Farmers who buy revenue protection (RP) policies might want to brace themselves: premiums could rise by more than 10% this year.
That’s according to analysis by Gary Schnitkey of the University of Illinois, who used a projected corn price of $4.15, a volatility factor of .21 and Risk Management Agency rate changes to estimate 2016 premium for a handful of key Illinois counties.
The results will be unwelcome to farmers already worried about input costs and profitability in 2016.
“All 2016 projected premiums are above 2015 premiums, with many of the changes being more than 10%,” Schitnkey wrote. “At an 85% coverage level, the RP DeKalb County premium is 11% higher for 2016 ($16.51 per acre in 2015 compared to $18.31 per acre in 2016). Champaign County is 8% higher ($15.97 per acre compared to $17.23 in 2016). Saline County premium is 16% higher ($50.37 per acre in 2015 compared to $56.28 per acre in 2016).”
Of course, these are early estimates. The projected price and volatility factor won’t be finalized until the end of February, and right now, December corn futures stand at $3.90 or so. If that price sticks, it would reduce the jump in premiums, although they would still likely be higher than 2015, based on the .21 volatility factor.
Click here to read Schnitkey's full analysis.