Crop Talk: 2023 Edition

Important Crop Insurance Information for Clients of Compeer Financial

FALL 2023

CROP TALK In this issue: 2 | Your Crop Insurance Documents Are Now Digital!

Online Renewals Holiday Office Closures 3 | Tailoring Your Policy for 2024 4 | Compeer Offers Exclusive Tool to Dairy and Livestock Clients 5 | Modern Agriculture: Innovations, Sustainability and the Path Forward 6 | Challenging Year: 2023 Weather Swings Test Farmers’ Resilience 7 | Farm Bill of Key Interest to Compeer Financial and Clients 8 | Crop Insurance Virtual Update Meeting

A MACRO OUTLOOK ON CROP INSURANCE

by Cole Patrick, Director of Insurance Strategies

In 2023, the world of crop insurance has undergone significant changes, impacting both Compeer Financial teams and clients.

Early in the year, producers locked in prices for their spring crops that were near record highs, and the growing season appeared to be following a path similar to the notable year of 2012. However, as we fast-forward to harvest season, it becomes evident that yield forecasts have soared, while prices have fallen sharply and input costs have remained high.

This has led to farmers experiencing revenue losses on their crop insurance, squeezing their profit margins. Additionally, there is looming uncertainty with the impending renewal of the Farm Bill on the horizon.

In these tough and uncertain times, sound farm management decisions are crucial, which is where Compeer’s crop insurance team shines.

Uncertainty in agriculture inherently brings risk.

Your risk tolerance is a unique factor, and it can change from year to year. We aim to help you in appropriately insuring that risk. Here are some key considerations:

• What are your production costs/ acre?

• What is your margin?

• How much do you need to protect?

• How should you approach marketing your grain?

• Is your current insurance coverage The current agricultural landscape demands more from our farmers.

According to the U.S. Department of Agriculture, the number of farms is expected to decrease, accompanied by a changing demographic of farm owners and operators.

Land values have rapidly expanded, surpassing the value of the agricultural goods they produce. This phenomenon has raised questions about the near-term rate of returns for investors. Inflation has spiked after years of experiencing near-zero interest rates. Furthermore, global trade alliances and foreign populations may undergo significant shifts in the next decade.

sufficient?

When making insurance decisions, it’s important to evaluate your individual situation in conjunction with industry trends, grain markets, local and global trade dynamics and technology. For example, it is crucial to assess how often harvest prices have fallen below projected prices and whether this ratio falls below your current insurance coverage level.

Are there strategies to enhance your guarantee without significantly increasing your premium?

We have answers and insights to address these questions.

With our comprehensive set of tools, Compeer’s team of experts is ready to help you assess your situation and ultimately find the right coverage to suit your needs. We look forward to working with you in the coming months.

Online Renewals Compeer Financial is committed to providing robust and secure online tools to help our clients get business done — where and when you want. That’s why we provide options for renewing your crop insurance policy.

If you’re not making any changes to your crop insurance policy, your Compeer insurance officer can send you an email, enabling you to review your policy coverage from the past year and easily renew with a simple click.

If you’re interested, please contact your Compeer insurance officer.

Offices Closed for Holidays Compeer Financial offices will be CLOSED on the following days in celebration of upcoming holidays: Monday, December 25, in observance of Christmas Day Monday, January 1, in observance of New Year’s Day Monday, January 15, in observance of Martin Luther King Jr. Day

YOUR CROP INSURANCE DOCUMENTS ARE NOW DIGITAL! We all accumulate paperwork throughout the year. To help you reduce this pile while maintaining access to your crop insurance information, Compeer Financial is now providing your crop insurance documents online through the MyCompeer portal.

With MyCompeer, you can enjoy the convenience of secure online access. MyCompeer is accessible 24 hours a day from your desktop, tablet or smartphone. Crop insurance documents available on MyCompeer include:

• Confirmation of Coverage • Schedule of Insurance • Approved Production History You can also view your policy coverage on the MyCompeer page.

Enrolling in MyCompeer is a swift and straightforward process.

Visit compeer.com/mycompeer or call us at (844) 426-6733.

Third-Party Access Providing third-party access to your crop insurance documents is a hassle-free process. Your Compeer insurance officer or our service team can help you complete the required form. Once enrolled and authorized, the third party can easily and securely access your crop insurance documents at their convenience.

Opt Out If you wish to opt out of electronic document delivery or are currently receiving a mailed copy and prefer a completely digital approach, please get in touch with your Compeer insurance officer or call us at (844) 426-6733.

