From the Furrow – Justin Foegen – September 7, 2023

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VOICEOVER
Future trading involves risk and is not suitable for all investors. Content provided in this segment is meant for educational purposes and is not a solicitation to buy or sell commodities.

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BRITT
Hello. Welcome to from the furrow. Brought to you by Ever.Ag insights. Each week we talk with subject matter experts on news and topics affecting the grain markets. I’m your host, Brett O’Connell. Let’s get started with a review of today’s markets. Today is Thursday, September 7th. Today, December 23 orders down one and three quarters says trading 484. Even with new crop November 23, soybeans down 15 and a quarter, trading 1361.

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BRITT
Even this week it’s my pleasure to have with us Justin Foegen. Justin is a crop insurance agent with the ever.ag team. Welcome to the show today, Justin.

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JUSTIN
Thank you. Glad to be here.

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BRITT
Justin, crop insurance is sometimes a topic that folks don’t think a lot about. Sometimes it’s something that they default to whatever they’ve done in the past. It’s a highly relational business, like so many things in agriculture, which is definitely a good thing. But I want to dive into some of the nuances of crop insurance. And I want to start specifically by talking a little bit about the margin protection program, because that’s got a deadline this coming up soon.

00;01;16;27 – 00;01;24;26
BRITT
So give me the rundown. What is margin protection and where is it a good fit? How does it work?

00;01;24;29 – 00;01;53;01
JUSTIN
So margin protection is relatively new. By that, I mean, it was started out in 2016, started out in Iowa, kind of expanded from there. That is a shallow loss program that they came out with is a 95% trigger, which is a fantastic trigger. I mean, it was kind of the first ones to hit that 95% trigger. Government subsidized just a nice little program altogether that will actually take into consideration your inputs and your expenses during the month of April.

00;01;53;02 – 00;02;21;00
JUSTIN
So right now we are tracking the December 24 corn to December 2020 for beans, potash, steppe area, stuff like that, as well as interest rate. So what we do is we take into consideration where those prices are now and we’re going to track your inputs during the month of April. But probably the biggest, most attractive part is that we are tracking the December 2024 corn in November 2024 beans.

00;02;21;00 – 00;02;37;06
JUSTIN
So as of today, we are looking at $5.09 on corn. Looking at $12.95 on beans. So that’s probably the biggest selling point behind it is we are looking at the corn and bean prices today for next year.

00;02;37;08 – 00;02;45;01
BRITT
Okay. So just so I understand, Justin, today, when you say those prices, how do you arrive at those prices Justin.

00;02;45;03 – 00;02;58;18
JUSTIN
So those prices are tracked starting on August 15th and they track until September 14. So we are almost near the end of discovery for that, meaning that we’re probably not going to see a whole lot of change in those prices as they stand today.

00;02;58;24 – 00;03;19;07
BRITT
Okay. So the price is established by averaging December 24 and November 24, according mean futures, respectively, over the course of basically a month geared towards the fall timeframe. Tell me more about the input side then. Is that track now? Is that tracked? You said something about April. Help me understand that part of it.

00;03;19;14 – 00;03;39;16
JUSTIN
So like your multiple real policy where we’re used to tracking those prices during the month of February and used to tracking those prices again in fall during the month of October, we are tracking the interest rate, that area potash. Stuff like that. We are tracking that today, basically doing where those prices are going to be in the month of April.

00;03;39;16 – 00;04;01;09
JUSTIN
And then we’re tracking those prices again, doing that same discovery in the month of April as well. So typically, historically, unless it’s this year, your inputs typically cost less and fall for the spring. And then when people are actually putting those inputs in the spring, prices typically go up a little bit. So that’s kind of where it’s at and it is a set margin.

00;04;01;09 – 00;04;16;27
JUSTIN
So they’re not pulling random numbers. There’s no adjustment to that. It’s basically this is where your inputs cost as of today, this is where your inputs are going to cost when they go in the ground. So we’re tracking it right now. We’re going to track those same inputs during the month of April.

00;04;17;04 – 00;04;27;09
BRITT
So inputs are tracked over the same pricing period as corn and soybeans are mid-August to mid-September. And then they’re also tracked again in April, is that right?

00;04;27;11 – 00;04;30;14
JUSTIN
Correct. Yep. Just the inputs are tracked again in April.

