Looking back at some of our previous ag newsletters, it seemed that a common theme for this time of year has always been and will continue to be “risk management.”
After all, we did change our agency name from First Crop Solutions to First Ag Risk Management this past fall!
For 2023, we had near-record high spring crop insurance prices of $5.91 for corn and $13.76 for soybeans. These prices, combined with high coverage levels, would likely guarantee a profit for most farms in 2023.
As the prices dropped in the fall, it triggered several revenue claims on farms that still had pretty good yields; if you had a bit of yield drag from the dry summer, there were some huge crop insurance indemnities paid out.
Looking at 2024, we have seen the prices for both corn and soybeans drop.
As of January 11, the December corn futures are $4.92 and the November soybean futures are $12.08. This will have a significant impact on the revenue that we can insure for 2024 compared to the previous few years.
We have preached for years that the Multi-Peril Crop Insurance policy is the bread-and-butter way to spend your crop insurance dollars, and that worked well in 2023 based on the claims we had.
For this year, it might make sense to add a little bit of county-based products like the Supplemental Coverage Option (SCO) or Enhanced Coverage Option (ECO) to increase some coverage.
County-based products are not for everyone, that’s for sure — but it could be the right fit for some farms. I would at least recommend having that conversation with your agent!
I believe that we can still have a profitable year of farming, but we are going to have to sharpen some pencils and make sure our dollars are being spent the best way possible.
Therefore, a custom-tailored crop insurance plan is critical to financial success.
On the livestock side, the Livestock Risk Protection (LRP) policies have really jumped out in the last few years to be a benefit to cattle and swine producers.
There have been some changes to this program to make it much more attractive, and it can sure help lock in great prices on cattle and hogs.
With prices being at historically high levels, make sure you are looking into this option if you have livestock.
LRP policies act very similar to a put option but are often cheaper and allow you to insure a specific head count versus what the CME Contract weights are.
Our team is happy to help anyone with their grain and livestock insurance needs. It doesn’t matter if you are a cash grain farmer, a hog producer, or a rancher — First Ag Risk Management has the products and services needed to help you succeed.
If you would like to visit and review your policies to ensure that they make the most sense for your individual farm, feel free to contact me anytime at (605) 999-8011!
Important dates and notes:
March 1 – Spring prices announced
March 15 – Crop insurance sales closing deadline; FSA Program signup deadline
**2023 Crop Insurance Indemnities and Taxes: If you received a crop insurance payment in 2023, it is likely the premium was subtracted from the indemnity. Therefore, the check deposited will be different than the amount on a 1099 from the insurance company. Make sure to record the full 1099 amount as income and include the premium of the policy as an expense. As always, please speak with your CPA for any tax advice.