Note: By enrolling in MyCompeer, you gain access to our exclusive MyLearning platform, featuring content tailored to our clients and their operations. Topics include developing a grain marketing plan, balance sheet basics, cost of production, transition planning and more. Don’t miss out on this valuable resource!

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Fall 2023

TAILORING YOUR POLICY FOR 2024 As you embark on the journey of planning for your 2024 crop policy options, consider several products that have gained significant attention in recent years.

These policies include the Supplemental Coverage Option (SCO) and Enhanced Coverage Option (ECO). When used in conjunction with your underlying Multi-Peril Crop Insurance (MPCI) policy, these options provide a means to customize your policy to align with your operation’s revenue requirements. Initially, these area plans mirror the county’s yields, but by acquiring a supplemental product from some of our insurance providers, you can extend coverage to as much as 95% on your planted acres in the event the area plan falls short. This equates to a mere 5% deductible in the face of today’s fluctuating prices in your own operation.

As of the time of writing this article, December corn for 2023 stands at $4.85. This represents an 18% decrease from the crop insurance base price. With ECO featuring a 5% deductible and SCO with a 14% deductible, both options have entered payment ranges based on average county yields. The Risk Management Agency is set to unveil the final area yields on June 16, 2024, once they have gathered all production data from crop insurance. Given the price drop in 2023, it’s plausible that your county experienced an above-average yield, enabling you to receive indemnities for SCO and ECO on your corn.

Looking forward to 2024, soybeans are now in the spotlight with area revenue plans.

Currently, soybeans have locked in a price of $13.76 for the Margin Protection base price, and tracking will commence on Feb. 1 for the 2024 ECO/SCO/MPCI base price.

Reflecting on this, if the $13.76 price remains unchanged by March 1, it will mark the second-highest soybean crop insurance base price since the introduction of SCO and ECO as products. With an anticipated increase in county yields of approximately 2% to 4% in most counties, this translates to one of the highest ECO liability levels we’ve ever seen.

Furthermore, by extending your coverage to 95% by using a supplemental ECO product, this opens up extra bushels to forward contract above your MPCI crop insurance. With the swings in the markets, this allows a better opportunity to not only insure your crop at one of the highest levels ever but also market more of your bushels because crop insurance has you covered.

When you know your breakevens, Compeer Financial can help you select products that provide the best opportunity to grow your business. Our insurance officers can tailor your crop insurance package to meet your operation’s needs. There are many products available today that can separate your operation from the competition by not only insuring you appropriately but also saving you the most money possible by blending your MPCI with private products.

Track your profitability with our tool!

Sign up for crop insurance

Scan the QR code or visit compeer.com/grain-margin-manager

Scan the QR code or visit compeer.com/cropinstext

GRAIN MARGIN MANAGER

TEXT NOTIFICATIONS!

Fall 2023

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COMPEER OFFERS EXCLUSIVE TOOL TO DAIRY AND LIVESTOCK CLIENTS In today’s uncertain markets, Dairy Revenue Protection (DRP), Livestock Gross Margin (LGM) and Livestock Risk Protection (LRP) stand out as vital options for managing risk. The Farm Credit Livestock Insurance Analyzer, a collaborative effort involving Marin Bozic from the University of Minnesota and several other Farm Credit associations, offers an exclusive resource for our DRP, LGM and LRP clients.

It consolidates all the necessary information to help Compeer Financial clients make informed coverage decisions.

The tool includes the following features for each type of coverage:

Dairy Revenue Protection (DRP) • Premium quoting with the option to receive daily customized quotes via email or text

• Historical and what-if analysis tools • Endorsement tracking and daily updated

indemnity projections • Market dynamics allow you to monitor price trends and set up price alerts to seize pricing opportunities (see image to the right)

Livestock Risk Protection (LRP) • • • •

Premium quoting with the option to receive daily customized quotes via email Ability to compare LRP with CME puts and track historical performance Market dynamics to keep track of pricing trends and see how pricing opportunities have evolved over time Endorsement tracking and daily updated indemnity projections (see image below)

Livestock Gross Margin (LGM) Dairy • Daily premium quoting • What-if analysis tool • Endorsement tracking and indemnity projections (coming soon)

Dairy Market Update Calls Additionally, Compeer hosts Dairy Market Update calls for our DRP and LGM dairy clients with Marin Bozic, during which he shares his unique insights into dairy markets and policy.

Recordings of these calls are accessible within the Analyzer tool.

To learn more about the Livestock Insurance Analyzer and Dairy Market Update calls, and to understand how DRP, LGM or LRP can integrate into your risk management plan, please contact your Compeer insurance officer.

