From the Furrow – Justin Foegen – February 6, 2024

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00;00;00;10 – 00;00;08;27
VOICEOVER
Future trading involves risk and is not suitable for all investors. Content provided in the statement is meant for educational purposes and is not a solicitation to buy or sell commodities.

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MIKE
Hello and welcome to From the World 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, Mike mcginnis. And today is tuesday, February 6th, 2024. Turning to our guests this week, it’s our privilege to have Justin Fagin, crop insurance agent on our very own ever ag team.

00;00;27;22 – 00;00;29;12
MIKE
Thanks for joining us this week, Justin.

00;00;29;14 – 00;00;29;29
JUSTIN
Glad to be.

00;00;29;29 – 00;00;49;22
MIKE
Here. Well, it’s great to have you. We are entering this crop insurance season when it’s about time to think about getting signed up, actually. Let’s frame this crop insurance season up for folks listening and give us the deadlines and some of the dates that people should be thinking about before we get in and explain what could be the hot topic this year for crop insurance.

00;00;49;24 – 00;01;13;03
JUSTIN
All right. I wouldn’t start out this year saying that March 15th is our big deadline that’s approaching. We’ve got a little under 45 days to get there. So in those decisions, we’ve got to decide what we’re going to do with the FSA, RC PLC elections as well as your crop insurance, what you’re actually going to elect on your crop insurance if you do not make any changes that will renew automatically the way that it was last year.

00;01;13;03 – 00;01;18;17
JUSTIN
So it’s very important that if you want to make any changes, they have to be done by March 15th.

00;01;18;20 – 00;01;35;21
MIKE
Let’s start with some of the acronyms of crop insurance, because a lot of folks, it’s a head scratcher for even the people that think they understand it and have trouble understanding it. Tell us about AAK it stands for Agriculture Risk Coverage PLC. The acronym stands for Price Loss Coverage. But give us a feel for the differences between the two.

00;01;35;28 – 00;01;57;10
JUSTIN
The quick speech on both of those is policy is strictly based off of price loss, based off of a marketing year, and our KONI is going to be based on sales yield or that KONI which is going to be a trend adjusted yield. Also using a benchmark price this year, I would probably see that our county benchmark prices are considerably higher than the policy reference prices.

00;01;57;11 – 00;02;05;09
JUSTIN
So I would say if you’re going to do the elections, I would strongly suggest you entertain our county for everything across the board.

00;02;05;14 – 00;02;16;22
MIKE
So again, the policy payment is triggered when your price falls below a certain level and the arc is farmers get paid when his or her revenue falls below a specific level. Is that correct?

00;02;16;23 – 00;02;29;16
JUSTIN
That’s correct. That’s correct. So Corn, this year we’re looking at a 4 to 1 price. And on our KONI, we’re going to be looking at 485. So it is quite a jump between the two programs where the prices come in this year.

00;02;29;19 – 00;02;48;24
MIKE
We’ll talk about what that really means here in just a moment. Also, I want to have you cover the eco and SEO. These are supplemental plans for existing individual coverage. Right. So you have to have the underlying insurance plan. Right. And then you can choose one of these. But could you explain real quick the difference between eco and SEO?

00;02;48;25 – 00;03;10;06
JUSTIN
Sure. So SEO or the supplemental coverage option has been out there for a number of years. It’s kind of a nice add on that. If you choose the supplemental coverage option that’s going to take you from wherever your underlying crop insurance lines can take you up to 86%. So if you typically insure 75% on your existing coverage, this will take you from 75 all the way up to 86%.

00;03;10;06 – 00;03;37;14
JUSTIN
So a nice addition. It’s very highly subsidized. And then also on top of that, about four years ago, we got introduced to ECO, which is the enhanced coverage option. And enhanced coverage option will pick up that 86% and take you up to 95%. So you’ve got to consider being branded products that can be added on to any existing policy and add quite a bit of coverage to that, especially if we’re looking at something that might be a declining price here.

00;03;37;21 – 00;03;46;24
MIKE
And I understand that SEO acreage enrollments really peaked, what, about 2021? They’re still pretty high, but they hit their highest level in 2021, as I understand it.

00;03;46;27 – 00;03;56;01
JUSTIN
Yeah, they really took off, especially for a product that’s been out there for as many years as it is. It took ACA a little bit of time to get off the ground, but the subsidy behind it is actually pretty impressive.

00;03;56;05 – 00;04;16;20
MIKE
Let’s talk about this year’s crop insurance heading into the growing season of 2024. You mentioned it already. This appears to be a year of low crop prices. What does this mean? As I understand it, a lot of claims have been coming in for the 2023 growing season. You can explain that a little bit, too. But what’s the picture look like as we head into 2024?

00;04;16;25 – 00;04;42;12
JUSTIN
So 2023, we’ve seen quite a bit of the spring price on corn was set at 591 full price that came in at 488, meaning that starting last week, Thursday, February 1st, we started tracking the February price, meaning that we are tracking December 2020 for corn and we are tracking November 2020 for beans. This year for 2024, we are sitting at 477 and beans we are sending it 1179.

00;04;42;13 – 00;05;01;03
JUSTIN
So if that price continues to diminish, basically from spring to fall, these prices are going to trigger a little bit more of an insurance claim like what we’ve seen this past year, just due to the large claims that were out there last year, spring to fall. We’ve seen a 21% decrease in price on corn, soybeans. We’ve seen a 7% decrease.

