Audio Transcript:

James Mintert: Welcome to Purdue Commercial AgCast, the Purdue University Center for Commercial Agriculture’s podcast featuring farm management news and information. I’m your host today, Jim Mintert director of the Purdue Center for Commercial Agriculture. And joining me today are my colleagues, Dr. Michael Langemeier, who’s the associate director of the Center for Commercial Agriculture. And we also have with us today, Dr. Brad Lubben from the University of Nebraska, where he is an extension policy specialist, as well as an associate professor in the Department of Agricultural Economics. Thanks for joining us, Michael and Brad, appreciate it.

We want to talk about making your 2024 crop insurance decision. On a previous podcast, we talked about, making the farm program decision. And when we wrapped that up, we kind of wrapped it up talking a little bit about the interplay between crop insurance. and the Farm Program Decision. We’ll follow up with that as you, as we kind of move through the course of our podcast here today.

Michael, maybe a few key terms to kind of review with respect to crop insurance to make sure everybody’s on the same page.

Michael Langemeier: Yeah, before I get into this too far, we will post the slides that we’re looking at here when we’re doing this podcast. And so keep that in mind. You don’t necessarily need to be writing all of this down. It will be in, on some posted slides because some of this terminology gets pretty specific.

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[00:01:21] Key Crop Insurance Considerations

Michael Langemeier: We’re going to talk a lot about enterprise units today. And that’s the addition of all basic units in one county for a single crop. You can also buy basic and optional units. Basic units are all of one crop in a county for a specific share of production is insured separately. And so, the easiest example there, if you have different crop share arrangements with different landlords, those would all be separate unit. The optional unit, each farm and crop is insured separately. As you go from enterprise to basic to optional, the premiums increase rather dramatically. And so enterprise units, because it’s combining all those basic units, in one county for a single crop, is the lowest per acre product there. But as you, as you know, it, it, it doesn’t quite provide the same protection as basic and optional. In terms of revenue protection, revenue protection insurance insures against revenue loss for a change in price, low yield, or a combination of these two items.

When you’re talking about a price change, Brad mentioned this in the other podcast, the farm policy podcast. This is very important to keep in mind. You’re talking about a price drop from the spring to the fall. When you’re, when you’re looking at farm policy, when you’re looking at ARC county PLC, that’s not the same same period that you’re looking at there. You’re looking at benchmark prices and reference prices, and those are calculated using five year, five year olympic averages. And so the price drop here is from the spring to the fall. And, and reason why that’s so important is it’s not that common. We’ll talk about this a little later, Jim. It’s not that common to have a 15 percent drop in either corn or soybean price from the spring to the fall in a given year. So the revenue protection guarantee, which we’ll also talk about, is, is trend adjusted yield times your coverage level, there’s a lot of choices of coverage level, and then the greater of the projected price or the harvest price. And that’s also a very important point. If the projected price is higher than the harvest price, then the projected price is used in the revenue protection guarantee computation. On the other hand, if you have a year like 2012, for example, where the harvest price was substantially higher than the projected price, your revenue guarantee is actually higher than it was when you were buying the insurance product in the spring.

And so the projected price is based on settlement prices for the future contracts during February. And then the harvest price is based on settlement prices for futures contracts during October.

James Mintert: And you mentioned this, Michael, but we’re recording this on the 27th of February. So we had to estimate the projected prices, but they’re going to be pretty close to the reality, right?

Michael Langemeier: We also estimated the volatility and, and as we’ve pointed off pointed out before, I mean, the vol, the, the volatility really does matter. If you have higher volatility, you have higher premiums.

One of the things that’s pretty important to keep in mind. The projected price in ’24 is gonna be substantially below the 2022 and ’23 projected price. In fact, you calculated this, Jim, and it was about 21% below when you’re looking at 2024 compared to ’22 and ’23.

James Mintert: I think our listeners probably already knew it was down, but the magnitude is kind of stunning with that 21%, right?

Michael Langemeier: Yes. It’s really is.

Brad Lubben: To, to be reminded of how far it’s fallen does not help.

