Early each year, the USDA Risk Management Agency calculates crop insurance guarantees for the upcoming season based on futures prices during the month of February. Applying the same pricing formulas, Gro has taken an early look at the calculations halfway through the month and determined that US crop insurance guarantees are headed to their highest levels in nearly a decade.
Crop insurance is a key risk-management tool for farmers. In addition, creditors often use the insurance prices to help determine how much credit to extend to farmers. The current high prices could expand farmers’ borrowing capacity in 2021 and encourage them to plant more acres. Over the past 10 years, corn and soybean plantings ranged from 170-180 million acres, and Gro expects 2021 figures will match or exceed the top end of that range.
Insurance pricing calculations also are used to determine the profitability of one crop over another, especially soybeans versus corn. Using average soybean and corn futures closing prices from Feb. 1-18, the soy/corn ratio currently stands at 2.59, the highest level in more than 20 years and strongly supportive of increased planting of soybeans at the expense of corn. Based on historical trends, a soy/corn ratio of 2.33 is the switching point, with values above that level favoring soy and below that level favoring corn.
Join Gro for our webinar on US planting intentions and our modeling work to forecast acreage for major crops, at 11am EST on Thursday March 11th, or 4pm EST on Monday March 15th. The USDA will report on US planting intentions at the end of March.
Crop insurance guarantees are calculated using two sets of figures: the spring projected base price—which is the average of futures closing prices during February—and the fall harvest price—which uses the same futures prices averaged during the following October. As of Feb. 18, the 2021 spring projected base price is 453 cents/bushel for corn and 1171 cents/bushel for soybeans. These figures, which could change as the month progresses, are the highest values since 2012.
This insight was powered by the Gro platform, which enables better and faster decisions about factors affecting the entire global agricultural ecosystem. Gro organizes over 40,000 datasets from sources around the world into a unified ontology, which allows users to derive valuable insights such as this one. You can explore the data available on Gro with a free account, or please get in touch if you would like to learn more about a specific crop, region, or business issue.