00;04;30;18 – 00;04;50;28
BRITT
So let me understand this then on the settlement or if an indemnity were due, how does that piece of it work? You’ve got this price average, you’ve got these two input averaging periods. Do you get to choose the higher of the two or the lower of the two? And then how is how is the math?

00;04;51;01 – 00;05;12;27
JUSTIN
So the spring price, the inputs are kind of a stationary static thing where you don’t have any adjustment to that. Your your inputs are set in falls or set in spring. Your margin is going to be established on that. However, the price you can take into consideration the fall price, meaning that if that fall price goes up or down, you can choose to partake in that.

00;05;13;00 – 00;05;32;12
JUSTIN
It’s one of those things where probably worthwhile to look into whether you want to partake in that fall price or not. There is an added charge to use that price, but nevertheless it is still that 95% trigger, meaning that’s just a considerably a shallow loss, government subsidized program, probably the first one out there.

00;05;32;14 – 00;05;37;05
BRITT
Okay. So this program is open for enrollment until when.

00;05;37;06 – 00;06;00;23
JUSTIN
And we have until September 30th of this year to sign up for this program. I do want to give people a little bit of an insight in this that you are buying it this September for the 2024 crop year. That being said, it is an area based plan, meaning we are only focused on area yields. So you are not covered on prevent plan, not replant on this policy.

00;06;01;00 – 00;06;29;02
JUSTIN
You do still have to report your acres, report everything else as you would your multiple barrel billing is still going to be that same August 15th of 2024. However, because we are using county based yields, they are not required to be turned in for crop insurance until the end of April of 2025. So we are not going to know of these policies paid out until probably around June of 2025 from this policy that you purchased today.

00;06;29;06 – 00;06;36;06
BRITT
So there’s a really wide timeframe that this policy covers really from enrollment to potential indemnification.

00;06;36;09 – 00;06;45;09
JUSTIN
It’s a very long term policy. There’s definitely a time commitment involved in it, which that’s probably one of the biggest deterrents from people purchasing it.

00;06;45;10 – 00;06;56;07
BRITT
In your experience, how have producers felt about this product? I know it’s relatively new. Has it been well received across the country or has it been a program that’s been a little more lightly used?

00;06;56;09 – 00;07;16;25
JUSTIN
I would say it’s a combination. There’s been a lot of growth year over year. As I said before, it started out in 2016 in Iowa in there’s been a huge expansion year over year pushing out to corn and beans in different states and even getting it rolled into wheat. It’s just had a huge growth rate as far as where this policy is available.

00;07;16;26 – 00;07;35;19
JUSTIN
However, the sales on it, they’re kind of they’re kind of all over the board on it. So some people sell a lot of it, some people don’t. But I would say it’s probably the the area plans that is probably the scariest thing behind it. But they do appreciate the idea of taking your inputs into consideration on this program.

00;07;35;24 – 00;07;45;24
BRITT
So if a producer buys this margin protection, should they also consider multiple barrel or is this a policy that could potentially replace multi barrel?

00;07;45;27 – 00;08;10;18
JUSTIN
No, I would strongly suggest you also buy a multi barrel policy underneath of this. There would be a premium credit that would come back in kind of pay for part of that underlying policy, which we would consider to be your revenue protection policy. So you get a little bit of a premium credit there. And with that base policy, you will get your prevent plant and replant coverages that you probably need in some of these areas.

00;08;10;23 – 00;08;23;06
BRITT
In your experience, Justin, where have you seen this margin protection program work the best? What types of scenarios or what type of scenario seems like the most attractive to look at a product like this?

00;08;23;08 – 00;08;52;15
JUSTIN
I would say it’s definitely farmer specific. If you’re worried about your inputs, then you should definitely take a strong consideration into it. If you know you’ve got a good marketing plan and you’re buying a lot of your inputs and you’re confident in that purchasing. I don’t know if you necessarily need it unless you really want that shallow loss, but otherwise, if you’re still looking for a shallow loss and may be a little gun shy of the premiums because it is, it’s a high liability behind it, there could be potential for some pretty large losses.

00;08;52;19 – 00;09;01;25
JUSTIN
So that’s why it’s kind of a costly policy. But if there’s things about it that you don’t like, there are other shallow loss policies that are government subsidies that are available as well.

00;09;02;02 – 00;09;21;22
BRITT
Excellent. Well, I certainly know a lot more about it today than I did prior to our conversation. So thanks for shedding some light on that. I want to pivot now to a product that obviously most folks are familiar with, which is their revenue protection policy. We’re coming into the fall of the year and harvest will be upon us before we know it.

