Farm Programs

The deadline for farm operators to purchase crop insurance for the 2022 growing season is March 15. The 2022 Spring prices for corn and soybean are likely to be near or above the highest base price levels in the past decade. This will enhance the available crop insurance guarantees for 2022 compared to recent years. However, due to the higher insurance guarantees, premium costs are also likely to be higher than a year ago for similar crop insurance products.

Producers have several crop insurance policy options to choose from, including yield protection policies and revenue protection policies, supplemental crop option, enhanced coverage option, and other private insurance policy options.

In recent years, most farm operators have chosen revenue protection insurance policy options which provide a guaranteed minimum dollars of gross revenue per acre (yield multiplied by Spring price). This minimum guarantee is based on yield history on a farm unit times the Spring (base) price. Spring price is the average of the Chicago Board of Trade prices during the month of February for December corn futures, and November soybean futures. As of Feb. 11, the 2022 estimated crop insurance Spring prices in the upper Midwest for yield protection and revenue protection policies were estimated at $5.79 per bushel for corn and $14.07 per bushel for soybeans. The 2021 crop insurance Spring prices will be finalized on March 1.

The current 2022 base price estimates compare to 2021 base prices of $4.58 per bushel for corn and $11.87 per bushel for soybeans. The final crop revenue for 2022 will be the actual yield on a farm unit times the final crop insurance harvest price, which is the average CBOT prices in the month of October for December corn futures and November soybean futures.

Another insurance option which carries a lower premium than a typical revenue protection policy with harvest price protection is a harvest price exclusion policy. This functions similar to a standard revenue protection policy except the guarantees on harvest price exclusion policies are fixed at the base price level and are not affected by harvest prices that exceed the base price. The revenue guarantee for standard revenue protection policies is increased for final insurance calculations if average CBOT prices during the month of October are higher than the February CBOT prices. This has occurred for corn and soybeans in both 2020 and 2021.

Many producers in the upper Midwest have been able to significantly enhance their insurance protection in recent years by utilizing the trend-adjusted yield endorsement, with only slightly higher premium costs. The actual production history yield exclusion option allows specific years with low production to be dropped from crop insurance actual production history yield guarantee calculations. For information on which counties, crops, and years are eligible for yield exclusion, go the U.S. Department of Agriculture’s Risk Management Agency web site: https://www.rma.usda.gov/

Historical harvest prices for corn and

FARM PROGRAMS soybeans An analysis for the past 15 years (2007By Kent Thiesse 2021) shows the final crop insurance harvest price for corn has been lower MARKETING than the Spring base price in 10 of the 15 years — including from 20132019. That trend was reversed in 2020 when the harvest price for corn was $3.99 per bushel, which was 11 cents above the Spring price. This occurred again in 2021 when the Spring price was $4.58 per bushel, compared to a harvest price of $5.37 per bushel (an increase of 79 cents per bushel). The only other years which saw an increase in the harvest price were 2010, 2011 and 2012. The range has been from an increase of $1.82 per bushel in the harvest price in 2012 to a decline of $1.27 per bushel in 2008 and a decline of $1.26 per bushel in 2013. For soybeans, the harvest price has increased in seven years (2007, 2009, 2010, 2012, 2016, 2020 and 2021), decreased in seven years (2008, 2011, and 2014-2019) and stayed the same in 2013. The range has been from an increase of $2.84 per bushel in 2012 to a decline of $3.00 per bushel in 2008. In 2021, the final harvest price was $12.30 per bushel, which was an increase of 43 cents per bushel from the Spring price of $11.87 per bushel.

Enterprise units and optional units

Enterprise units combine all acres of a crop in a given county into one crop insurance unit, while optional units allow producers to insure crops separately in each individual township section. Enterprise units usually have considerably lower premium costs (approximately $8-$12 per acre) compared to optional units for comparable revenue protection policies. Producers should be aware that enterprise units are based on larger coverage areas, and do not necessarily cover losses from isolated storms or crop damage that affect individual farm units — such as damage from hail, wind or heavy rains. So additional insurance, such as hail or wind insurance, may be required to insure against these types of losses. It is also important for producers to run “what if” scenarios when analyzing the comparison between enterprise units and optional units. Many times, producers automatically opt for enterprise units every year, due to the lower premium cost per acre for similar coverage. It is important to understand the differences in coverage between enterprise units and optional units. It is important to analyze the yield risk on each individual farm unit when determining if paying the extra premium for insurance coverage with optional units makes sense. If a producer has uniform soil types and drainage, in a close geographical area, and is primarily concerned with a price decline, a revenue protection policy with enterprise units is probably a good option. However, if a producer has farm units which are more spread out geographically, with more variation in soil types and drainage, and has greater concerns with yield variability, they may want to consider a revenue protection policy with optional units.

