Insurance crucial marketing tool
Crop insurance is a crucial marketing tool, says ADM risk specialist
Published: Sep 9, 2012
Increasingly, ag markets are influenced by global economic crises, forces at the Fed, and Washington policies often drafted under short-term pressures, stressed an Archer Daniels Midland Co. (ADM) risk management specialist.
Crop insurance -- and thus the 2012 farm bill -- offers farmers a buffer against the imponderables and a key marketing hedge, according to Steve Freed, vice president of research with ADM Investor Services, a company subsidiary that trades futures and helps farmer clients manage risk.
The drought has raised serious concerns both for growers who engaged in little forward marketing prior to the late-season drought and livestock producers “risking a dollar to make a dollar” with each grain purchase, Freed said.
Major barometers such as USDA supply-and-demand numbers would seem to indicate “prices eventually would have to work higher,” he told FarmWeek. However, Freed notes “a lot of noise” infusing the market, from economic slowdowns across the planet and anticipation of Federal Reserve actions to “Washington talking about ethanol” -- i.e., proposals to reduce 2013 ethanol targets.
The next six months threaten “probably some of the most volatile markets we’ve ever seen,” underlining the need for federally subsidized production and price insurance, Freed said. The current Revenue Product crop policy triggers payments based on either spring or fall harvest prices.
“Because of the big inverses in the market, we’re not encouraging farmers to hedge 2013 crops yet,” Freed said. “But as you get closer to $7 corn and $14 beans, that might be something to look at.
“And, this year, crop insurance is so critical. On our farm in Central Illinois, we’re going to have 50-bushel corn. Normally, we have 200-bushel corn. The farmer who farms our farm said, ‘Thank God for crop insurance.’ I want to make sure the farmer gets crop insurance for next year.”
As of last Thursday, Country Financial had fielded 6,400 insurance production claims, along with scattered aflatoxin reports. To date, no claims are based solely on aflatoxin.
Meanwhile, USDA’s Risk Management Agency filed special provisions allowing farmers who need feed to plant cover crops on damaged or destroyed acres. Farmers may hay or graze acreage later this fall or in early spring without impacting insurability of 2013 spring-planted crops, though they may be required to halt haying or grazing on a certain date.
Regional haying/grazing requirements will be determined by Nov. 30.
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