This year's harvest has been an extremely trying time for corn and soybean producers who have struggled through perhaps the worst October ever for harvesting grain. As we enter November, only 25% of the corn and 51% of the soybeans are harvested - woefully behind the normal pace of 71% corn and 87% soybeans. This could be a disaster in waiting, and the market is starting to treat this serious threat to the 2009 crop with more and more price premium as time clicks on. The one thing that can seal the nail in this coffin is an early arrival of winter, effectively socking in a good share of the 2009 crop in the fields.

Soybeans could be more devastating than corn in this regard, as snow would shatter soybeans certainly more easily than causing losses in corn. But even corn could be affected, as corn needs time to dry down and also to get picked and dried in grain dryers. We already are getting well behind normal so that drying needs to occur at cooler temps in November instead of October - slowing the whole process down. The seriousness is even more evident when you consider that problem areas will take a while to dry down soils before being able to tackle the harvest. The time needed to do that will be frustratingly long, as the whole process of drying out soils takes longer in November under cooler conditions and shorter days than in September or October.

So, the whole process of dealing with this harvest has been more than trying. For some areas, it actually gets even worse. In many ND, MN, and other fields down into Ill, corn is molding in the cob. The mold can be a potential problem down the road, as buyers are being very particular about not accepting this questionable quality grain at harvest. Buyers simply don't have time to blend this 'off' grade grain off at this time, and therefore some farmers are finding they don't have a market for this grain at harvest.

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Pro Ag has researched the mold problem and found that crop insurance considers it kernel damage, and is not treated like mycotoxins. Instead, the kernel damage is considered a loss but it takes over 35% of kernel damage (corn and soybeans) to qualify for a price comparison method of adjustment (Reduction in Value or RIV treatment), where the big insurance checks can come. Otherwise kernel damage for both corn and soybeans up to 35% is basically a one-for-one deal (slightly more in corn but less in soybeans) - based on a table in RMA special provisions. For example, 22.5% molded corn is adjusted at 22.5% less than total production (our 200 bu example would be 200 x .775 = 155 bu corn). The elevator may say the corn is worthless today, but crop insurance says its worth the same as 155 bu corn. Therein lies the rub. Of course, after harvest this corn might be worth a whole lot more as competition to blend the corn for cattle feed might make it more marketable.

For farmers with less than 35% mold (which includes most corn with mold problems), there is an unpleasant surprise! Many elevators say over 10% mold is unmarketable, so farmers are finding that crop insurance will give only a 5.9% adjustment for 10.5% mold. If you have a 200 bu crop, 94.1% of it still counts as production so essentially this is no loss for most producers. Quite a catch to find a large crop that is unmarketable, and then find no loss for crop insurance. The table ratchets up to 41.1% adjustment at 34-35% mold, and over 35% goes to a price comparison method, or RIV.

For those with over 35% mold (which may be rare after harvesting the crop and drying it down), they qualify for a reduction in value but the grain must be sold. If not sold, the maximum adjustment is counting 50% of the production (in our 200 bu example, 100 bu would still count against your insurance guarantee). The only way to get better than a 50% adjustment for mold is to sell the grain at less than 50% of value. That is something most farmers may not want to do at harvest, when this discount is likely to be the largest. The grain buyer, however, might prefer it as the discounts are likely to diminish after harvest is complete. This will make it a difficult decision for farmers with over 35% mold - to harvest and sell to get the maximum crop insurance, or to harvest and take a 50% reduction and not sell the grain, hoping to get more later?

The mold adjustment method for crop insurance is set in code in the special provisions of insurance, and for now that is what is in place. There is some talk that RMA/USDA may decide to modify it, but this pre-specified procedure would then be changed after the fact. That might be a great and unpleasant surprise to insurance companies, and one which might not even be legal. Pro Ag would argue that it is unlikely to be changed, so it might be best to get familiar with the adjustment procedure so you can make intelligent decisions in the field today.

HARVEST REVENUE PRICES

Harvest revenue prices for insurance have been announced, with CRC corn at $3.72 (base price was $4.04), soybeans at $9.66 (base at $8.80), and oil sunflowers at $0.192 (base price 0.177). Corn prices were the only revenue price to drop, so you may be over your bushel guarantee and still have a CRC corn loss. Other crops must have a yield loss to qualify for payment.

The information contained, while not guaranteed as to accuracy or completeness, has been obtained from sources we believe to be reliable. The opinions and recommendations contained are based on our judgment and do not guarantee that profits will be achieved or that losses will not be incurred. Recommendations should not be construed as an offer to buy or sell commodities. There is substantial risk of loss in trading futures and options on futures.

If you have questions about this column, call Progressive Ag at 1-800-450-1404, or email ray at rlg@progressiveag.com.