Crop Insurance Today June 2018 - 16

Figure 14 Share of Insured Acres Covered at 70% or Higher

Data ss of April 17,2018
Source: RMA Summary of Business

cent increase in exports.
U.S. milk production was up 1.5 percent from
2016 to 215,466 million lbs., and all milk price increased from $16.30 per cwt. to $17.60 per cwt.,
up almost 8 percent. Domestic disappearance of
all products remained at about 2016 levels; however, exports grew more than 5 percent from the
previous year. Based on 2017 U.S. average all feed
cost of $10.50 per cwt., the calculated price above
total feed cost margin was $7.10 per cwt., an
increase of $1.30 from the previous year. While
prices increased, they remain well below the 2017
national average total cost of production estimated to be $22.27 per cwt., up modestly from 2016.

Crop Insurance

Market Developments

The projected base prices used to establish the
value of the crop and the insured liability for the
Revenue Protection and Yield Protection forms
of insurance policies are shown in Table 2, starting from 2011 and ending with the 2018 crop.
Projected base prices are the average of futures
prices during the discovery month that precedes
the sales closing date for the policy.
Base prices are influenced by various factors,
including remaining stocks for the crop, planting
intentions in the U.S., increasing yields, changes
in demand for the crop, the availability of alternatives, and growing conditions in other countries. Base prices in 2016 were at or near the low
end of the price range seen in recent years. Prices

rebounded in 2017 for spring and winter wheat,
cotton, and rice but are still close to the lower end
of the recent price range, while the soybean price
is down from 2016 and corn is unchanged.
Corn is responsible for roughly one-third of
the value of all crop production and has a strong
influence on the prices of other crops. Figure 12
provides corn futures prices for the contract for
December delivery for each crop season starting
with 2012 and continuing through 2017.
The base price of $5.68 per bushel in 2012
was down marginally from the price level observed at the end of 2011. As the 2012 drought
set in, prices ran up to more than $8.00 per bushel by late August. With the decline in demand
at the higher price level, in combination with
an increase in foreign production, prices began
to moderate, ending the year above $7.00. Corn
prices started the 2013 year sharply lower due to
an end to the drought and an expectation for a
recovery in corn production, resulting in a base
price of $5.65. Prices continued to fall throughout 2013, ending the year at around $4.25. The
slide in prices continued into 2014, with futures
prices finishing the year at $3.96 per bushel. With
no support on the demand side and accumulating stocks, the 2015 futures price hovered above
the $4.00 level before retreating toward the end
of the year. Futures prices remained weak in the
early part of 2016 and, other than a brief surge in
June, weakened further throughout the remainder of the year. The base price in 2017 recovered
from the prior year's ending price to just under
the $4.00 level, but future prices followed a similar path as in 2016, ending the year below $3.40.
The implied volatility factor (IV) derived
from futures market information serves as a measure of riskiness of expected prices. Each year

Table 3 Volatility Factors
	Historical
	Price	
	Volatility1

Volatility Factor2

	
								
CROPS
		
1968-2017	
2011	2012	2013	2014	2015	2016	2017	
2018	

% CHANGE
2016-17	2017-18

	 Wheat, Winter ($/bu)	
0.19	 0.33	0.26	0.24	0.19	0.17	0.22	0.18	0.16	-18.2%	-11.1%
	 Wheat, Spring ($/bu)	
0.23	
0.25	0.19	0.15	0.14	0.15	0.15	0.13	0.13	-13.3%	 0.0%
	
Corn ($/bu)	
0.20	 0.29	0.22	0.20	0.19	0.21	0.17	0.19	0.15	 11.8%	-21.1%
	
Soybeans ($/bu)	 0.18	 0.23	0.18	0.17	0.13	0.16	0.12	0.16	0.14	 33.3%	-12.5%
	 Upland Cotton ($/lb)	 0.24	 0.37	0.19	0.17	0.15	0.16	0.14	0.15	0.14	 7.1%	-6.7%
	
RICE ($/cwt)	
0.23	 0.22	 0.14	0.11	 0.10	 3	 0.15	0.17	 0.12	
13.3%	-29.4%
1
Historical volatility values are obtained by fitting log-normal distribution to the time series of the ratio of the harvest price to the base price from 1968 to 2017. For each year in that time period, the harvest
and base prices are calculated by using relevant futures prices in that year. Source: Barchart.com
2
Revenue Protection as of April 10, 2018.
3
Due to insufficient futures price data, revenue insurance was not available in 2015
Source: Various RMA Manager's Bulletins

