June 2013 Steven D. Johnson Farm & Ag Business Management Specialist (515)

Marketing Revenue Protection (RP) Guaranteed Bushels Source: Johnson, ISU Extension, June 2013

Separate Bushels : Delivery vs. Non-Delivery Revenue Protection = Insurance Bushels that can be committed to Delivery Insurance Bushels = APH X Level of Coverage X Higher of Projected vs. Harvest Price (ie. acts like a subsidized Put Option) Combine Insurance Bushels sold for Delivery along with the use of Futures and Options Strategies for Non-Delivery bushels.

Delivery of Corn Bushels with Revenue Protection (RP) Marketing Strategy Pre-Harvest Sell for Delivery up to 144 Bu/A Price Guarantee is Higher of the Projected Price vs. Harvest Price Slight Basis Risk Must Plant the Crop (Prevented Planting = 60%) 180 Bu/A Actual Production History (APH) 80% Level of Coverage 144 Bu/A Guarantee X $5.65/bu Projected Price Deductible 20% = 36 Bu/A = $814/A Revenue Guarantee Source: Johnson, ISU Extension, March 2013

Comparing 2013 Revenue Guarantees APH= 180 bu/A Corn, 50 bu/A Soybeans Projected Prices = $5.65/bu Corn, $12.87/bu Soybeans Source: Johnson, ISU Extension, March 2013

Corn Revenue 80% Final Yield: 100 bu/A vs. 200 bu/A Yield Price: $5.65/bu Projected, $4.50/bu vs. $7.50/bu Harvest Pre-Harvest Sales 100 $5.30/bu Unpriced Bushels = Harvest Price - $.20/bu Basis $894 $860 $960 $1,260 Source: Johnson, ISU Extension, March 2013

Source: USDA Risk Management Agency & CME Group, Nov Corn Insurance Prices vs. Seasonal Highs

December Corn Futures Seasonals Source: October Average High $ Average High $2.92

Source: June 5, 2013 New Crop Corn Futures Chart Projected Price: February Average: $5.65/bu.

Soybean Revenue 80% Final Yield: 30 bu/A vs. 60 bu/A Price: $12.87/bu Projected, $11/bu vs. $14/bu Harvest Pre-Harvest Sales 30 $12.50/bu Unpriced Bushels = Harvest Price - $.50/bu Basis $560 $515 $690 $780 Source: Johnson, ISU Extension, March 2013

Soybean Insurance Prices vs. Seasonal Highs Source: USDA Risk Management Agency & CME Group, Nov. 2012

November Soybean Futures Seasonals Source: October Average High $ Average High $13.10

Source: June 5, 2013 New Crop Soybean Futures Chart Projected Price: February Average: $12.87/bu.

Pre-Harvest Marketing Thoughts Revenue Protection preferred for sale of Crop Insurance Bushels = Delivery Bushels (Guaranteed Higher of Projected vs. Harvest Price) Sell Delivery Bushels (Forward Cash Contract or HTA) when new crop futures are above the Projected Price (February average) Generate adequate Cash Flow Needs for Fall 2013 through the Winter of Sell Futures or Buy Put Options for Non- Delivery Bushels. Source: Johnson, ISU Extension, June 2013

Work with your Crop Insurance Agent & Grain Merchandisers Keep Good Planting and Yield Records Use of Revenue Protection (RP) Crop Insurance; consider use of Hail/Wind Endorsements Selling Some Guaranteed Insurance Bushels (Use the Spring and Summer Months) 5 Crop Insurance Strategies Caution for Selling Delivery Bushels if taking Prevented Planting Source: Johnson, ISU Extension, June 2013

5 Crop Insurance Web Sites Ag Decision Maker – ISU Extension Econ (Decision Tools, Newsletters, Publications, Voiced Media, Monthly e- Newsletter) USDA Risk Management Agency (RMA) Farm Doc – U. of Illinois Extension Econ Ag Manager – K-State Extension Econ Crop Risk Management - ISU Polk County (Crop Marketing Newsletter & Crop Insurance Updates, Webcasts) Source: Johnson, ISU Extension, June 2013