SCO and ECO insurance coverage for 2022

The Supplemental Coverage Option coverage is only available to producers that choose the Price Loss Coverage farm program option for the 2022 crop year. The deadline for 2022 farm program signup is March 15 (which is the same as the enrollment deadline for 2022 crop insurance). As a result, farm operators will need to consider Supplemental Coverage Option insurance coverage at the same time they are finalizing their 2022 farm program choice. The federal government subsidizes 65 percent of the premium for Supplemental Coverage Option coverage, so farm-level premiums are quite reasonable, which may make Supplemental Coverage Option a viable option for producers that choose the price loss coverage farm program option.

Supplemental Coverage Option allows producers to purchase additional county-level crop insurance coverage up to a maximum of 86 percent coverage. For example, a producer who purchases an 80 percent revenue protection policy could purchase an additional 6 percent Supplemental Coverage Option coverage.

Supplemental Coverage Option is a county revenuebased insurance product which is somewhat similar to some of the area risk protection crop insurance products available. The calculations for Supplemental Coverage Option function very similarly to revenue protection insurance policies, since they utilize the same crop insurance base price and harvest price. The biggest difference is that Supplemental Coverage Option uses county level average yields, rather than the farm-level average production history yields typically used for most revenue protection and yield protection policies. As a result, the Supplemental Coverage Option and revenue protection insurance policies may achieve different results.

The Enhanced Coverage Option was a new crop insurance option in 2021 and will again be available for 2022. Enhanced Coverage Option provides areabased insurance coverage from 86 percent up to 95 percent coverage, utilizing county yields similar to Supplemental Coverage Option coverage. Producers can choose between 90 or 95 percent Enhanced Coverage Option coverage. Unlike Supplemental Coverage Option coverage, the purchase of Enhanced Coverage Option coverage is available with selection of either the price loss coverage or agriculture risk coverage farm program choice for 2022. Producers can utilize both Enhanced Coverage Option and Supplemental Coverage Option together,

See THIESSE, pg. 16

THIESSE, from pg. 15

in addition to their underlying revenue protection or yield protection insurance policy.

It is possible for a producer to collect on an individual revenue protection policy, but not collect on a Supplemental Coverage Option or Enhanced Coverage Option policy, or vice versa. For example, a producer with an 80 percent revenue protection policy may have a loss which qualifies for an insurance indemnity payment on a farm unit, while the county as a whole may not meet the threshold to qualify for a Supplemental Coverage Option or Enhanced Coverage Option payment. It could also be possible to collect a Supplemental Coverage Option or Enhanced Coverage Option payment for a county-level revenue loss, while not qualifying for a revenue protection insurance indemnity payment at the farm-level. Interested producers should check with their crop insurance agent for details on Supplemental Coverage Option and Enhanced Coverage Option insurance coverage and premiums for 2022.

Key items to consider

There are a wide variety of crop insurance policies and coverage levels available. Make sure you are comparing “apples to apples” when comparing crop insurance premium costs for various options or types of crop insurance policies, as well as recognizing the limitations and the differences of the various insurance products. 2022 crop insurance premiums for most coverage levels of corn and soybeans in the Midwest will be higher than comparable 2021 premium levels,

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View crop insurance decisions from a risk management perspective. Given the significantly higher crop input costs in 2022 and the high degree of crop price volatility, it may be more important than ever to have adequate crop insurance coverage. A producer must decide how much potential profit margin to risk if there are greatly reduced crop yields due to potential weather problems in 2022, and/or lower-than-expected crop prices by harvest time.

Take a good look at the 80 perTable A — Comparison of Revenue Protection and Yield Protection Insurance Coverage for Corn cent or 85 percent coverage levels — especially when using enterprise (Figures use an average production history of 200 bushels per acre; an 85 percent yield protection guarantee of units. In many cases, the 85 per170 bushels per acre; a yield protection market price of $5.50 per bushel (CBOT December futures estimate); a revenue protection spring base price of $5.50 per bushel (CBOT December futures estimate); and an 85 percent revenue protection minimum guarantee of $935 per acre.) cent coverage level offers considerably more protection, with a modest increase in premium costs. Estimated Actual 2022 Production (bushels per acre) Many producers will be able to 210 200 190 180 170 160 guarantee near $700 to over $900 Insurance Type Estimated Insurance Indemnity Payment Per Acre per acre for corn, and near $500 to (before premium deductions) over $700 per acre for soybeans at