James Mintert: Yeah, exactly.

So you looked at the dollars per acre and that, well, obviously the percentages are going to be the same basically, but that’s kind of stunning as well.

Michael Langemeier: Yes, the revenue protection, the guarantees are much, much lower. If you look at, for example you look at, for example, Posey County, we’re using Posey County in our examples here. The far southwest county in Indiana. You’re looking at even with the 85 percent revenue protection, which would be a very high coverage level, the highest revenue protection coverage level you can get, your guarantee would be $718. Last year, if you had the 85 percent RP product, your guarantee would have been over $900. And so a big drop in revenue guarantees.

James Mintert: And again, looking at the chart that you put together, Michael, if you go back two years to 2022, that drop on the 85 percent coverage level is almost $300 a year.

Michael Langemeier: Yes, it’s, it’s, it’s rather large.

James Mintert: Yeah, so that, that’s an eye catcher. It’s kind of stunning to think about what’s happened in a short period of time.

Michael Langemeier: Now, one of the advantages, we’ll get into premiums here in a little bit, one of the advantages of having a lower revenue guarantee and a lower price is the premiums are lower.

James Mintert: That’s true.

Michael Langemeier: That’s true.

James Mintert: Alright.

Michael Langemeier: But you’re getting less protection.

James Mintert: So, why do most producers purchase revenue insurance? That’s a question you posed, right? So, I’ll let you answer it.

Michael Langemeier: I’m going to let you answer that one because it has to do with put options.

James Mintert: So, crop insurance does give you a put option, and Brad Lubben mentioned this when we were on our previous podcast talking about that. The embedded price in there, whether that turns out to be the projected price or the harvest price, is effectively a put option. But the problem with the 2024 is the fact that that put option strike price is a much, much lower and as we indicated, roughly 21 percent on corn lower than it was last year.

So in the case of 85 percent coverage, that mean price has to decline by more than 15 percent for that put option to be effective. And you took a look at this from a historical perspective. This isn’t really a forecast, but it’s a historical perspective. And it doesn’t happen very often, right? I think it was

Michael Langemeier: Four out of 17. Four of the last 17 years we had a larger than 15 percent drop in corn price. And one of those years was just barely.

James Mintert: Yeah. So if you, if you just take the raw numbers there, that means one out of four approximately. But as you point out, the one was kind of a break even, so to speak.

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[00:06:54] Corn comparison of Crop Insurance

James Mintert: All right, let’s take a look at the comparison, the crop insurance bundles for corn. And one of the things we wanted to do was ask the question, do you want to either increase or perhaps decrease your coverage? And then maybe an easy kind of a thumb rule way to do that.

Michael Langemeier: Now, we’ve made some assumptions here in terms of the projected price and the volatility. And so the premiums would depend on what those final numbers come up, you know, where they come up. We’ve also assumed that a 190 trend adjusted yield for Posey County. That is a About where the trend adjusted yield is, but we’ve assumed kind of a county average there, even though we’re looking at a farm level coverage here. And so let’s start with 75%. The 75 percent product, you get a, it’s $15.40 approximately, and you have an revenue guarantee of $665.

As you move to 80%, you get about an 11 jump in premium, but you also get about a 45 jump in, in, in, in the Farm Level Revenue Guarantee. To me, that’s a pretty good buy, Jim. That essentially means that about, you have to have a loss more than one out of four years. You know, in order to make that pay. I don’t think that’s that big a premium jump for the extra revenue guarantee that you get. And so, and so that explains why a lot of producers in, in, in southern Indiana go with that 80 percent product rather than the 75 percent product.

However, when we go from the 80 to 85 percent product, you’re talking about a pretty significant increase in premium. That premium goes all the way up to $46 per acre. That’s kind of an ouch. If you will. But you, you, you, but you still only get a $45, increase in revenue guarantee. That’s a pretty expensive increase in revenue guarantee going from 80 to 85%. And so a lot of producers I’ve talked to in southern Indiana that’s just too big a jump in premium to, to move to that 85%.

