Crop insurance should stave off a financial disaster from this month’s early frost in parts of Minnesota as well as the poor growing conditions caused by this summer’s cool weather across the state, experts say.
About 90 percent of Minnesota’s corn and soybean crops are covered by insurance against harvest losses, said Craig Rice, state director of the U.S. Department of Agriculture’s Risk Management Agency.
Not only that, but the crop insurance policies that protect farm income assume corn and soybean prices that are currently higher than the market prices for the two most important field crops grown in the state.
“I’m really proud of how Minnesota farmers use risk management tools to protect their crops and their farm income,” Rice said Thursday, noting that only Iowa and Illinois farmers make greater use of crop insurance programs.
However, insurance payments for a failed or partially damaged crop still fall short of giving the boost to the state’s economy that would come from a large harvest and strong commodity prices.
Kent Olson, an economist and a farm management specialist at the University of Minnesota, said crop insurance recovers only 75 percent to 85 percent of the revenue that farmers would usually get from a normal harvest.
Crop insurance policies are written to protect the yield, based on historical county harvests, or farm revenue from marketing, or both, Olson said.
These policies may prove important this fall because cool temperatures have put crop development behind schedule by at least four weeks, and frost conditions last week killed or damaged plants in several parts of the state. The western tier of counties, especially the northwest, apparently sustained the most damage.
Rice said the prices insured Minnesota farmers would be paid for lost bushels or lost farm income are $2.81 a bushel for corn and $6.71 a bushel for soybeans. Closing market prices Thursday were $2.251/4 a bushel for corn and $6.163/4 a bushel for soybeans.
In addition, Rice said, many farmers locked in higher prices earlier using futures and options contracts traded at the nation’s commodity exchanges, or by using a system of forward contracts at country grain companies.
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