Crop Insurance + Grain Marketing: What Agents Need To Know

Farmers have many options to market their grain and hedge their price risk, but many hesitate to fully utilize forward marketing. However, marketing ahead of harvest can result in better prices and increased revenue for farmers.

By being aware of the factors that farmers take into consideration as they market their grain, agents can help guide their customers toward the policy decisions that will help them capitalize on guaranteed production and maximize profit.

Below, find excerpts from FMH’s newest InsureCast episode on how customers can use forward marketing and crop insurance for optimal risk management.

What are some of the reasons farmers may hesitate to utilize forward marketing?

Ken Ripley, FMH Assistant Vice President – Regional Sales Manager and a farmer himself, said a lack of historical precedent keeps many farmers from forward marketing their crops. “We learned a lot from our elders. My grandfather never forward contracted a single bushel in his life. Some of that rubs off on you,” he said. “But we’ve got tools now to let us sell it before it’s in the trunk, so to speak.”

Jake Moline, risk management consultant at StoneX, agreed. “There’s a lot of fear from farmers – how can I sell something I don’t have in the bin? That fear really limits forward selling,” he said.

How does crop insurance help protect farmers against risk from forward marketing?

“The most crucial thing to understand as a grain farmer is how your hedging plan, combined with crop insurance, protects you,” Moline said.

That protection can give farmers confidence to market their crop early and aggressively. “It’s usually when you’re most uncomfortable about making sales that you should be most aggressive in making sales,” said Moline. “As long as you’re not marketing over your guaranteed bushel level, you really can’t get hurt.”

Ryan Benes, FMH Assistant Vice President – Regional Sales Manager, added that a farmer’s crop insurance policy can protect more than just revenue. “Any type of federal crop insurance has a unique tool: It protects yield,” he said. “No financial tools can protect yield.”

How should farmers think about increasing revenue and using spring insurance prices to their advantage?

Benes said he encourages farmers to think of their crop insurance liability as their revenue, and to aim to surpass that number with their sales. “Every time you make a sale that’s better than the spring insurance price, you’re increasing your revenue,” he said.

Moline recommends taking the opportunity to make profitable sales while the chance is there. “While the window is sometimes very small, that window almost always presents itself. There’s always a chance to make sales above your spring price,” he said. 

Ripley agreed. “You’ve got the guarantees [of crop insurance] there to protect you – take advantage of the price while you’ve got it,” he said. “It’s always better to make a sale that’s a profitable sale than wish you’d made a sale when the market’s turned the other direction. A good sale in 2023 is a great sale in 2024.”

What crop insurance policies support forward grain marketing?

Revenue Protection (RP) and Enhanced Coverage Option (ECO) policies are great choices for farmers as they forward market their crops. 

According to Ripley, recent price projections for 2024 are 10 to 15 percent lower than this crop year, meaning now is a great time to lock in coverage. “If projections are even close to right, ECO is a good plan,” he said. ECO is an optional endorsement to supplement a farmer’s underlying policy, providing area-based coverage for a portion of the deductible of that policy, with top-end coverage levels up to 95 percent. FMH also offers ECO+™ for even more top-end coverage on an individual basis.

Benes also highlighted RP coverage, a federal product that protects against production loss, price decline or increase, or both. With RP, if a farmer loses revenue off bushels, that can potentially be replaced by their crop insurance. “You’re still responsible for marketing your bushels, but if for some reason you fall short, you have the crop insurance backstop there,” he said.

    Listen to the Episode

    Learn more in our full InsureCast episode on grain marketing, and be sure to subscribe wherever you get your podcasts.