The 2024 price discovery period used to determine projected prices and volatility factors for Federally-sponsored corn and soybean crop insurance products is completed for areas with a March 15th sales closing date (SCD). For the majority of the corn belt, the approved Projected Price (PP) for corn is $4.66 and the Volatility Factor is 0.19, and for soybeans, the Projected Price is $11.55 with a Volatility Factor of 0.15. These represent substantially lower prices than in recent years and will result in lower premiums in general and correspondingly lower insured revenue levels.

Table 1 below contains Projected Prices, Volatility Factors, and Harvest Prices for the previous 14 years. The Projected Price (PP) and Harvest Price (HP) are futures price measures used to determine guaranteed revenue and actual revenue for Federal crop insurance, and do not reflect the local cash basis. The Projected Price for corn is determined by averaging the closing December futures price during the trading days of February, and for soybeans by averaging the November Futures closing prices during February. The Volatility Factors are determined by an average of the most recent five trading days’ implied volatility estimates, scaled for the interval of time from now until the middle of October — the month during which average prices are used to determine Harvest Prices. Bolded values in Table 1 indicate which of the PP and HP measures was greater in a given year.

For corn, the projected price is $4.66 or 21% below last year’s PP, and for soybeans the PP is $11.55 or 16% below the 2023 projected price. In simplest terms, a producer with a 225 bushel APH insuring at an 85% coverage level would have $891 of insured revenue (0.85 x $4.66 x 225) compared to $1,130 in 2023 (0.85 x $5.91 x 225).

Figures 1 and 2 below provide a graphical depiction of the same information along with the long run averages for each crop. In the case of corn, the historic pattern has been that the Harvest Price has averaged about $0.06 below the Projected Price, and for soybeans, the Harvest Price has averaged about $0.17 below the Projected Price.

During February this year, the futures prices for both corn and soybeans trended downward during the month resulting in Projected Prices that are above the current futures prices for both corn and soybeans. The Dec corn futures contract is trading just a few cents below the PP but Nov Soybean futures are trading $0.11-$0.15 below the projected price at the time of this writing.

This relationship has important implications for the risk management provided by crop insurance, as the initial coverage levels are slightly above the levels of revenue implied by the current futures trade, and thus the initial crop insurance position would be viewed as being partly “in-the-money”. Conversely, it does result in a situation where the likelihood for fall prices being above current Projected Prices is reduced, lessening the value of the harvest price provision in revenue protection (RP) policies that allows the guaranteed revenue to increase if HPs are above PPs.

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