Yield Protection (85 percent) 0 0 0 0 0 $55.00 the 85 percent coverage level for

Revenue Protection (85 percent) 2022. Refer to Tables A and B for (CBOT harvest price per bushel) 2022 corn and soybean examples $6.50 0 0 0 0 0 $65.00 with revenue protection and yield $6.00 0 0 0 0 0 $60.00 protection insurance coverage. $5.50 0 0 0 0 0 $55.00 Evaluate Supplemental Coverage Option, Enhanced Coverage Option $5.00 0 0 0 $35.00 $85.00 $135.00 and other “buy-up” insurance $4.50 0 $35.00 $80.00 $125.00 $170.00 $215.00 options. In addition to the govern$4.00 $95.00 $135.00 $175.00 $215.00 $255.00 $295.00 ment subsidized Supplemental Coverage Option and Enhanced Coverage Option county-based

Table B — Comparison of Revenue Protection and Yield Protection Insurance Coverage for Soybeans (Figures use an average production history of 60 bushels per acre; an 85 percent yield protection guarantee of 51 bushels per acre; a yield protection market price of $13.50 per bushel (CBOT November futures estimate); a revenue protection spring base price of $13.50 per bushel (CBOT November futures estimate); and an 85 percent revenue protection minimum guarantee of $688.50 per acre.) insurance products which allow insurance coverage up to 95 percent coverage, there are also “buyup” private policies using farm-level yields up to 95 percent coverage. Private companies also offer separate wind and hail insurance Estimated Actual 2022 Production (bushels per acre) endorsements. Of course, any of Insurance Type 60 55 50 45 40 Estimated Insurance Indemnity Payment Per Acre (before premium deductions) 35 the “buy-up” or “add-on” insurance options add to the premium cost. Producers need to ask what mix of

Yield Protection (85 percent) 0 0 $13.50 $81.00 $148.50 $216.00 crop insurance products gives the

Revenue Protection (85 percent) best risk protection for the premi(CBOT harvest price per bushel) um amount I am willing to spend $14.50 0 0 $14.50 $87.00 $159.50 $216.00 for protecting my 2022 crop invest$14.00 0 0 $14.00 $84.00 $154.00 $224.00 ment? $13.50 0 0 $13.50 $81.00 $148.50 $216.00 A reputable crop insurance agent $13.00 0 0 $38.50 $103.50 $168.50 $233.50 is the best resource to find out more details of the various crop $12.50 0 $1.00 $63.50 $126.00 $188.50 $251.00 insurance coverage plans and pre$12.00 0 $28.50 $88.50 $148.50 $208.50 $268.50 mium quotes, as well as to receive assistance with putting a sound Note: The crop insurance Tables are for example only. Actual crop insurance calculations will vary, risk management program in place depending on the insured crop, farm location, actual production history yield, endorsements, etc. for the 2022 crop year. To receive a Crop Insurance Tables were developed by Farm Management Analyst Kent Thiesse free copy of an information sheet, “2022 Crop Insurance Decisions” written by Kent Thiesse, e-mail kent.thiesse@minnstarbank.com. There are also some very good web sites with crop insurance information: USDA Risk Management Agency (http://www.rma.usda.gov/); and University of Illinois FarmDoc (http://www.farmdoc.illinois.edu/ cropins/index.asp) Kent Thiesse is a government farm programs analyst and a vice president at MinnStar Bank in Lake Crystal, Minn. He may be reached at (507) 726-2137 or kent.thiesse@minnstarbank.com. v

MIELKE, from pg. 11

$22.88 per hundredweight. This is up $1.24 from February, $7.68 above March 2021, and the highest Class I since Dec. 2014. It equates to about $1.97 per gallon, up from $1.31 a year ago.

The three-month Class I average stands at $21.41, up from $15.29 at this time a year ago and compares to $18.01 in 2019.

Meanwhile, the International Dairy Foods Association reports, “Americans are facing the fastest inflation growth in 40 years. At the same time, consumer sentiment has dipped to 61.7, down from 76.8 a year ago. A third of Americans participating in the sentiment survey said rising prices are clouding their economic outlooks.”

The government reported the consumer price index rose 7.5 percent in January from a year ago, according to the International Dairy Foods Association, “marking the largest increase since February 1982, when inflation hit 7.6 percent.”