James Mintert: So for clarity there, Michael, when you were looking at, for example, the 75 to 80 percent jump in in coverage level. You came up with a computation that said well It’s going to cost roughly $11 an acre to get $45 of coverage that works out to using the exact math I guess about 24 percent of the time. So what we’re saying is you’d have to, that 5 percent jump in coverage would be triggered one out of four times for this payoff, right? It’s not the total payoff, it’s that jump in coverage that we’re trying to analyze. So for listeners, an easy way to look at this is to maybe download the slide, maybe that makes that a little more clear with respect to thinking about it.

But intuitively, you know, it’s kind of a nice thumb rule with respect to asking yourself particularly when you looked at that 80 to 85, Michael, and you said, well, hey, what’s, what are the odds of me collecting on this additional 5 percent of coverage? More than every couple of years?

Michael Langemeier: Yeah, those are not real good odds.

James Mintert: Yeah.

Michael Langemeier: Now, if you go to northern Indiana, we’re not going to show a separate slide for northern Indiana. If you go to northern Indiana, you can go all the way to 85 percent and the premium, it still makes sense to go from that 85 percent. Because the extra premium is not that big for the jump in revenue guarantee you have.

James Mintert: All right, let’s turn our attention again when we did the other podcast with Brad Lubben and we talked about farm program choices. One of the things we talked about was if you decide to go the PLC program choice, you should look carefully at what’s known as Supplemental Coverage Option or SCO. So let’s walk through how that works.

Michael Langemeier: We’ve covered some of this already in the policy podcast, but I don’t think it would hurt to cover some of that again and then maybe elaborate a little bit more. First of all, SCO can only be purchased on FSA farms on which PLC is chosen. That’s extremely important. Also, SCO provides coverage from 86 percent to the coverage level of an underlying revenue protection or yield protection policy. Well, revenue protection is by far and away the workhorse in the crop insurance world, and so let’s talk about the revenue protection product.

And so, for example, if you picked 80 percent coverage level for Posey County, you could buy this SCO coverage and protect from 86 percent down to 80 percent or an additional 6%. You know, 6 percent of the revenue would be covered with this SCO a product.

The SCO indemnity payments are capped because you are looking at a very specific range of additional coverage that you’re getting. And another thing about SCO that’s very important to keep in mind, is SCO is a county level product. And so if you had revenue protection coverage at 80%, that’s based on farm level yields. That 80 to 86 percent could be protected with the SCO. The, that SCO is based on county. And so your, your county yields may or may not be correlated with your farm yields or vice versa. And so it’s important to keep that in mind when you’re looking at the SCO product. Another point about the SCO product, it’s fairly heavy, heavily subsidized. And so it’s, it’s fairly it’s fairly low premium to go that extra percent going from 85 to 86 percent or going from 80 percent to 86%. At least when I’ve looked at this for different counties in Indiana, you’re only talking a few extra dollars to go to 80 to 86%.

James Mintert: So, Brad, I think one of the challenges with the possibility of choosing the SCO is it’s probably not all that attractive if you’re thinking about 85 percent coverage. It becomes more attractive as you start looking at lower levels of coverage on your RP policy, right?

Brad Lubben: Right. I, I would agree that the, the higher you want to buy individual coverage, the less valuable SCO becomes. It’s just a smaller gap. Whatever advantage SCO has plays out over a smaller gap and the extra value of it just isn’t there.

But if you have, compare it to ARC, and there’s a reason as Michael noted, you can’t have SCO and ARC together, you have to have one or the other. Technically we should add a footnote in there. You can buy SCO if you’re not in the farm program altogether. So, you don’t have to be in PLC, you just have to not be in ARC to, to note.

But fundamentally, if I’m choosing to enroll in ARC it’s because I’m happy with the safety net that’s tied to revenue at the county level that protects me from 86 down to 76. If I’m thinking SCO sounds like a better deal. Maybe it’s because I’m not already buying up to 75 percent or higher. Maybe I’m protecting a lower level and that gap is, can be filled with accounting product. Maybe I like the price protection of PLC better and I can effectively replace SCO with, or I can effectively replace ARC with SCO. And maybe that’s, that’s 1 other alternative.

