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Crop insurance price guarantees coming

Jeff Caldwell 10/30/2013 @ 10:01am Multimedia Editor for Agriculture.com and Successful Farming magazine.

Remember LDPs? Cashing in on an LDP depended on hitting the lowest possible cash price and making up the difference with the LDP.

Higher grain prices over the last few years have made LDPs something of an antiquity. Or such was the common belief before grain futures prices started diving earlier this fall. But that doesn't mean cash basis levels aren't making sales more enticing, says Steve Johnson, Iowa State University Extension farm management specialist.  

"Farmers are going to feel pretty beat up by the the time we get these crops harvested," Johnson says. "Bottom line: Futures markets typically don't rally at harvest, but the basis improves! This usually occurs when about half the U.S. crop is harvested. Remember the old LDP days when farmers waited until just about now to grab the LDP? Usually one morning in October after futures prices rallied, they'd grab the LDP. They were picking the lowest cash price with the largest LDP."

And, if you had to file a crop insurance claim or two this year -- whether because of prevented planting or damage during the growing season -- you'll be finding out soon what your coverage price guarantees will be, as USDA determines those prices later this week.

The harvest price is determined in October. It's the daily average futures price from open outcry," Johnson says.

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