CROP TALK
The Year Ahead: AN OUTLOOK ON YIELDS, WEATHER, MARKETS AND RISK MANAGEMENT
by Cole Patrick, Director of Insurance Strategies
Yield Reports
The October U.S. Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates (WASDE) report generally confirmed the summer projections on yields, raising the corn yield estimate for 2024 to 183.8 bushels per acre (bpa). If there is no change in the January 2025 report, this figure would beat the previous U.S. record-high corn yield by 6.5 bpa set in 2023 at 177.3 bpa.
New records are expected in many cornproducing states, including Illinois, Iowa, Nebraska, South Dakota, Wisconsin, Michigan, New York and Louisiana. Illinois’ 2024 corn yield is estimated at 222 bpa versus the previous record of 214 bpa set in 2022. Iowa is pegged at 214 bpa versus 204 bpa set in 2021. Minnesota is pegged at 183 bpa and Wisconsin at 182 bpa.
In somewhat of a surprise, the WASDE report did not show any stress to soybeans from a hot and dry September. The 2024 U.S. soybean crop is expected to yield 53.1 bpa, according to the report. This would be a new record for the U.S., beating the previous high of 51.9 bpa set in 2016. Illinois, Iowa, Missouri, Arkansas, Mississippi, Michigan, New York and Texas are expected to achieve record-high soybean yields.
In summary, corn and soybean crops are both forecast to have a sizable ending stocks projection. Soybeans have a more bearish storyline because South America is projecting record acres planted.
Weather Impacts
The latest projection is that La Niña has a 60% chance of emerging in September–November and is expected to persist through January–March 2025. If realized, that would be a very short La Niña period, as opposed to the previous one, which lasted parts of 2021–2023.
Stay tuned because as markets become increasingly more global, a winter bounce in prices is possible if previous La Niña weather drought patterns emerge in the South American region. For the Midwest, the typical pattern of above-average precipitation in January–March would provide relief for the drought conditions that arose during late summer and continued throughout harvest.
Meanwhile, on the farm, the uncertainties and volatilities from both the economic atmosphere and weather patterns are pinching down margins. From a macro perspective, factors such as commodity prices, inputs, land costs and interest rates are putting downward pressure on farm income.
Supply and Income Levels
Here’s what we’re looking at: With the expected U.S. record yields for corn and soybeans for the second year in a row, the stock-to-use ratio in the mid-teens would have an inverse relationship to price. In addition, the trade deficit is projected to stay in negative territory. A lot of grain is on the sidelines, and bins are filling up. In short, we have a domestic
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 observance of upcoming holidays:
Tuesday, December 24, at noon in observance of Christmas Eve
Wednesday, December 25, in observance of Christmas Day
Wednesday, January 1, in observance of New Year’s Day
Monday, January 20, in observance of Martin Luther King Jr. Day
YOUR CROP INSURANCE DOCUMENTS ARE AVAILABLE TO YOU DIGITALLY
We all accumulate paperwork throughout the year. To help you reduce this pile while maintaining access to your crop insurance information, Compeer Financial provides 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. Scan the QR code, visit compeer.com/mycompeer or call (800) 705-6603.
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.
Did you know? If you’re a Compeer loan client, you can receive your patronage dollars faster — without the hassle of a physical check — thanks to our patronage direct deposit option! It’s just one more way we can help our clients get business done when and how you want. To sign up for patronage direct deposit or manage your patronage payment preferences, log in to your MyCompeer account and navigate to Tools & Forms.
LOOKING AT ARC AND PLC FOR 2025
With all the unknowns about the 2025 crop year — including an undetermined spring price for crop insurance — it’s difficult to decide between Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC). Making the right choice will allow farmers to invest wisely in protection in this tight environment.
ARC and PLC, administered by the Farm Service Agency (FSA), have been below market levels in recent years, which hasn’t made them attractive safety net options. As prices get closer to their trigger levels, though, these options are more relevant.
While ARC and PLC are free products, they most likely will not provide producers with enough standalone coverage. They should be used in conjunction with other crop insurance products.
ARC provides county-based revenue coverage at 86%. It is based on Olympic average yields and prices and used with the marketing year average price and county yields to determine potential revenue losses.
PLC is price loss coverage that insures farmers against a drop in the marketing year average price on Aug. 31 of the following year.
