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Maximize Revenue While Managing Risk in 2021

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With planting season just around the corner, Farm Credit Mid-America specialists are helping farmers understand and manage risk factors while maximizing potential revenue for 2021.

February 23, 2021

As it is every year, weather is a primary influence drawing attention headed into spring. About 60% of the United States is experiencing some form of drought conditions right now, which has Eric Snodgrass, principal atmospheric scientist for Nutrien Ag Solutions, concerned.

“Winter snowfall has been below normal,” says Snodgrass, who is monitoring La Niña conditions in the Pacific Ocean. “La Niña changes the jet stream pattern and affects North and South American weather. If ocean temperatures should remain cool, that would be an early indication of drought potentially developing in the midsection of the country as well.”

Building a weather premium into corn and soybean markets may be premature, but market advisors caution that global demand is signaling for more corn and soybean production.

“Demand is expected to remain strong,” says Rich Morrison, vice president for farm services with NAU Country Insurance Co. He encourages farmers to maximize the holy trinity of farm revenue options: crop insurance as a base, a corresponding marketing plan and federal programs.

“Lock in the best crop insurance option for your farm and then forward market to set a price floor for corn and soybeans,” he says. “The market has been offering good opportunities. Chinese buying has fueled price strength, and speculative fund buying has added to the rally.”

Morrison adds that the biggest risk to prices is if/when specs turn sellers in 2021. He advises farmers to use trailing sell stops, for example, that allow sellers to take advantage of the rally while managing risk. Farmers also should weigh using the new Enhanced Coverage Option or Supplemental Coverage Option (ECO/SCO) to raise crop insurance coverage this year. He forecasts a $10.50 average soybean price and a $3.95 per bushel average corn price for 2021-22.

USDA’s Ag Risk Coverage (ARC) and Price Loss Coverage (PLC) are not likely to be part of the price support equation this year since the market is well above trigger levels. Farmers will get another round of Coronavirus Food Assistance Program (CFAP) payments this year.

“Now as much as ever, farmers can have the potential to lock in a profit. Prices may not stay this way, so you need to set a floor on price and yield,” says Chad Cooper, Farm Credit Mid-America crop insurance specialist in Bloomington, Indiana. “We can use our exclusive decision-making tool to evaluate options and set farmers up for success in determining premiums and guarantees.”

Joseph Townson, Farm Credit Mid-America crop insurance specialist from Ripley, Tennessee, adds, “Farmers are now mitigating risk with a combination of policies. By adding the new Enhanced Coverage Option alongside other insurance plans, producers now have the opportunity to guarantee nearly all of their anticipated crop.”

Farm Credit Mid-America’s data-driven tools allow agents to use real-time data, including a farmer’s unique, individual policy information, county data and specific crops and yields, to create a variety of crop insurance recommendations customized to each operation.

Farm Credit Mid-America has 64 non-commission-based agents across Ohio, Indiana, Kentucky and Tennessee, who continuously evaluate and analyze policies and programs for farmers. To connect with a local agent, call 800-444-FARM or inquire on our website.