At Lund & Smith Insurance Services, we’re committed to keeping our clients informed on crucial developments that impact their farming operations. The 2024 harvest prices for corn and soybeans have been announced by the U.S. Department of Agriculture (USDA), and they may have significant implications for your crop insurance coverage this season.
2024 Harvest Prices for Revenue Protection Policies:
- Corn: Harvest price set at $4.16 per bushel, down 10.73% from the projected price of $4.66.
- Soybeans: Harvest price set at $10.03 per bushel, down 13.17% from the projected price of $11.55.
These lower prices set the trigger for Revenue Protection (RP) policy coverage, meaning farmers may see payouts if actual revenue falls below their guarantee. This is especially important after a challenging season marked by drought.
How Harvest Prices Impact Revenue Protection
The harvest price is a critical factor in determining final loss payments for Revenue Protection (RP) policies. The harvest price is set based on the average daily close during October (using November Futures for corn and soybeans), the harvest price is then compared to the spring’s projected price to calculate any revenue shortfall. This year’s lower harvest prices mean that your RP policy could trigger a payment if yields and/or prices are low enough to reduce revenue below the guaranteed level.
Real-World Example:
Consider a corn farmer named John who opted for an 80% RP coverage level this spring.
- APH: 180 bushels per acre
- Projected Price: $4.66 per bushel
- Harvest Price: $4.16 per bushel
- Coverage Level: 80%
- Acreage: 100 acres
Revenue Guarantee Calculation
John’s initial revenue guarantee is based on the projected price:
- Revenue Guarantee: 80% of APH × Projected Price
= 0.80 × 180 bu/a × 100 acres = 14,400 bushels
= 14,400 bu × $4.66 = $67,104 Revenue Guarantee
Updated Loss Trigger Calculation
With the harvest price now lower, the loss trigger yield is recalculated using the new harvest price:
- Loss Trigger = Revenue Guarantee / Harvest Price
= $67,104 / $4.16 = 16,130.8 bushels
= 16,130.8 bu / 100 acres = 161.3 bu/a
This updated trigger yield provides additional protection due to the price decrease. John now has coverage up to 161.3 bu/a, above the initial trigger yield of 144 bu/a.
Actual Revenue Calculation
Suppose John’s yield averages 160 bu/a across his 100 acres, below his APH but above his initial production guarantee. Even though this is higher than his initial loss trigger, the lower harvest price reduces his actual revenue, creating a loss:
- Actual Revenue = 160 bu × 100 acres = 16,000 bu
= 16,000 bu × $4.16 = $66,560 Revenue
Loss Payment Calculation
John’s loss payment is the difference between his revenue guarantee and actual revenue:
- Indemnity Payment = $67,104 – $66,560 = $544 (or $5.44 per acre)
The lower harvest price, despite decent yields, results in a loss payment due to the increased loss trigger from the adjusted harvest price.
Next Steps: Reporting Production and Filing Claims
To determine if your revenue falls below your RP policy’s guarantee, it’s essential to report your actual or estimated production to your agent as soon as possible. Early reporting ensures your claim is processed quickly, allowing for timely payments.
Quick Final Checklist
- Calculate Actual Production: Gather your yield data for both corn and soybeans. Accurate numbers help clarify if you’re near or below your revenue guarantee.
- Submit Production Data to Your Agent: Don’t wait—provide your agent with your production data or estimates to help assess potential eligibility for a claim.
- Review Your Coverage Levels: Confirm your revenue protection with your agent to understand how the decreased harvest prices affect your operation.
We’re Here to Help
At Lund & Smith Insurance Services, we’re here to support you through the challenges of this season. Contact us today to review your coverage, discuss any necessary claims, and ensure your revenue protection is working effectively. Let’s safeguard your operation and bring you peace of mind as we head into the next season.
If you have questions or need guidance, don’t hesitate to reach out—we’re here to help!
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