Fall 2020 Crop Insurance Price Expectations
Today marked the last trading day of February. The final trading day of February is significant in grain markets because it is also the final day of price discovery for the Spring Price for many Revenue Protection Crop Insurance plans. We don't sell crop insurance, but we think it's something most producers should consider, and it fits in nicely with what we do for our clients.
In seven months, discovery will begin for the Fall Price based on the average settlement price of December 2020 corn futures on the Chicago Board of Trade (CBOT) for October. It's one thing to know February's average today, after the fact, but wouldn't it be nice to have a window into where the Fall Price might land? Well, ask, and you shall receive. We generated the following chart by putting CBOT option prices into the proprietary hedging model we've built to help producers manage their price risk. Each column represents a 25-cent price range, and the height of that column represents our estimate of the likelihood of the Fall Price settling in that range.
December 2020 corn futures settled at $3.77/bushel today. Readers should note that our model says the corn options market implies a well-over 50% chance that the Fall Price will be lower than today's settlement price (we discuss why this might be the case in another note we wrote about Risk Premiums). In any event, don't make the mistake of thinking (or hoping) grain prices can't go any lower.
The bad news is that grain prices can go lower. The good news is that there are effective ways to protect yourself from falling markets. At Quartzite Risk Management LLC, we're experts at helping producers like you manage risk. So contact us today to see how we can help you take control of your risk management plan.