00;09;21;26 – 00;09;34;21
BRITT
We’re going to be entering the October pricing timeframe here in a couple of weeks. Talk to me about what produce you should have on top of their minds as we move through harvest, as it pertains to their revenue protection policy.

00;09;34;28 – 00;09;57;17
JUSTIN
I think coming into fall harvest producers should be well aware of where their yields are, where their guarantees are. If you have a rough idea that you typically do a 200 bushel average and you’re coming in anywhere below that 195 area, you should definitely be turning in a claim. Keep in mind there is no harm to producers by turning in a claim for any of their products.

00;09;57;19 – 00;10;23;14
JUSTIN
The adjusters are happy to come out there. It’s one of those things where the risk Management Agency has really been cracking down on timeliness of termed in claims. So I want people to be understanding of if you think there is a loss, what’s over? Pull your crop adjuster, call your agent. You have somebody get out there as soon as possible, or at least have the conversations with your agent or adjuster to make sure that everybody’s in the same loop.

00;10;23;21 – 00;10;48;02
JUSTIN
I did run a quick scenario this morning that if you do have a 208 H on your corn with a 80% policy, the February price is still at $5.91. Today is December. Corn is at $4.85. If you came in below that 194, you’re going to have a paid loss just due to the price drop alone. So I want producers to be aware of that.

00;10;48;02 – 00;10;54;10
JUSTIN
So we are going to be looking at a lot of shallow losses this year on crop insurance because of just the price loss alone.

00;10;54;15 – 00;11;14;27
BRITT
Excellent, Justin. So, Justin, before we wrap up, I just want to ask a few more questions here as we think about fall timeframe, as we think about collecting data for crop insurance. If a producer has a claim, reach out to their agent. The assessor will come out, kind of assess the damages. What about any other reporting that they may need to worry about?

00;11;15;04 – 00;11;37;10
JUSTIN
Primarily, the crop reporting is the biggest thing right now at this point. As long as the adjuster is well aware of it, what’s going on? If you have any questions, concerns, doubts, your your crop insurance agent is going to be your first and foremost call as long as they’ve got the claim termed in timely. The producers should have nothing to worry about as far as going into fall harvest.

00;11;37;17 – 00;12;05;01
JUSTIN
It’s probably my biggest discouragement that I see with farmers on purchasing crop insurance. They get bogged down by it, the stress over it. And my goal here is to make crop insurance easier for people, easier for farmers, easier for producers overall to take that worry away from you. It should be an easy product. It should be kind of hassle free for the producer where there’s a lot of tools in place where we can do that.

00;12;05;08 – 00;12;26;29
JUSTIN
One of the biggest things, especially coming into fall, is coming in do production records. You can use combine records to fill in your production report from the year. So I want producers to be aware of that. A lot of that technology is out there. Not a lot of people use it, but the technology is out there trying to make this as easy as possible for the farmers.

00;12;27;02 – 00;12;51;15
BRITT
That’s a good point. Justin, appreciate you bringing that forward. That was really the heart of my question is getting to that acre piece, because I know that can be a bit of a hassle for some folks. Justin, thank you so much for talking crop insurance. Definitely. Good to have you on again as we continue to come up upon these really critical time frames for this product, a great product that we all have known and love for a long time.

00;12;51;15 – 00;13;00;24
BRITT
But as they expand the offerings, I think it is important to talk about some of these nuances and really make sure we understand what we are choosing to purchase there.

00;13;00;26 – 00;13;02;09
JUSTIN
Thanks for having me, Justin.

00;13;02;09 – 00;13;08;10
BRITT
If listeners would like to learn more about crop insurance or chat with you, how can they best do so?

00;13;08;16 – 00;13;26;24
JUSTIN
You can reach out to me either through your grain marketer or my contact information can be found in the episode description and I would be glad to have any conversations with any of these producers about any questions, concerns, comments or, you know, just overall crop insurance questions. I love to help out any way that I can.

00;13;26;27 – 00;13;48;12
BRITT
Awesome. Well, we certainly appreciate your time. Thanks again, Justin. Thanks to the ever insights team Paige Driscoll for mixing and mastering today’s production. And Korri Romero, our producer. If you’ve enjoyed listening to From the world, feel free to share us with a friend. Give us a thumbs up or subscribe wherever you listen to your favorite podcasts.