price can give you confidence in your marketing plan because that protected revenue is your starting point.”
Corn insurance prices are based on the December futures average, soybeans on November futures, spring wheat on September futures and sorghum on a calculation that uses corn futures and basis. Remember, you have to select percent of insurance coverage by March 15.
Before making final decisions on insurance coverage, run your game plan by stakeholders, namely your banker, Flory advises.
“Once you have insurance protection under your feet, delve into a spring rally—yes, long before knowing final yields,” Flory says. “You can sell into rallies knowing if Mother Nature wallops you and you can’t deliver the crop, you can make good at the elevator later.”
$3.82 to $3.95*
Corn marketing options could start out similar to 2017, however, some experts are watching for price spikes this fall.
“The big thing with corn they told you to do last year was sell the carry, which meant you had to hedge,” explains Angie Setzer, vice president for Citizens LLC. “If you’re looking at $3.90 December futures, for example, you can store and expect carry to put them at $4.15 to $4.20 futures. Spreads turn into cash and give you more opportunity.”
“I’d like for producers to be at least 10% sold on new crop corn this spring, but don’t be afraid to sell more if the opportunity is right and it fits your marketing plan, says DuWayne Bosse, owner of Bolt Marketing in South Dakota. “I like producers to set up a marketing plan with scale up sales from $3.90 to $4.40.
“I’m pretty bullish when it comes to corn—I’m likely not looking to cash in on my crop insurance,” Bosse adds. “I’m actually considering going down in insurance coverage (from say 75% coverage to 70%) in corn since I expect fall prices could be higher—but it’s case by case. I would want to be confident producers understand they will have less insurance coverage if they drop a percentage level.”
$9.79 to $10.16*
Weather worries in Argentina could lead to opportunities for soybean growers. Poor South American yields could increase export demand—and therefore price—for U.S. farmers.
“At the current soybean-to-corn price ratio, 2.56:1, the market isn’t giving much of a nod to soybeans,” Flory says. “During this Argentine weather scare, we’ve had a range from $9.893 to $10.298—a 40¢ swing in soybeans.”
Don’t hang all your hope on Argentina’s weather, however. USDA’s current carryover forecast for soybeans is 530 million bushels.
USDA’s forecast of soybean production in Argentina currently sits at 2.06 billion bushels for 2018, says Todd Hubbs, University of Illinois professor in the Department of Agriculture and Consumer Economics.
Take advantage of high prices sooner than later. “You want to be pretty aggressive on new crop soybean sales—see if you can sell about 30%,” Bosse says. “The price outlook for soybeans this fall does not look good. I’d consider going up a percentage level in crop insurance since I think fall prices will be lower. Those lower prices could trigger a revenue claim.”
Look for the $10 to $10.50 futures price range to get started selling new crop, Setzer says.
$4.87 to $6.31*
Farmers have good profit potential in spring wheat, if they manage marketing decisions wisely.
Considering we’re looking at higher spring wheat acres, which could be up one million total, I’m probably going to be aggressive selling new crop spring wheat at my target price,” Bosse says.
In 2017, farmers saw a spring wheat rally, and Bosse is watching for another one. In fact, he’s holding off on aggressively selling until wheat hits $6.50, but admits that might be risky. It’s not a bad idea to lock in prices where they’re at now or just slightly higher, he advises. However, he only suggests selling about 15% right now.
Dry conditions in the southern plains could present further opportunities for wheat. Wheat prices change quickly with weather and planting reports, so it’s important to keep tabs on it daily.
“There will be substantial marketing opportunities for wheat, but they won’t necessarily last a long time,” Setzer says. “It could just be a day or two, so it’s important to have orders in place.”
Farmers in northern states might not have their final planting decisions nailed down just yet. With more optimistic spring wheat futures, be mindful of an acreage jump that could be higher than expected. If that does happen, locking in bushels will pay dividends.
$3.78 to $3.82*
“Once crop insurance prices are set, look first at your defensive options,” says Matt Wiegand, commodity broker and risk management consultant at FuturesOne. “Look to lock in prices in a rally for any uninsured acres and consider cash prices with basis volatility.”
With drought conditions in many wheat-growing states, there’s a chance a greater number of acres will switch to sorghum upon wheat failure. If this happens, it’s likely many producers will miss the March 15 window for insurance, resulting in greater potential revenue risk and increased need for strategic marketing.
“If we get to a $4.05 per bushel price, that’s a good time to cover about 25% of your crop,” Wiegand says. “Lock in basis for the bushels you need to move at harvest, and if you have the potential for carry it’s still workable in there.”
Because sorghum is planted on fewer acres, it’s more sensitive to political changes that affect price, too. For example, in January China threatened more tariffs, which caused the sorghum bid to drop from $4 to $3.05 in terminal locations. That kind of a swing is still potentially out there, Wiegand says.
Despite politics, there’s always reason to be optimistic because sorghum has numerous uses.
74¢ to 75¢*
The cotton market will likely follow trends similar to what farmers experienced in 2017. The good news is at a 75¢ per pound insurance price, cotton will be profitable for most growers.
“Historically, February and March are good times to contract some of your new crop—I recommend up to 25% hedge protection at this point,” says Ashley Arrington, founder of Agri Authority. “Last year, we saw old crop go high and even hit limit from March to July. It got close to 90¢ per pound. When we see those rallies in old crops, we often see new crop prices jump with it.”
Consider booking acres in the 75¢ range or slightly higher. While the market could go up a nickel, it could just as easily go down, Arrington says. “Pay close attention to the market, especially weather markets and what happens in Texas and Georgia.”
Cotton is expected to jump to more than 13 million planted acres this year, up from 2017’s 12.6 million. If the March 31 planting report shows more than 13 million acres, prices could respond by dropping, which is why it’s a good idea to market some of your new crop now, Arrington adds.
Also note, farmers with irrigated acres should be mindful to market those acres first because the overall cost to produce is higher there.
*numbers listed are range for crop insurance price as of feb. 22. for state-specific number, visit https://prodwebnlb.rma.usda.gov/apps/PriceDiscovery/GetPrices/YourPrice.