“However, prices for dairy foods — including milk, cheese, butter, yogurt and ice cream — gained the least among several food categories between January 2021 and January 2022. Compared to many other goods and services, dairy products are a best buy,” the IDFA concludes. n

The USDA’s latest Livestock, Dairy, and Poultry Outlook, issued Feb. 15, mirrored milk price and production projections in the Feb. 9 World Agricultural Supply and Demand Estimates report.

The Outlook stated, “Due to declines in milk cows in recent months, higher projected feed prices, a low inventory of replacement heifers, and higher expected cull-cow prices, milk cows are projected to average 9.36 million head in 2022, 25,000 lower than last month’s forecast. Milk per cow is projected to average 24,265 pounds per head in 2022, unchanged from the previous forecast.

Dairy product prices and milk price estimates were raised however, and U.S. dairy prices are expected to be less competitive in international markets, according to the Outlook. The 2022 export projections were adjusted downward accordingly. Lower exports are expected for whey products, dry skim milk products, butter, and cheese.

Dairy import projections were raised to 6.9 billion pounds on a milk-fat basis and 5.7 billion pounds on a skim-solids basis. Higher imports are expected for butter, milk protein products, and several other miscellaneous dairy products.

In the week ending Feb. 5, 62,900 dairy cows were sent to slaughter, down 1,100 from the previous week, and 4,600 head or 6.8 percent below a year ago.

Farm level milk production is trending steady to higher throughout the country, says the USDA’s weekly update, as warmer temperatures start to return. Some Midwestern contacts report tightening milk availability. Some southwest handlers are sending milk to other regions where demand surpasses local milk supply.

Since school pipelines were refilled in January, Class I orders have remained stable in many areas but have increased in others, particularly where retail bottling sales have grown, according to the USDA.

Lee Mielke is a syndicated columnist who resides in Everson, Wash. His weekly column is featured in newspapers across the country and he may be reached at lkmielke@juno.com. v

Funds here to update livestock operations

ST. PAUL — Minnesota livestock farmers and ranchers seeking to improve their livestock operation are encouraged to apply for an additional round of the Agricultural Growth, Research and Innovation (AGRI) Livestock Investment Grant program. The Minnesota Department of Agriculture anticipates awarding up to $443,000 using a competitive review process in this round.

The AGRI Program’s Livestock Investment Grants encourage long-term industry development through investment in facilities, infrastructure and equipment. Applicants may apply for up to 10 percent of the first $250,000 of an eligible investment. Grant awards can range in size from $400 to $25,000. Each livestock operation is eligible to receive a lifetime maximum of $50,000 from this grant program. To be

eligible for reimbursement by this grant, you must be invoiced and pay for all project materials and services after Jan. 1, 2022. Project examples include buildings or facilities for the production of livestock or livestock products, development of pasture for use by livestock, including but not limited to lanes, watering systems, and fences, and equipment for livestock housing, confinement, feeding, and waste management. Proposals must be received no later than 4 p.m. on April 5. To learn more, visit https://www.mda.state. mn.us/business-dev-loans-grants/agri-livestockinvestment-grant. This article was submitted by the Minnesota Department of Agriculture. v USDA organic listening session set

The U.S. Department of Agriculture seeks stakeholder feedback on regulatory priorities for the development of clear organic standards that support a level playing field and market development. USDA intends to use information received through public comments to guide the prioritization of future organic standards development.

The virtual meeting is scheduled for March 21 from noon to 2 p.m. Eastern Time. Details on how to sign up to make oral comments, submit written comments, and the meeting link (via Zoom) can be found at https://www.ams.usda.gov/event/national-organicprogram-priorities-listening-session.

The deadline to submit written comments is March 30.

This article was submitted by the U.S. Department of Agriculture. v

Soybeans rally, but can change quickly

NYSTROM, from pg. 14

bushels behind last year. China has purchased 2.58 mmt of new crop U.S. soybeans compared to 2 mmt last year by this date.

Outlook: May soybeans closed the week with a 17.25 cent gain to close over $16.00 for the first time at $16.03.5 per bushel. July beans rallied 20 cents for the week to settle at $16.01 and the November contract was 19.75 cents higher at $14.63.75 after setting a new contract high at $14.72 per bushel. Soyoil and palm oil also established fresh contract highs during the week.

Buckle up, boys and girls! This party likely has many twists and turns in store for us yet. Mother Nature and politics will be of primary importance and can change direction on a whim. Manage what you can with the many tools available to you.

Weekly price changes in March wheat for the week ended Feb. 18: Chicago wheat was unchanged for the week at $8.04, Kansas City rallied 13 cents to $8.40, and Minneapolis finished 3.75 cents higher at $9.61.25 per bushel. v

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