In this episode of Grain IQ, host Chad Moyer and guest Cory Walters, an associate professor in the Department of Ag Economics at the University of Nebraska Lincoln, discuss the role of crop insurance in grain marketing and risk management.
Crop Insurance Overview: Cory explains that crop insurance is essential for rearranging financial outcomes, providing indemnity payments in case of low yields or low prices. It allows farmers to manage risk by sampling from a different distribution of outcomes, thus enabling them to make informed decisions about their farm operations.
Understanding Risk: Risk is highly personal and varies depending on factors such as farm location, cropping practices, and financial standing. Cory defines risk as events that are rare and financially devastating, emphasizing the importance of managing rare events to protect farm operations.
Assessing Risk Exposure: Cory advises farmers to calculate their insurance guarantee, deduct all costs from it, and determine whether they have positive or negative profits. This assessment helps farmers understand their risk exposure and whether they have enough working capital to survive potential losses.
Pre-Harvest Grain Marketing: Crop insurance plays a crucial role in pre-harvest grain marketing strategies, allowing farmers to forward-contract a portion of their grain while being protected by insurance in case of adverse events.
Private Insurance Attachments: Cory discusses supplementary insurance policies like SCO and ECO, cautioning farmers to understand the differences between these policies and traditional crop insurance. He emphasizes the need to be strategic in using these policies and to be aware of changes in county-level yields.
Takeaways: Cory advises farmers to understand their financial exposure, utilize crop insurance to manage risk, and adopt forward-looking, positive approaches to grain marketing. He suggests utilizing resources like the Center for Ag Profitability at UNL for additional information and tools.
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This episode is proudly supported by the Nebraska Soybean Board and brought to you in part by Nebraska Soybean Farmers and their checkoff.
