From the University of Illinois' Farmdoc Daily, December 19:
Projected prices for 2018 crop insurance policies will
not be set until February for corn and soybean grown in the Midwest
states. However, current levels of futures contracts provide estimates
of likely levels of 2018 projected prices. At this point, futures prices
suggest that the 2018 projected price for corn will be near the 2017
price of $3.96 per bushel. The 2018 projected price for soybeans likely
will be near but lower than the 2017 projected price of $10.19 per
bushel.
Background
Projected prices are used to set minimum guarantees
for Revenue Protection (RP), a revenue insurance used on over 78% of the
corn acres planted in Illinois (farmdoc daily, December 13, 2016).
In addition, the projected price sets the per bushel payment on yield
shortfalls associated with Yield Protection (YP). Once set, projected
prices determine the overall level of revenue and yield protection
offered by crop insurance.
Projected prices are set using prices of futures
contracts. As a result, projected prices vary from year-to-year based on
market conditions. For corn grown in Midwest states, the projected
price is the averaged of settlement prices of the December Chicago
Mercantile Exchange (CME) contract during the month of February For
soybeans grown in Midwest states, the projected price is the average of
settlement prices of the November CME contract during also the during
the month of February.
Outlook for Corn Projected Price
Currently, the December 2018 corn contract is trading
near $4.00 per bushel. A 2018 projected price of $4.00 would be roughly
the same projected prices as in the last three years: $4.15 in 2015, and
$3.86 in 2016 and $3.96 in 2017 (see Figure 1). Therefore, guarantees
will be roughly the same level in 2018 as in the last three years. Those
levels are lower than from 2007 through 2014 when the projected price
averaged $4.93 per bushel.
Outlook for Soybeans Projected Price
Currently, the November 2018 soybean contract is
trading near $9.80 per bushel A 2018 projected price of $9.80 would be
in the same range as projected prices since 2015: $9.74 in 2015, $8.85
in 2016, and $10.19 in 2017 (see figure 2). A $9.80 price for 2018 would
be slightly lower than the $10.19 price in 2017 but higher than the
2016 price of $8.85. Similar to corn, projected prices have been lower
since 2015 than in the years from 2007 through 2014 when the projected
price average $11.22.
Commentary
Crop insurance provides valuable revenue and yield
protection to farmers. However, use of RP will not set a revenue
guarantee that covers all costs on most farms. As a result, farmers will
face losses if they receive crop insurance payments in 2018....
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