2016 Crop Insurance Payments

2016 Crop Insurance Payments
Gary Schnitkey, Agricultural Economist - University of Illinois

This season’s crop insurance setting period for corn and soybeans has ended. Todd Gleason has more on what farmers across the United States might expect from the program.

Harvest prices used to determine crop…
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Harvest prices used to determine crop insurance payments for corn and soybean policies in the Midwest are based on Chicago Mercantile Exchange (CME Group) futures settlement prices during the month of October. The 2016 harvest price for corn is $3.49 per bushel. This is 10% lower than the $3.86 projected price set in February. The soybean harvest price is $9.75 per bushel. That’s 10% higher than the $8.85 projected price. For the most part it means crop insurance payments to farmers will be relatively low says University of Illinois Agricultural Economist Gary Schnitkey.

Schnitkey :28 …did not fall as much this year.

Quote Summary - If we look at analogous years, 2016 corn yield looks like 2014. That year the corn loss ratio was point-four-four. This means for every dollar of premium paid, there was a $0.44 payment. This year farmers should expect less because the harvest price didn’t fall as much this year from the projected price.

The year most similar to this season for soybeans appears to be last year. The yields were high, and this year the harvest price is above the projected price. Most farmers won’t get a soybean payment. Some may…

Schnitkey :15 …be a low insurance payment year.

Quote Summary - If the farmer purchased 85% coverage crop insurance, then the yield short fall must be 15% or greater. Most won’t have that kind of loss. So, soybean payments will be low. Overall 2016 will be a low insurance payment year.

The exception to this may be found in Indiana and Ohio. Schnitkey thinks the loss ratios in those two states could exceed one.