Think of a different back of the envelope calculation. What’s, what’s SCO or what’s ARC really worth? It’s the value of the SCO product that you could have bought as a, as an alternative. That’s sort of the maximum expected value of ARC. What’s, what’s the value of PLC? It’s sort of what a, what a put option at the, at the effective reference price would have been. So you could, you could do several different calculations and try and figure out what the market thinks they’re currently worth, what the insurance market thinks they’re worth. But fundamentally, the more, the more that you want individual coverage, and the less interested you are in SCO then, then the more you lean towards ARC. The more interested you are in SEO, the more you lean towards PLC.

Michael Langemeier: So let’s be really specific here for southern Indiana. We can include southern illinois and Kentucky also in that comparison. What we’re suggesting here is when you’re looking at corn, for example, you know, look at ARC county or perhaps look at, at PLC with maybe, maybe, maybe an SCO coverage of 6%. And so maybe choosing that revenue protection product at 80%. And then if you want some additional coverage, look at SCO go from 80 to 86%. So that, that kind of gives you a gives you a couple of things to look at.

James Mintert: I would agree with that, except I’d probably take it maybe one step further, Michael. And I think particularly as you think about southwest Indiana. Southeast Illinois. You mentioned Kentucky. Yeah, probably look at the 75

Michael Langemeier: Yeah. Do that too. Yeah.

James Mintert: 75 would be a very viable option with combined with SCO.

Brad Lubben: And Michael, this might put you on the spot. I’m sure you can handle it. The relative federal subsidy levels for SCO are higher, I think, than what the subsidy rates are for those highest levels in individual coverage.

Michael Langemeier: Yes.

Brad Lubben: So, when you go from 75 to 80 or when you go from 80 to 85, you give up on the subsidy support. SCO ends up being a more supportive product at that level, right?

Michael Langemeier: Yeah, the extra, the other way of saying that, you know, is the extra, the extra amount you pay for SCO is not very large. It is heavily subsidized. For example, I’ll look at Posey County here. If I want to go to 80 to 86 percent, you know, so I have 80 percent revenue protection. I want to go to 8, I want to go to 6, you know, use 6 percent SEO. You’re talking $7 per acre. That’s not very much. But again, you’re, you’re, you’re, you’ve got to do use PLC. If you’re going to go that route, you need to choose PLC. And, and so.

Brad Lubben: Right.

James Mintert: And then the corollary is, is remember when you buy the SCO product that it’s a county level product and that’s that, that could be a stopper for some folks. Right. So.

All right, what about the ECO, Enhanced Coverage Option?

Michael Langemeier: Yeah, the Enhanced Coverage Option, this is a relatively new option, and so a lot of producers haven’t really taken a serious look at this, but I think there’s situations where this does fit. If you’re dealing with a farm that really, really can’t afford a very large loss for whatever reason. This is a product to perhaps look at. Because it certainly does give you a higher coverage level than what we’ve been talking about so far. In fact, with the ECO product, the Enhanced Coverage Option, you could go to 90 percent or to 95% coverage level. And so think of this as a, an addition or endorsement on top of your revenue protection or yield protection product, just like SCO. Coverage extends from the selected level down to 86%, which is a point for the SCO. And so if you’re doing 90% ECO, you get protection from, from 86% to 90%. If you’re doing 95% ECO, you get protection from 86% to 95%. That 95% is getting up there, folks. The, the caveat here is the same with SCO. You are combining county level coverage. ECO is county level coverage with your underlying revenue protection, which is farm level coverage. And again, Jim, some people just aren’t comfortable combining county level coverage with farm level coverage. As, as Brad indicated in the policy podcast, it probably makes more sense in the Eastern Corn Belt, but there’s still a lot of people I talk to in Indiana that just aren’t very comfortable with combining, you know, county and, and farm level. So that is the caveat, but again, if you really need more of a safety net than is provided by the revenue protection products, this is an option.

James Mintert: So, Michael, you’ve taken a look at some bundles of insurance and made some comparisons here.

