WEST LAFAYETTE, Ind. — Farmers already seeing corn and
soybeans prices plummet as the markets expect bountiful harvests have some
potential safety nets that might help protect them financially, two Purdue
University agricultural economists said.
Corn and soybeans futures prices have dropped to their
lowest levels since 2010 — corn below $4 per bushel and soybeans under $11. That
is partly because of higher yields expected for many farms this fall.
Although high yields result in more bushels for farmers to
sell, the abundant supply leads to much lower prices, eroding profits.
“Midwest crop producers have been shocked by the sharp drop
in corn and soybean prices as favorable weather has increased yield prospects
this summer,” Michael Langemeier and Chris Hurt said in a review of crop
insurance and a new government program.
“Such large decreases in prices are raising anxieties among
producers and their lenders regarding weak margins and the potential for tight
Langemeier and Hurt said producers should evaluate how two
safety-net programs might help protect them:
* Crop insurance: Revenue policies — those that consider both yield and
price — are the most popular. The economists said that even with above-normal
yields, prices could drop low enough to trigger insurance payouts on some
As an example, a farm with an 85 percent policy and yields
this year 10 percent above its base actual production history of 170 bushels per
acre might trigger an insurance payment if December corn futures in October
average below $3.57 a bushel, a level the market is approaching.
The same farm with an 80 percent policy, however, would not
trigger an insurance payout until the December corn futures average in October
drops below $3.36 a bushel.
Langemeier and Hurt said that is a less likely situation,
but still one that provides some protection against catastrophic low
Soybean insurance payouts because of low prices seem much
less likely for all coverage levels.
* Agricultural Risk Coverage — County Option: This new government program,
also referred to as ARC-CO, currently has a higher probability of adding support
to corn and soybean farmers, the economists said.
They explained that under the current projections of
above-normal yields, the program would begin making payments when the marketing
year average of corn drops below about $4 per bushel. The payments would
increase as prices drop to about $3.50 a bushel.
At $3.75 a bushel, estimated Indiana average payments would
be about $25 to $40 per acre of corn base, and at a $3.50 marketing year average
price, they would grow to the maximum of about $55 to $80 per acre.
For soybeans with above-normal yields, ARC-CO payments might
begin with a marketing year average price below about $10.60, with maximum
payments occurring at a price of about $9.40.
As an example, a $10 per-bushel marketing year average price
would result in payments of about $20 to $30 per acre of soybean base. If prices
fell to about $9.40, the payments would range from about $40 to $60 per
Langemeier and Hurt noted that the U.S. Department of
Agriculture’s Farm Service Agency still is working out details of the program
and that payments will vary from county to county.
“The important point for producers is that the new
government program now appears to have a high potential of providing some
protection against low revenues for corn and maybe some assistance with low
soybean revenues,” they said.
“However, 2014 corn and soybean government payments will not
be available until the fall of 2015 and thus will not be available to meet more
immediate cash-flow needs.
“Crop insurance currently appears less likely to be of
assistance for producers with strong yields, although those with high corn
coverage levels have some chance of triggering crop insurance payouts.”