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"Crop insurance payments could be large on some farms and will
partially make up for shortfalls in income," said Gary Schnitkey, U
of I Extension farm financial management specialist. "Rains during
middle July have reduced dry and droughty conditions over some areas
of Illinois," he said. "Other areas, however, received little or no
rain, and crop yields likely are still being reduced. Even areas
that received significant rains have had yield reductions due to
little rain during May and June."
The insurance calculator,
2005 iFarm Insurance Payment
Calculator, allows a producer to enter the crop, county and actual
production history yield for the situation of interest, Schnitkey
said. Then, insurance payments are generated for user-specified
yields and harvest prices.
Information at the calculator website includes county-by-county
statistics for corn yield as a percent of trend-line county corn
yield, expected 2005 yields, and soybean yield as a percent of
trend-line county soybean yield.
"This year is a fairly typical drought year, except that the
drought is not as widespread as in some years," said Schnitkey. "In
drought years, yields are lower because of dry weather, and harvest
prices often are higher than base prices. Base and harvest prices
are used to determine insurance payments and are averages of
settlement prices of Chicago Board of Trade futures contracts --
December contract for corn and November contract for soybeans.
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"The base price is determined by average settlement prices during
February, while harvest prices are based on averages during a
harvest month. Generally, during short crop years, futures prices
are higher in the fall than in February. Hence, one would expect
harvest prices to be higher than base prices this year."
Because this year's supply shortfalls will not be as large as in
some years in which droughts were more widespread, Schnitkey expects
that harvest prices may not be above base prices as much as in some
years.
Because the growing season is still under way, both harvest
prices and yields are not known. Indication of harvest prices can be
obtained from futures prices. For yields, the statistics mentioned
above can provide some insight.
"Use of county yields may not represent an individual farm
field," Schnitkey noted. "Farm yields are more variable than county
yields, so the percents in some of the tables may be higher or lower
than that experienced on an individual farm.
"As yield and price estimates become more certain, the calculator
can be used to estimate crop insurance payments."
[News release from the
University of Illinois College
of Agricultural, Consumer and Environmental Sciences]
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