Michael Langemeier: Yeah, we already talked about the revenue protection products, 75, 80 percent and 85 percent. And so if you wanted to go up to the the 90 percent, 90 percent ECO, again for Posey County, you’re looking at an additional $12 per acre. To go from the 85 percent revenue protection all the way to the, to the 90 percent SEO. If you’re going to, going from the 75 percent product up to the 95 percent product, you’re talking an additional $30 per acre. That sounds like a lot of money and it is a lot of money. And again, this is county specific. But but, but, you know, you started getting it to 95%. You’ve got a pretty good safety, safety net there.

But also on the slide, I have noted here that your, your farm level revenue guarantee does not go up with ECO. And so you keep the farm, you keep the same farm level revenue guarantee as you had with the underlying. revenue protection product rather you get an additional county revenue guarantee and if your farm and county yields are not that correlated you’re not, you’re not protecting your farm level yields and so again we have that caveat that we’re mixing farm level yields with county yields.

And so I’ve got several scenarios. I’m going to go through here you know, rather quickly. The first scenario I’m going to talk about is a 10 percent drop in price and, and and, and hitting trend yield. And so a 10 percent drop in price is not going to trigger trigger any of the revenue protection products. So you get no additional dollars there. It would trigger, 90 percent ECO and the 95% ECO. And so and so even a 10% drop, you’d get some payout payout in particular with the 95% ECO. And so it just, it just shows you that don’t have to have a very large drop in price. And, and the 95% ECO kicks in. That assumed that the, that the farm and the county yields were the same.

I’ve got a second and third column, in particular the second column, that assumes that the price is the same. Projected price and harvest price is the same. But in this case, the county yield is right at trend, and for whatever reason, the farm yield was, was about 20 percent below trend. And so I purposely made it a fairly big number, you know, and so the farm level’s below the trend. In this case, you get a You get a revenue protection you get revenue protection payout for 80% and 85% because it’s over 20% reduction in yield. You get nothing, no additional payout on ECO because the county yield didn’t change. And so that’s, that’s a scenario where your farm yield is not correlated with a county yield. And again, that’d be very farm specific, whether it is or it isn’t. But you can think of a lot of counties, Jim, even in Indiana, where there’s a lot of difference in soil quality from one end of the county to the next. And so that’s not that extreme of an example.

Finally, on the third column, I’m actually looking at an increase in price from the projected to harvest. This is your your natural hedge, if you will with a reduction in farm and, and county yields. And so both are being reduced. And here we get payouts from revenue protection and we get additional payout from the county level coverage in, in that case.

And so, and so the, the, and, and so the, the bottom line here is your yields are fairly a correlated between your farm and your county yield. These products work pretty good together. And so at that point, you just deciding, do I need an additional safety net above 80 percent revenue protection or 85 percent revenue protection? If those yields are not that correlated, then you’re really comparing apples and oranges when you’re looking at the revenue protection and the SEO and ECO.

James Mintert: And to maybe take it one step further, Michael, if you are really highly, very highly correlated with the county yield, then the 75 percent becomes more attractive on the RP product.

Michael Langemeier: Oh, definitely. I think you’re looking at that 75 percent and then maybe, maybe getting it 11 percent SEO.

James Mintert: I think our listeners could tell Michael tends to lean towards a very conservative risk management program.

Michael Langemeier: But this is particularly important for soybeans. We’re going to talk about soybeans here, but I think it’s particularly relevant for soybeans, maybe picking a lower coverage level and thinking about increasing SCO. The problem there is we didn’t recommend PLC for soybeans and I’m not going to either.

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[00:23:08] Soybean comparison of Crop Insurance

James Mintert: Okay. All right. So let’s, let’s flip and talk about soybeans. So the projected price for 2024 is down substantially. It’s down 16 percent instead of 21. That’s the good news, but it’s still low. So I think the number was at least through last Friday was about 1161. That’ll change a little bit as we get a couple of more data points there, but it’s going to be in that ballpark. And that gives us lower guarantees. I’ll let you talk about the guarantees.

