Reviewing Crop Insurance
The most popular insurance election by growers is the revenue protection policy with the harvest price option. Seventy-nine million acres of corn, 11 million acres of cotton and 65 million acres of soybeans were covered by these RP policies. Harvest price option policies have an indemnity function that utilizes the maximum of the spring or harvest price to determine if a farm has suffered a loss and may assist growers by indemnifying at the replacement value of the crop (if the harvest price is greater than the spring price).
Spring prices for corn, soybeans and cotton are determined by averaging the new-crop futures contract settlement prices (December for corn and cotton, November for soybeans) during the month-long February price discovery period. Harvest prices are determined by averaging the same new-crop futures during the month-long October price discovery period. The spring prices announced in March 2019 were $4.00 per bushel, 73 cents per pound and $9.54 per bushel, respectively, for corn, cotton and soybeans. At the beginning of November, USDA’s Risk Management Agency announced the harvest prices for corn, cotton and soybeans at $3.90 per bushel, 63 cents per pound and $9.25 per bushel, respectively.
For corn, the harvest price was 10 cents per bushel below the spring price and marks the seventh consecutive year that harvest prices have been below the spring prices established in February. For cotton, the harvest price was 10 cents per pound below the spring price and matches the prior low of 63 cents in 2015. For soybeans, the harvest price was down 29 cents per bushel but was up 65 cents from the prior-year.