16

JUNE2018


http://www.Barchart.com

Table of Contents for the Digital Edition of Crop Insurance Today June 2018

No label
Crop Insurance Today June 2018 - No label
Crop Insurance Today June 2018 - Cover2
Crop Insurance Today June 2018 - 1
Crop Insurance Today June 2018 - 2
Crop Insurance Today June 2018 - 3
Crop Insurance Today June 2018 - 4
Crop Insurance Today June 2018 - 5
Crop Insurance Today June 2018 - 6
Crop Insurance Today June 2018 - 7
Crop Insurance Today June 2018 - 8
Crop Insurance Today June 2018 - 9
Crop Insurance Today June 2018 - 10
Crop Insurance Today June 2018 - 11
Crop Insurance Today June 2018 - 12
Crop Insurance Today June 2018 - 13
Crop Insurance Today June 2018 - 14
Crop Insurance Today June 2018 - 15
Crop Insurance Today June 2018 - 16
Crop Insurance Today June 2018 - 17
Crop Insurance Today June 2018 - 18
Crop Insurance Today June 2018 - 19
Crop Insurance Today June 2018 - 20
Crop Insurance Today June 2018 - 21
Crop Insurance Today June 2018 - 22
Crop Insurance Today June 2018 - 23
Crop Insurance Today June 2018 - 24
Crop Insurance Today June 2018 - 25
Crop Insurance Today June 2018 - 26
Crop Insurance Today June 2018 - 27
Crop Insurance Today June 2018 - 28
Crop Insurance Today June 2018 - 29
Crop Insurance Today June 2018 - 30
Crop Insurance Today June 2018 - 31
Crop Insurance Today June 2018 - 32
Crop Insurance Today June 2018 - 33
Crop Insurance Today June 2018 - 34
Crop Insurance Today June 2018 - 35
Crop Insurance Today June 2018 - 36
Crop Insurance Today June 2018 - 37
Crop Insurance Today June 2018 - 38
Crop Insurance Today June 2018 - 39
Crop Insurance Today June 2018 - 40
Crop Insurance Today June 2018 - Cover3
Crop Insurance Today June 2018 - Cover4
https://www.nxtbook.com/allen/cint/56-2
https://www.nxtbook.com/allen/cint/56-1
https://www.nxtbook.com/allen/cint/55-4
https://www.nxtbook.com/allen/cint/55-3
https://www.nxtbook.com/allen/cint/55-2
https://www.nxtbook.com/allen/cint/55-1
https://www.nxtbook.com/allen/cint/54-4
https://www.nxtbook.com/allen/cint/54-3
https://www.nxtbook.com/allen/cint/54-2
https://www.nxtbook.com/allen/cint/54-1
https://www.nxtbook.com/allen/cint/53-4
https://www.nxtbook.com/allen/cint/53-03
https://www.nxtbook.com/allen/cint/53-02
https://www.nxtbook.com/allen/cint/53-01
https://www.nxtbook.com/allen/cint/52-04
https://www.nxtbook.com/allen/cint/52-03
https://www.nxtbook.com/allen/cint/52-02
https://www.nxtbook.com/allen/cint/52-01
http://www.brightcopy.net/allen/cint/51-04
http://www.brightcopy.net/allen/cint/51-03
http://www.brightcopy.net/allen/cint/51-02
http://www.brightcopy.net/allen/cint/51-01
http://www.brightcopy.net/allen/cint/50-04
http://www.brightcopy.net/allen/cint/50-3
http://www.brightcopy.net/allen/cint/50-2
http://www.brightcopy.net/allen/cint/50-1
http://www.brightcopy.net/allen/cint/49-4
http://www.brightcopy.net/allen/cint/49-3
http://www.brightcopy.net/allen/cint/may2016
http://www.brightcopy.net/allen/cint/february2016
http://www.brightcopy.net/allen/cint/november2015
http://www.brightcopy.net/allen/cint/september2015
https://www.nxtbook.com/allen/cint/may2015
https://www.nxtbook.com/allen/cint/february2015
https://www.nxtbook.com/allen/cint/november2014
https://www.nxtbook.com/allen/cint/september2014
https://www.nxtbook.com/allen/cint/may2014
https://www.nxtbook.com/allen/cint/february2014
https://www.nxtbook.com/allen/cint/november2013
https://www.nxtbook.com/allen/cint/august2013
https://www.nxtbook.com/allen/cint/may2013
https://www.nxtbook.com/allen/cint/february2013
https://www.nxtbook.com/allen/cint/november2012
https://www.nxtbook.com/allen/cint/august2012
https://www.nxtbook.com/allen/cint/may2012
https://www.nxtbook.com/allen/cint/february2012
https://www.nxtbook.com/allen/cint/44-4
https://www.nxtbookmedia.com