June 2013
Steven D. Johnson
Farm & Ag Business Management Specialist
(515) 957-5790
sdjohns@iastate.edu
www.extension.iastate.edu/polk/farm-management
Marketing Revenue Protection (RP)
Guaranteed Bushels
Source: Johnson, ISU Extension, June 2013
Separate Bushels:
Delivery vs. Non-Delivery
• Revenue Protection = Insurance Bushels that
can be committed to Delivery
• Insurance Bushels = APH X Level of
Coverage X Higher of Projected vs. Harvest
Price (ie. acts like a subsidized Put Option)
• Combine Insurance Bushels sold for
Delivery along with the use of Futures and
Options Strategies for Non-Delivery
bushels.
Source: Johnson, ISU Extension, June 2013
Delivery of Corn Bushels with Revenue
Protection (RP)
Marketing Strategy
180 Bu/A
Actual
Production
History
(APH)
Deductible
20% = 36 Bu/A
• Pre-Harvest Sell for
Delivery up to 144
Bu/A
RP @ 80% Level
of Coverage
144 Bu/A
Guarantee X
$5.65/bu
Projected Price
• Price Guarantee is
Higher of the
Projected Price vs.
Harvest Price
= $814/A Revenue
Guarantee
• Slight Basis Risk
• Must Plant the Crop
(Prevented Planting = 60%)
Source: Johnson, ISU Extension, March 2013
Comparing 2013 Revenue Guarantees
APH= 180 bu/A Corn, 50 bu/A Soybeans
Projected Prices = $5.65/bu Corn, $12.87/bu Soybeans
Source: Johnson, ISU Extension, March 2013
Corn Revenue Protection @ 80%
Final Yield: 100 bu/A vs. 200 bu/A Yield
Price: $5.65/bu Projected, $4.50/bu vs. $7.50/bu Harvest
Pre-Harvest Sales 100 bu/A @ $5.30/bu
Unpriced Bushels = Harvest Price - $.20/bu Basis
$1,260
$960
$894
$860
Source: Johnson, ISU Extension, March 2013
Corn Insurance Prices vs. Seasonal Highs
Source: USDA Risk Management Agency & CME Group, Nov. 2012
December Corn Futures Seasonals
2003-07 Average
High $2.92
2008-12 Average
High $5.90
Source: www.cmegroup.com, October 2012
New Crop Corn Futures Chart
Projected Price:
February Average:
$5.65/bu.
Source: www.FuturesSource.com, June 5, 2013
Soybean Revenue Protection @ 80%
Final Yield: 30 bu/A vs. 60 bu/A
Price: $12.87/bu Projected, $11/bu vs. $14/bu Harvest
Pre-Harvest Sales 30 bu/A @ $12.50/bu
Unpriced Bushels = Harvest Price - $.50/bu Basis
$780
$690
$560
$515
Source: Johnson, ISU Extension, March 2013
Soybean Insurance Prices vs. Seasonal Highs
Source: USDA Risk Management Agency & CME Group, Nov. 2012
November Soybean Futures Seasonals
2008-12 Average
High $13.10
2003-07 Average
High $6.96
Source: www.cmegroup.com, October 2012
New Crop Soybean Futures Chart
Projected Price:
February Average:
$12.87/bu.
Source: www.FuturesSource.com, June 5, 2013
Pre-Harvest Marketing Thoughts
• Revenue Protection preferred for sale of Crop
Insurance Bushels = Delivery Bushels
(Guaranteed Higher of Projected vs. Harvest Price)
• Sell Delivery Bushels (Forward Cash
Contract or HTA) when new crop futures are
above the Projected Price (February average)
• Generate adequate Cash Flow Needs for
Fall 2013 through the Winter of 2013-14
• Sell Futures or Buy Put Options for NonDelivery Bushels.
Source: Johnson, ISU Extension, June 2013
5 Crop Insurance Strategies
Work with your
Crop Insurance
Agent & Grain
Merchandisers
Caution for Selling
Delivery Bushels if
taking Prevented
Planting
Keep Good
Planting and
Yield Records
Use of Revenue
Protection (RP)
Crop Insurance;
consider use of
Hail/Wind
Endorsements
Selling Some Guaranteed Insurance Bushels
(Use the Spring and Summer Months)
Source: Johnson, ISU Extension, June 2013
5 Crop Insurance Web Sites
• Ag Decision Maker – ISU Extension Econ
(Decision Tools, Newsletters, Publications, Voiced Media, Monthly eNewsletter)
www.extension.iastate.edu/agdm
• USDA Risk Management Agency (RMA)
www.rma.usda.gov
• Farm Doc – U. of Illinois Extension Econ
www.farmdoc.illinois.edu
• Ag Manager – K-State Extension Econ
www.agmanager.info
• Crop Risk Management - ISU Polk County
(Crop Marketing Newsletter & Crop Insurance Updates, Webcasts)
www.extension.iastate.edu/polk/farm-management
Source: Johnson, ISU Extension, June 2013