Michael Langemeier: Yeah, the revenue guarantee, just like corn, we don’t need to belabor this. The revenue guarantee, just like corn, is much lower in ’24 compared to what it was in ’22 and ’23.

James Mintert: Yeah, so I think, again, looking at your Posey County scenario, what, 85 percent coverage level this year? 523 versus 614 last year?

Michael Langemeier: Yeah.

James Mintert: So down significantly.

Michael Langemeier: One of the things we sometimes talk when the revenue guarantee goes down is we sometimes say is that a situation where, where, on increased coverage? We’re, so we’re trying to kind of embed that in our discussions here. When we look at the increase in premium, we’re also thinking about that.

But let’s go through some of the same same steps here we did with with corn for soybeans in, in Posey County. At the 75 percent revenue protection, it’s $7.13 per acre, so a pretty reasonable price on that. For an additional $6 per acre, you can go to the 80 percent revenue protection product. And then for another $11 you can move to the 85 percent revenue protection. That, and each time you do that, your, your guarantee goes up approximately 30 to 35 dollars.

And so my point here, I want to, I want to also say on this slide, just like I did for corn, going from 75 to 80 percent seems logical to me. That’s not that big an increase in premium for, for a fairly large increase in farm level revenue. In fact, we did our percentage, it’s, it’s, it’s 20 percent. When you start going to the 80 to 85 percent then that, that percentage we were talking about with respect to corn is 33%. So you have to have losses fairly, fairly often to make that jump work. And so 80 percent seems to be the sweet spot for, for corn and soybeans in, in Posey County.

Looking at the, the looking at the the, the ECO products here, the, the, the increase in the dollars is not quite as big as it was, what it was for corn. If you go from the 85 percent revenue protection to the 90 percent ECO, you’re talking an additional $6 per acre. Moving from from the 85 percent revenue protection up to the, the 95%, you’re talking about $16 there. And so it is a, it is a rather large increase as a percentage, but the dollar amounts aren’t, aren’t as big for soybeans as they are for corn. But as most people know in Indiana, you don’t collect very often on soybeans compared to corn either. Another way of saying that is soybeans tend to be quite resilient in terms of their yield.

James Mintert: And, Michael, I think before the program started, we you and I were talking about this a little bit. You’ve done some calculations and looked at how often soybean contracts pay off in Indiana. It’s pretty rare.

Michael Langemeier: Yeah, I did. I did an example using White County, and I, I think it was once in the last 25 years. And the payment was small. It was, it was one of the early 2000 years. There has not been a payoff since 2007. Depending on the coverage level you have to have, of course. But if you had 85 you know you know just not very often you get a payout for soybeans compared to corn.

James Mintert: And I think that same analysis applies over in Illinois as well, at least in most counties, so something to think about.

Michael Langemeier: So we did some scenarios again looking at looking at a drop in price, a, a, a different farm yield compared to county yield and an increase in price and, and keeping the farm yield and the county yield the same. And so let me just summarize this real briefly. If you, if you’re looking at a, if you’re looking at a drop in price and your farm yield is the same as the county yield that ECO product is, is going to kick in.

In fact, that ECO set 95%. I had a student that was doing a doing a thesis looking at different crop insurance products and different grain marketing strategies, and that 95 percent product kicks in often. But you’re paying for that. I mean, you, you, you, that’s why you’re paying so much for that, because it does kick in fair, fairly often.

Looking at the second column of your farm yield is is not the same as your county yield. In other words, they’re not correlated. You’re not going to get any benefit from the ECO if the farm yield is low and the county yield is not. If the, if, if both the farm and the county yields are, are lower they’re going to, they’re going to both have payments in terms of both revenue protection and the ECO products would, would would, would be in the green and you’d be getting some payments for, for having low yields. If that’s the case. So it’s the same story with corn. You really have to think about how correlated these farm and county yields really are. If they’re not very correlated, I don’t think the ECO products are that attractive compared to what they would be if they are correlated.

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[00:28:06] Concluding Summary

James Mintert: Yeah, so let’s kind of wrap up here and kind of see if we could draw some conclusions for our listeners.

