Crop Insurance and Grain Marketing

Help Farmers Leverage Crop Insurance to Provide a Safety Net for Grain Marketing

Crop insurance agents don’t need to be experts in grain marketing to help farmers use their crop insurance as part of a grain marketing strategy. Agents can help their customers by showing them how a policy can protect their bushels when marketing grain. Likewise, if the customer has specific goals with marketing grain, their agent can help determine the best coverage to meet those goals.

Ken Ripley explains the relationship between grain marketing and crop insurance from his perspective as a farmer and FMH Strategic Account Manager. Ripley says, “A customer should feel comfortable marketing their protected bushels. Every farmer that buys an insurance policy has the possibility to market grain. Many people don’t understand how to use it.”

Giving farmers the confidence to sell early is valuable because grain prices tend to be lowest near harvest, and many farmers risk selling grain at the bottom third of the market while waiting for prices to bounce back.

With the changing agriculture industry and global market, there are many ways a farmer can market grain including direct sales, buying a futures contract with the local co-op, or hedging future prices.

For example, say a customer is concerned about not producing enough grain to fulfill a futures contract. If the customer has a policy that protects the contracted bushels, then he or she wouldn’t need to grow the extra crop to fulfill that contract.

Or, in the instance of hail damage, the farmer would be able to negotiate with futures contract buyers and potentially move the contract into the next crop year because of the safety net of his or her policy.

Each option offers a different way to market grain, with different levels of risk and benefits. Ripley says that grain marketing works better as a long-term plan to benefit the overall farm operation. “It just depends on what flexibility you want to have with that marketing plan. Using my crop insurance-protected bushels is the starting point to determine what price I need in order to sell,” Ripley says. As a farmer, he tries to keep an eye on the seasonality of the market and have a sell-by date.

When it comes to crop insurance policies, a revenue policy is a more robust coverage option for farmers interested in grain marketing. It better protects against market fluctuations unlike a yield-only policy.

An FMH private product like RAMP can help farmers protect the bushels not covered by their MPCI policy. With the additional coverage, the farmer gains confidence to sell grain sooner, avoiding later market drops.

Agents can use their understanding of crop insurance to give the customer confidence to market grain with futures contracts, including cueing them into what bushels are protected, allowing them to make the most out of their insurance product.