When electing the Supplemental Coverage Option (SCO) endorsement, producers must choose the PLC option due to its similar coverage to ARC. The biggest difference between ARC and SCO is that ARC pays on a farm’s base acres (85% on ARC-County/PLC and 65% on ARC-Individual), and SCO pays on planted acres for the current year.
Here’s how prices are lining up for the 2025 crop year for ARC and PLC, unless there is a new Farm Bill with updated prices:
Corn
• ARC: $5.03 (86% = $4.33)
• PLC: $4.26
Soybeans
• ARC: $12.17 (86% = $10.47)
• PLC: $9.66
More than 75% of corn and soybean producers have chosen to participate in the ARC program over the PLC program, as seen in the chart at the top of this article. The higher pricing environment over the past few years influenced this
decision thanks to the 2014 Farm Bill’s guaranteed payments. PLC has gained some traction recently with the highly subsidized SCO product that is available when electing PLC.
2025 SCO and ECO
While final 2024 payments for Enhanced Coverage Option (ECO) claims are still being calculated, 2023 levels were at an all-time high, as seen in the map below that illustrates the loss ratio (ratio of total indemnity payments to total premiums paid).
be worth taking that highly subsidized endorsement to gain that extra coverage.
One thing to consider: The ARC-CO yields don’t always match up with the SCO and ECO yields, which could affect the payment amounts. Insureds would be paid on the 85% of base acres for those farm numbers at the FSA office versus being paid on 100% of planted acres. Double-check base acres before making this decision.
This history — coupled with the increased federal subsidy on ECO — may make some farmers consider taking ARC at the county level with ECO stacked on top of their underlying policy to save on insurance premiums instead of renewing their SCO endorsement.
This year the subsidy for ECO has increased from 44% to 65%, matching the 65% subsidized SCO coverage. These endorsements, which capture a coverage level up to 95%, are affordable options that can help protect your livelihood and peace of mind.
Election decisions will likely come down to where the spring prices land. If the SCO and ECO corn price is higher than the $4.33 locked in for ARC at the county level (ARC-CO), it might
Another major component to consider is the expected county yield. Many counties in the Compeer Financial territory have seen an increase of more than 20% since 2018. This means that the move from National Agricultural Statistics Service (NASS) to Risk Management Agency (RMA) production in 2018 was positive, which led to these products having more value. Consult with your Compeer insurance officer or check the actuarials on the RMA website to see how your county fared with the yields provided by RMA.
There is a lot to consider moving into the 2025 crop year. The options presented above can help you capture additional levels of coverage at an affordable rate. Closer to February, we’ll have a better idea of where prices are going to land for SCO and ECO. It’s crucial to compare those prices to ARC and PLC prices. Contact your Compeer insurance officer to help you make the best decisions for your operation.
WEIGHING LIVESTOCK INSURANCE COVERAGE OPTIONS
With livestock and dairy providing a large share of the overall revenue on many farms, farmers should make sure they’re considering insurance coverage options carefully. Livestock Risk Protection (LRP), Dairy Revenue Protection (DRP) and Livestock Gross Margin (LGM) are three plans that have been improved to help producers better manage risk.
To help clients make informed coverage decisions on these three programs, Compeer Financial offers the Livestock Insurance Analyzer (compeer.com/insurance-analyzer) and dairy market update webinars. To learn more about these valuable resources and find out how LRP, DRP or LGM can benefit your operation, contact your Compeer insurance officer.
Livestock Risk Protection (LRP)
LRP provides protection against a decline in market price below the insured’s selected coverage price for fed cattle, feeder cattle and swine. Simply put, it sets a floor price to protect producers if the market price falls, but it doesn’t limit the upside price potential if markets increase.
LRP has grown in popularity over the last several years thanks to continuous improvements making it more user-friendly. Key benefits of LRP include:
• Significant premium subsidies, which make it more affordable
• Premium due after coverage has ended rather than being paid upfront
• Option to cover unborn feeder calves and swine
• Increased head limits, allowing for more participation
Dairy Revenue Protection (DRP)
Since its introduction in 2018, DRP has been widely adopted by dairy producers. DRP provides protection against unexpected quarterly declines in milk revenue. It also offers a subsidy to reduce premiums. Like LRP, it allows farmers to set a floor price for their milk while still maintaining the opportunity to receive a higher price if the market goes up.