On the farm program side, Brad, we’re thinking about ARC versus PLC. Sounds like we think that you’ve really got a decision to make with respect to corn, but not so much on soybeans. On soybeans, we both, maybe all of us, lean towards the ARC County program. On the corn side, you could at least think about the PLC program in part, if it fits in with your insurance strategy. Is that kind of where you’re at?

Brad Lubben: You know, I, I would probably, remember I come from a slightly more risky area than you do, you guys do. But I would probably suggest that ARC looks like a stronger safety net, kicks in faster, kicks in bigger, unless you’re really bearish on prices. And you got to decide how bearish you are on prices. If, if you’re really bearish on prices, you can paint a scenario where PLC wins. For both commodities. So ARC wins, unless you’re also a fan of SCO, and then you want to see how SCO adds to your safety net, maybe better than ARC does, particularly for you know, sort of given where insurance prices are relative to, to safety net prices. Take a close look at SCO and and see if that’s a better alternative.

James Mintert: And I agree with that and I would just maybe add one additional point and that is if you go the PLC route on corn, you should look very hard at purchasing SCO. Michael, do you agree with that one?

Michael Langemeier: Yes, if you’re going to, if you’re going to go the PLC route, you need, you need to do it because you’re thinking about purchasing SCO. Otherwise, it doesn’t make, like Brad said, ARC county is going to, is going to probably pay more and more, and more frequently.

Brad Lubben: Yeah. If, if I was, you know, if I was debating the numbers would suggest the only real reason that you’d go PLC is if you’re also planning to purchase SEO.

James Mintert: All right.

Brad Lubben: It’s hard to come up with a bearish enough scenario where PLC beats ARC on the, on the direct comparison.

James Mintert: Yeah, so I, so I think we’ve maybe given our listeners some, some good thoughts with respect to making their decisions on both the farm program and the crop insurance side, so.

Michael Langemeier: And the crop insurance, I mean, I, we spent 30 minutes here just to, just for me to tell you that you know, using 85 percent in northern Indiana, revenue protection looks like a pretty good, a pretty good product to buy. And using 80% revenue protection in southern Indiana also looks like a pretty good product to buy. It’s the same as last year. But I, I don’t see no reason to necessarily increase your coverage. Again, we have that caveat in corn that if, that if you are, if you are looking at PLC, then you probably should maybe reduce your, your revenue protection coverage and, and buy SEO.

James Mintert: All right. With that, I’m going to wrap it up. Go ahead, Brad.

Brad Lubben: Jim, I would, I would, let me offer one wildcard tangent point here that is worth mentioning and, and but, but it’s, it’s relevant. This debate about ARC versus PLC and, and we sort of lean one direction, unless you’re really bearish.

Well, if you’re really bearish, you can draw scenarios where payments get really big on a per acre basis. If payments are big enough on a per acre basis, you can also have producers that have enough acres, that suddenly payment limits matter. And it doesn’t do any good to enroll everything in one program crop, if you’re going to cap out on payment limits on just half your acres or something. So there could be a few larger producers who, who see the scenario where neither farm program will actually pay the max because they’ll cap out before I ever get there. Maybe they’ll actually diversify and choose some of both in that case, but.

James Mintert: Yeah, that’s a good point. One we hadn’t talked about and it doesn’t apply to a lot of people that are probably applies to some of our listeners. So that’s a, that’s a good point to think about.

Brad Lubben: If, if we look at some of the potential payment rates on there in the 80 to 100 dollar per acre range plus. Big PLC payments, if you get down that far. Then suddenly it doesn’t take that many acres to cap out.

James Mintert: Yeah, that’s right. $125,000 payment limit per person. So.

Michael Langemeier: Yeah, that’s a good point.

James Mintert: Yeah, it is.

All right. With that, we’re going to wrap it up for today. And I want to thank my colleagues Michael Langemeier here at Purdue and Brad Lubben at the University of Nebraska. Thanks for joining us today and on behalf of the Center for Commercial Agriculture, thanks for listening to us. I’m Jim Mintert.