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Fall 2023

MODERN AGRICULTURE: INNOVATIONS, SUSTAINABILITY AND THE PATH FORWARD Since the beginning of agriculture, the pursuit of enhancement, optimization and expansion has been a constant endeavor. Driven by a constant commitment to innovation, modern agriculture is no exception.

However, a significant transformation has occurred. Previously, we approached change based on theoretical instinct, but we have now shifted to empirical data models. We understand that data plays a pivotal role in driving business solutions and shaping farming practices. It empowers us to fine-tune aspects of our operations, leading to improved yields, time savings, reduced costs and more. Moreover, agricultural investors now have more avenues to allocate capital toward emerging technologies like biologicals, artificial intelligence (AI) computing platforms and fractionalized land ownership.

AI machine learning and robotics will continue to push the boundaries of what’s possible in agriculture.

Precision tools used in planting and harvesting are poised to experience significant advancements in capability and accuracy, thanks to enhanced processing power. Auto-steer and row shut-offs were groundbreaking innovations, but by 2050, self-driving specialized farming equipment may take the form of modular fleets in some areas. This could potentially reduce labor demands in certain parts of the Midwest for large row-crop farms. The integration of drone technology and satellites is set to revolutionize the operations

of both insurers and producers in the upcoming decade. Furthermore, new hybrid crops, like those tailored for short corn, are already under development and testing to mitigate wind- and greensnap-related loss.

In addition to these technological advancements, an element that has garnered substantial attention and awareness is sustainability and environmental consciousness.

Conservation practices are actively encouraged and supported in farm policies, with the aim of reducing inputs and enhancing soil health.

Assuming that farmers wholeheartedly embrace these conservation efforts, experts predict that by 2035, approximately 25% of crop protection inputs will be of biological origin. Additionally, initiatives like Sustainable Aviation Fuel (SAF) may see corn and soybeans playing a more significant role in the energy sector.

Undoubtedly, agriculture’s role in the climate change discourse will be pivotal.

As with all emerging technologies seeking to disrupt markets, there will be both winners and losers. In a rapidly evolving world, planning for the future can be daunting. When it comes to transition planning or adjusting your operations, Compeer Financial offers a comprehensive range of over 40 lending services to assist in charging a clear pathway for the future of your farm and family. These services are complemented by insurance products so we can help you achieve your goals with the assurance of security every step of the way.

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CROP TALK 5

2012

2023

CHALLENGING YEAR: 2023 WEATHER SWINGS TEST FARMERS’ RESILIENCE In 2023, the weather presented a stark contrast from the summer we ultimately experienced. Looking back to April, we found ourselves in discussions about Prevent Plant options with several clients. While parts of Illinois were gearing up their planters for the season, northern Wisconsin and Minnesota were grappling with unexpected blizzards, complete with heavy snowfall as late as April 17. Depending on one’s perspective, the glass could be seen as half-empty or half-full.

By May, the drought of 2023 began to take hold, ultimately allowing us to plant our fields from fence post to fence post. Those who had the foresight to plant early while sub-soil moisture was still present made a wise choice. Earlyplanted crops sprouted quickly, while some later-planted ones lagged behind, waiting for their seeds to germinate.

Once the crops emerged from the ground, they displayed surprising

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resilience to the heat and lack of moisture. Many fields appeared rough, causing concern among our clients.

It seemed as if we were on the brink of a crisis, with the threat of failure if rain didn’t arrive within a week or two.

Fortunately, it wasn’t in vain; just in the nick of time, each region received just enough rain to buy a little more time.

While it wasn’t a record-breaking crop, considering the challenging weather conditions of 2023, we were indeed fortunate to have the crop we did. For many of us, the most severe drought we could recall dated back to 2012, often likened to the conditions of 1988.

In comparison to 2012, 2023 was another notable drought year, although its impact on the overall yield was not as severe. This may be attributed to the relatively generous precipitation we received late in the

winter and early spring, which left our soils well-saturated in April and May. However, when spring finally arrived, it brought with it an abundance of heat and strong winds, rapidly drying out the topsoil. This left many freshly planted fields with less than ideal stands, and, as a result, we encountered a fair number of replant claims across our service area.

Looking ahead, some forecasters are anticipating an active and colder season for all of the United States, with above-average precipitation and snowfall and below-average temperatures expected to persist well into March next year. One bright spot in the forecast is the prediction of a robust snowpack in the southern Rockies, which bodes well for California and the replenishment of reservoirs.