Producers can select coverage based on either class or component pricing to best reflect their risk in the market. State-level milk production per cow is also a factor in DRP.
Livestock Gross Margin (LGM)
LGM offers the following coverages against the loss of gross margin between:
• Dairy – milk revenue and feed cost (Class III milk, corn and soybean meal)
• Swine – market value of swine and the cost of feed (lean hogs, corn and soybean meal)
• Cattle – market value of cattle and the cost of feed and feeder cattle (live cattle, feeder cattle and corn)
Recent changes to LGM include revisions in the timing and methodology for calculating actual and expected prices to make coverage more user-friendly. There is also some flexibility in choosing the cattle weight and corn amount used for LGM cattle.
2025 OUTLOOK (cont’d from page 1)
We are coming off a steep decline year over year in both commodity prices and farm income. According to USDA, U.S. net cash farm income, which considers the year in which farm sales of crop or livestock products occur, is forecast at $154 billion in 2024, down $16 billion, or 10%, when adjusted for inflation. Grain prices are declining (2024–2025 projections: corn $4.10, soybeans $10.80), while input and land costs remain elevated.
All things considered, farm income remains at or above the 20-year average but is trending downward. The University of Illinois’ farmdoc breakeven cost of production estimates paint this picture well, projecting them to be mostly in the red when factoring in land costs.
Some positives are on the horizon for U.S. farmers:
• South American soybean harvest yields continue to face droughts. Total production per acre is only offset by additional acres planted this year.
• Innovations in the biofuels sector are providing opportunities for grain producers.
• Gold has rallied to all-time highs, which may be an early indicator for risk to shift to commodities in the coming years.
• The Farm Bill, the largest in history, looks to have bipartisan support for safety net provisions. For more, read page 7.
• The federal crop insurance program increased the Enhanced Coverage Option subsidy from 44% to 65%. Learn more on page 3.
While markets remain volatile and weather is unpredictable, Compeer Financial is ready to coach our clients through this economic environment with its financing and risk management tools. Markets will remain volatile. Weather will continue to be unpredictable. Compeer will be here for you through it all.
CARBON CREDITS OFFER ECONOMIC OPPORTUNITIES
Have you been thinking about transitioning to no-till farming and the use of cover crops? It’s not just healthier soils, reduced erosion and better water retention that make these practices appealing; the new revenue streams opened provide advantages too. By taking small, incremental steps and leveraging available resources, you can make this transition smoothly and successfully.
Adopting cover crops and no-till farming practices can offer economic opportunities through carbon credits. By sequestering carbon in the soil, farmers can earn carbon credits to sell to companies looking to offset their carbon emissions, providing an additional income stream to their operations. Companies are increasingly investing in sustainable practices in their supply chains, and farmers can benefit from these investments by adopting such conservation practices.
Two markets are related to managing carbon emissions: carbon offsets and carbon insets.
• Carbon offsets: These involve companies directly investing in projects that reduce carbon
emissions to compensate for its own emissions, such as Delta, Disney or Alphabet (Google’s parent company). The investments pay for a reduction in greenhouse gases through carbon registries certified by third-party verifiers tracking the ownership, issuance and transfer of the carbon credit to farmers sequestering carbon in the soil through the use of cover crops and no-till farming practices.
• Carbon insets: These are directly integrated within a company’s own supply chain. For example, a beverage maker like PepsiCo needing a lot of corn syrup may be interested in sourcing corn from a farm that uses no-till practices with cover crops. While it is logistically challenging to achieve corn grown that way directly, it can be facilitated through inset programs.
Transitioning to cover crops and no-till farming practices might seem daunting, but carefully planning and taking a step-by-step approach can streamline the process. Begin by implementing cover crops and no-till practices on a
small portion of acreage to experiment and learn without risking the entire crop. After all, inset and offset programs are designed to be used field by field.
Farmers may decide to gradually expand these practices as they become more comfortable and observe the common benefits, such as healthier soils, reduced erosion, better water retention and new revenue streams. Unlike the investments in equipment made by past generations in new plows and chisel plows, no-till farming can be done incrementally, field by field, with little to no investment.
Today’s producers have the opportunity to leverage the benefits of sustainable agriculture. With cover crops and notill farming, they can ensure the soil remains fertile and productive for years to come. Plus, as seed companies offer new technologies and advancements in genetics, seedlings have more vigor and treatments are more effective, making it safer than ever to consider no-till.
