A rally in the new crop December corn futures price happens nearly every year during the spring and summer months. The December futures contract tends to move higher, and remains relatively high until at least mid-June when more is known about the planted acreage and yield prospects. New crop November soybean prices often rally in the late spring or early summer months. These higher new crop futures prices during the spring and early summer months are referred to as the Seasonals.
Because most Corn Belt farmers take Revenue Protection (RP) crop insurance, they have the ability to tie pre-harvest marketing of their insurance bushels for delivery. That’s because RP guarantees a farm’s Actual Production History (APH) times the level of coverage elected (65%, 70%, 75%, 80% and 85%).
These insurance bushels are guaranteed at the higher of two prices: the projected price determined in the month of February for the average December corn futures and November soybean futures. These prices are used to determine the revenue guarantee for each insured crop as well as the premium to be paid in the fall. The key to RP is that if the harvest price increases (October average for those same futures contracts) the revenue guarantee re?ects the higher of these two prices. That’s a real advantage if there’s a shortfall of contracted insurance bushels because that higher harvest price will be re?ected in the ?nal indemnity payment.
The ability then exists to sell a portion of these new crop insurance bushels for delivery, using forward cash or hedge-to-arrive (HTA) contracts. So farmers have the ability to tie the sale of these crop insurance bushels to pre-harvest marketing strategies.
|Conference||2013 National Farm Management Conference|