Economic forecast for corn production next season
MADISON - As the holiday season starts to wind down, plans become more and more firm for the 2018 production season. There is still quite a bit of time before planters start rolling in the field, but some key decisions need to be made now at the kitchen table. Projecting prices and potential yields are where many farmers begin. The next step is to calculate production costs and see if gross revenues (price x yield) are greater than costs.
Projected prices for 2018 crop insurance policies will not be set until February for corn and soybean grown in the Midwest. Likewise corn and soybean acreage intentions will not be compiled until the end of March. However, current levels of futures contracts provide estimates of of 2018 projected prices.
Projected prices are used to set minimum guarantees for Revenue Protection (RP). Also, the projected price sets the payment on yield shortfalls associated with Yield Protection (YP). Once set, projected prices determine the overall level of revenue and yield protection offered by crop insurance.
Projected prices are set using futures contracts and vary from year-to-year based on market conditions. For corn grown in Midwest states, the projected price is the average of settlement prices of the December Chicago Mercantile Exchange (CME) contract during the month of February. For soybeans grown in Midwest states, the projected price is the average of settlement prices of the November CME contract during the month of February.
Projecting potential yields are difficult due to weather and management challenges. Using your actual production history (APH) for each farm can help to develop realistic yield projections. However, we know yields are advancing at the rate of 1.5 to 3.0 bu/A per year. So knowing upper limits of production can also help. Below are the highest recorded yields by county as reported by the National Corn Growers Association Corn Yield Contest.