FARM BILL OF KEY INTEREST TO COMPEER FINANCIAL AND CLIENTS

IRA conservation dollars to address other conservation needs farmers have beyond adoption of climate mitigation practices.

by Perry Aasness, Vice President of Legislative Affairs

For our part, Compeer Financial and the Farm Credit System have been active in educating members of Congress and their staff on the importance of the Farm Bill to our clients. We are encouraging Congress to craft and pass a Farm Bill that recognizes the unique challenges and opportunities facing U.S. agriculture and rural communities. Some of the key Farm Bill priorities Compeer is focused on include:

With the 2018 Farm Bill expired as of Sept. 30, 2023, the work of the U.S. Congress writing and passing a new Farm Bill is of key interest to Compeer Financial, our clients and U.S. agriculture entities. Crafting a Farm Bill that can attract bipartisan support in Congress is becoming increasingly challenging given today’s political climate in Washington, D.C. As with the development of every Farm Bill, the health of the U.S. agriculture sector, dollars available to write a new bill and politics all determine whether Congress passes a short-term extension or must extend the current Farm Bill beyond the 2024 election.

Throughout 2023, the House and Senate agriculture committees have held numerous hearings and listening sessions to gather input from constituents and farm group leaders on ways the next Farm Bill can best support the diverse needs of U.S. agriculture. Some themes heard during listening sessions within Compeer’s territory were the importance of maintaining and enhancing the Federal Crop Insurance Program, ways to support the next generation of farmers, enhancing livestock and dairy risk management tools, ensuring necessary resources for animal disease and surveillance and supporting programs that promote U.S. agricultural exports to overseas customers.

A key challenge for the agriculture committees in crafting the next Farm Bill comes down to funding and whether additional dollars can be found to help address the myriad needs and challenges facing U.S. agriculture.

Overall, Farm Bill spending has continued to increase due to the rising costs of the Supplement Nutrition Assistance Program (SNAP) and other nutrition programs authorized by the Farm Bill. When the 2018 Farm Bill was written, the Congressional Budget Office (CBO) estimated the cost of the legislation to be $876 billion over 10 years. However, CBO’s current 2023 Farm Bill baseline projections show spending estimates in excess of $1.51 trillion over the next 10 years.

Conservation funding within the Farm Bill is also under discussion. The Inflation Reduction Act (IRA) that passed Congress in 2022 appropriated more than $18 billion in new, one-time funding to assist farmers in adopting climate mitigation practices, delivered through Farm Bill authorized programs such as the Environmental Quality Incentives Program (EQIP), the Conservation Security Program (CSP), the Agricultural Conservation Easement Program and the Regional Conservation Partnership Program (RCPP). Consideration is being given to rolling the IRA conservation funding into the Farm Bill baseline to permanently bolster funding for conservation programs and help the Natural Resources Conservation Service address its backlog of application requests. If this occurs, a key point of debate within the agriculture committees will be whether to broaden eligibility for the

• Protecting and enhancing risk

management tools for farmers

• Increasing U.S. Department of Agriculture (USDA) Farm Service Agency (FSA) guarantee and direct loans for farmers and modernizing FSA farm operation definitions to recognize changing farm ownership structures that aid in intergenerational farm transfers

• Permanent authority for Compeer and

other Farm Credit institutions to partner with local lenders to help finance essential rural community facilities such as hospitals and senior living, child care, education and emergency response buildings

With the 2018 Farm Bill recently expiring and the end of the year approaching, pressure will grow on Congress to pass and sign a Farm Bill into law, leaving little time for farmers to plan for the 2024 growing season. Currently, both House and Senate agriculture committee chairs (Rep. Glenn “GT” Thompson, R-Pa., and Sen. Debbie Stabenow, D-Mich.) continue to publicly state their commitment to getting a Farm Bill passed in the next few months, even if it takes a short-term extension to allow Congress to complete its work. Ultimately, getting a Farm Bill passed by Congress will take bipartisan support from a coalition of those with rural and urban interests.

Compeer will continue to work with members of Congress from Illinois, Minnesota and Wisconsin, and collaborate with other agricultural interests, to advocate for a new Farm Bill that allows our clients to manage weather and economic challenges and ensures the vibrancy of rural communities.

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Mark your calendar!

CROP INSURANCE SPRING UPDATES WEBINAR TUESDAY, JANUARY 16 | 10–11 AM Stay informed about the latest developments in crop insurance and gain valuable insights into optimizing your coverage options for 2024. Our team of experts will cover a range of important topics, including: • Recap of the 2023 growing season, yields and claims • Maximizing your coverage options for 2024 • Importance of SCO and ECO • Federal crop insurance program and FSA program updates

Speakers will include: Dan Bauer and Mike Boen, Compeer State Insurance Product Officers Cole Patrick, Compeer Director of Insurance Strategies

Register today!

compeer.com/spring-updates