Wheat producers expecting payments from a Revenue Assurance or Crop Revenue Coverage crop insurance plan may not receive the payments they are counting on to ride out a rough harvest this year.
According to Dalton Henry, a specialist with the Kansas Association of Wheat Growers, the lack of payment is a result of a wide basis level at county elevators. While prices may appear low, well below $4 a bushel at most elevators, the Kansas City Board of Trade, which establishes prices based on futures contracts, is trading wheat at nearly $5 a bushel.
Producers’ insurance policies are based on their five-year yield average. Most producers will insure their crops at 70 or 75 percent. So, for instance, if a producer has an average of 40 bushels an acre, then they are insured up to 28 bushels an acre.
Insurance policies are used to protect producers against yield losses and price reductions.
The RA and CRC insurance policies issued to farmers use the futures prices to determine whether a producer receives a payment. Although producers aren’t getting great prices at the elevator, the formula used to determine insurance payouts likely won’t deliver an additional paycheck.
“It appeared the harvest price, as determined at the Kansas City Board of Trade, will be too high to trigger CRC and RA program payments, even though the cash price a producer may receive could be much lower than the harvest price,” Henry said.
In past years, the difference between the local, elevator price and the KCBT price is small, around 50-cents.
This year, the difference is exceeding $1, reaching $1.25 in some parts of the state. The dramatic difference in prices has been blamed on rising transportation costs – which have nearly doubled in the past year - and the nearly 1 billion bushel stockpile, which is a result of the wheat being overpriced in other markets.
“There is a disconnect between the futures and the cash prices,” said Gary Gantz, Kansas Grain and Feed Association chairman.
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Wheat producers expecting payments from a Revenue Assurance or Crop Revenue Coverage crop insurance plan may not receive the payments they are counting on to ride out a rough harvest this year.
According to Dalton Henry, a specialist with the Kansas Association of Wheat Growers, the lack of payment is a result of a wide basis level at county elevators. While prices may appear low, well below $4 a bushel at most elevators, the Kansas City Board of Trade, which establishes prices based on futures contracts, is trading wheat at nearly $5 a bushel.
Producers’ insurance policies are based on their five-year yield average. Most producers will insure their crops at 70 or 75 percent. So, for instance, if a producer has an average of 40 bushels an acre, then they are insured up to 28 bushels an acre.
Insurance policies are used to protect producers against yield losses and price reductions.
The RA and CRC insurance policies issued to farmers use the futures prices to determine whether a producer receives a payment. Although producers aren’t getting great prices at the elevator, the formula used to determine insurance payouts likely won’t deliver an additional paycheck.
“It appeared the harvest price, as determined at the Kansas City Board of Trade, will be too high to trigger CRC and RA program payments, even though the cash price a producer may receive could be much lower than the harvest price,” Henry said.
In past years, the difference between the local, elevator price and the KCBT price is small, around 50-cents.
This year, the difference is exceeding $1, reaching $1.25 in some parts of the state. The dramatic difference in prices has been blamed on rising transportation costs – which have nearly doubled in the past year - and the nearly 1 billion bushel stockpile, which is a result of the wheat being overpriced in other markets.
“There is a disconnect between the futures and the cash prices,” said Gary Gantz, Kansas Grain and Feed Association chairman.