00;05;01;07 – 00;05;12;23
JUSTIN
So it’s good to look at some of these shallow loss products, especially that echo where we have a 5% loss on that, especially if we do get into over a 5% loss on price from spring to fall.

00;05;12;25 – 00;05;22;22
MIKE
Real quick, I don’t want to sidetrack us, but is there any impact of the farm bill not being signed yet? And what does that mean if it doesn’t get signed by September?

00;05;22;27 – 00;05;39;17
JUSTIN
To my knowledge, I believe that the Farm Bill or the Title one commodity program, meaning the KPLC program, should be fine for the 2024 crop year. If something changes, we will be the first to let you folks know. But as far as I know, with the title one Commodity program is safe for this year.

00;05;39;17 – 00;05;59;19
MIKE
I know you hit on a minute ago a little bit, but let’s take a look at the elections in Arkansas. TLC again. What are you seeing as far as being a better choice going into a season like this year when we have low prices, high stocks that seem to be getting higher? So the bears are running the camp, so to speak, and the prices don’t seem to be going higher anytime soon.

00;05;59;19 – 00;06;03;20
MIKE
What does that mean for a farmer looking at his choices to sign up for crop insurance?

00;06;03;27 – 00;06;27;07
JUSTIN
So the marketing year average is what we typically use to elect the policy and see prices. The policy is going to be based off of a low set at $3.70 again this year because we do use a five year historical look back. This year it’s bumped up to 401 soybeans went from 840 last year to 926. So I mean, we did see a great price rally on these prices.

00;06;27;07 – 00;06;43;17
JUSTIN
However, they do actually use a marketing year average that starts in September 1st, and it will take through the whole year until August of next year. So what we lack today will not actually start to price track until September 1st of this year. And then we’ll go through 2025.

00;06;43;19 – 00;06;51;24
MIKE
Let’s talk about the popularity of the program. As I understand it, more farmers really are choosing crop insurance, right. Or have been in the past 3 to 5 years.

00;06;51;26 – 00;07;10;01
JUSTIN
There’s been a lot more interest out there, especially with these higher prices. People are taking advantage of that, just wanting to capitalize on that or just make sure that their inputs are covered. Just because we have seen such a large rally on inputs. So it’s nice to have the crop insurance behind you to back that up, make sure that your cost per acre is covered on a lot of that stuff.

00;07;10;01 – 00;07;25;01
JUSTIN
And then the FSA or TLC elections are just kind of a nice add on in addition to your existing policy, even though the last couple of years we’ve had seen such great prices that neither one of them have really paid off, it’s just nice to have that in your back pocket just in case.

00;07;25;03 – 00;07;33;29
MIKE
Are there any factors this year that would make crop insurance coverage particularly important for producers? And maybe we’ve already answered that because of this lower trending price?

00;07;34;06 – 00;07;52;03
JUSTIN
I would say the price is probably one of the biggest things that’s definitely on my radar. I would also take into consideration that we are in an El Nino year, meaning that, you know, for the most part it seems like it’s going to be a little bit wetter this winter. However, they are talking about shifting back to a La Nina here by mid-summer.

00;07;52;03 – 00;08;06;04
JUSTIN
So if that happens, what does that mean for your farm? And we should have the conversation to really see what coverage we should elect or what your growing concerns are, whether it’s prevent plant or drought or hail. There’s quite a bit of things to entertain this year.

00;08;06;04 – 00;08;13;02
MIKE
Well, again, I know a lot of advisors have always said that crop insurance should be included in your risk management plan, correct?

00;08;13;08 – 00;08;31;21
JUSTIN
Yeah, it’s definitely gotten to be a lot more attractive. There’s a lot of ad hoc programs that came out during COVID and everything like that. However, I do get the feeling that they are trying to push crop insurance a little bit more than these ad hoc programs where the disaster payments were definitely a nice relief on some of those low years.

00;08;31;21 – 00;08;42;28
JUSTIN
But I do know that the feds are trying to push a little bit more subsidy in the crop insurance and make people definitely take advantage of crop insurance rather than wait for you know, potential ad hoc program to pay out.

00;08;43;04 – 00;08;50;16
MIKE
If farmers are out there listening. Justin, what should they do? How do they get a hold of anybody yourselfer or whoever to pull the trigger on signing up?

00;08;50;22 – 00;09;06;25
JUSTIN
I would say you can reach out to us directly at the Platteville office. We’ve definitely got a team of people to back us up, Whether it’s the marketing side, we can take advantage of prices throughout the year or on the crop insurance side. I would be happy to have any conversations with any folks who are listening. Just have these conversations.

00;09;06;25 – 00;09;19;10
JUSTIN
I think it’s important to definitely make crop insurance a conversation year over year and just kind of see what your concerns are for that year. Specifically see how we can definitely address those concerns and see what we can do going forward.

00;09;19;12 – 00;09;21;29
MIKE
All right. Well, thanks for joining us today, Justin.

00;09;22;01 – 00;09;22;17
JUSTIN
Happy to be.

00;09;22;17 – 00;09;33;15
MIKE
Here. If you’ve enjoyed listening to From the Fertile, be sure to tell a friend or two in subscribe to us wherever you listen to your podcasts. Thank you to the Ever.Ag Insights crew for their work on today’s show.