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Risky Environment Calls for Close Eye on Breakeven, Insurance and Marketing Plans

Earlier this year, we published results of a study done by economists at the University of Nebraska, who determined that crop insurance indemnity payments in our four-state area generated nearly $2.2 billion in off-farm economic impact and protected more than 20,000 off-farm jobs in the 2012 growing season.

Crop insurance remains the most important safety net for grain producers.  Clearly it’s also important to the economies of rural and urban communities where farmers spend their money.

farmer looking at the fieldHeading into 2014, corn and soybean prices have declined while input prices are flat, so margins will be tighter.  In the Midwest, weather is always uncertain – even this year, we had a wet spring that prevented farmers in some areas from planting, while others saw drought conditions nearly as severe as 2012.

All this means that we’re heading into a riskier environment in 2014.  As a result, it’s more important than ever for grain producers to understand their breakeven price so they can make smart decisions about the amount and type of crop insurance to purchase.  Top producers know their breakeven – it’s one thing that helps make them successful. 

Producers also need to have a strong understanding of crop insurance and a strong understanding of marketing, and ensure their marketing and insurance plans are working together to maintain profitability.

Farmers can learn more about the outlook for 2014 grain prices at our annual GrowingOn® meetings. Thirty events are being held in 29 locations in December and January.  Steve Johnson, farm and ag business management specialist from the Iowa State University extension office, is helping producers understand supply changes and their potential impact on grain prices.  Steve is helping folks understand what’s within their control, and how to combine specific marketing strategies (like futures hedging, and buying puts and calls) with crop insurance and forward contracting to minimize risk and maximize profits. 


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