Before making significant changes to farming practices, let your Compeer Financial insurance and financial officers know so they can provide insights and considerations for your operation.
U.S. AGRICULTURE AWAITS CONGRESS TO PASS A NEW FARM BILL
by Ben Duncanson, Senior Legislative Affairs Consultant
Despite some hopeful signs earlier this year that Congress would pass a new Farm Bill in 2024, progress has stalled considerably over the last few months. The 2018 Farm Bill technically expired on Sept. 30 without a replacement, even though funding for most U.S. Department of Agriculture programs will continue through the end of 2024.
In May, the House Agriculture Committee passed the Farm, Food, and National Security Act of 2024, sponsored by Chair Glenn “G.T.” Thompson, R-Pa., out of committee with a degree of bipartisan support. However, the legislation has not moved forward for a vote on the floor of the U.S. House as it has not attracted enough bipartisan support to pass the full chamber. Also, this spring on the Senate side, both Agriculture Committee Chair Debbie Stabenow, D-Mich., and Ranking Member John Boozman, R-Ark., separately released their own Farm Bill frameworks. Unfortunately, little progress towards passing a new Farm Bill has been made since, and as a result it appears another Farm Bill extension into 2025 will be needed.
The major obstacle preventing passage of a new Farm Bill continues to center on spending and how to pay for enhancements to farm safety net programs (i.e., increased reference prices for the Agriculture Risk Coverage and Price Loss Coverage programs) and further improvements to the crop insurance program.
The nutrition title of the Farm Bill, which includes the Supplemental Nutrition Assistance Program (SNAP), accounts for more than 80% of Farm Bill costs and has significantly grown in expenditures since the passage of the 2018 Farm Bill due in part to changes made by the Biden administration during the pandemic.
Without significant additional budget allocation for the Agriculture Committees to write a new Farm Bill, funding for improvements to farm safety net programs will need to come from either redirecting spending from other areas of the Farm Bill or modifying existing programs, such as SNAP.
To help pay for their proposed farm program safety net enhancements, Agriculture Committee Republicans have sought to change the way in which inflation is accounted for in the SNAP program as well as reallocate money that was added to conservation programs from the previously passed Inflation Reduction Act to other titles of the Farm Bill. This is a “red line” for a majority of Democrats on the Agriculture Committees and their leadership.
These disagreements only become more difficult in an election year in which both parties attempted to protect narrow majorities in Congress, making it challenging to find bipartisan consensus on a host of key issues, including a new Farm Bill.
On a positive note, there appears to be strong support for the crop insurance programs across the board, including further enhancements to the program in all the materials released by both chambers. For example, all seek to expand premium discounts for beginning farmers up to 10 years from the current five years. However, there is still disagreement on how that would be structured, mainly due to all three proposals having different topline budget numbers.
With the 2024 election now behind us, members of Congress have returned to Washington, D.C. for its post-election “lame duck” session. While there was some optimism Congress would find a way to overcome their disagreements and pass a Farm Bill by the end of the year, that possibility now appears extremely unlikely.
Instead, Congress is expected to pass another one-year extension of the current Farm Bill, which will likely be included as part of a large year-end legislative package that will also keep the federal government funded until sometime into 2025. Congress is also expected to include a disaster assistance package for those affected by natural disasters this year and likely include assistance for farmers impacted by other weather events as well as the downturn in the U.S. agriculture economy.
Punting a new Farm Bill to the next Congress underscores the importance of educating newly elected members – especially those appointed to serve on either the House or Senate Agriculture Committee – on the importance of supporting and passing a new Farm Bill in 2025 that includes a strong safety net for producers, including a strong crop insurance program. Compeer will continue to do our part to inform and advocate with members of Congress on the need to pass a strong Farm Bill for our clients and rural America.
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CROP INSURANCE UPDATE WEBINARS
Thursday, January 16
Agriculture Macro Outlook with Dr. Gary Schnitkey
Risk Management Update: Planning for ARC and PLC, how they couple with ECO and SCO and how coverage options impact break evens
Thursday, February 27
Weather Outlook with Eric Snodgrass
Register today! compeer.com/spring-updates Both webinars will take place from 1–2 PM
Risk Management Update: Spring crop price announcements, county yield projections and livestock insurance updates
