Sunflower Crop Insurance for 2007
Thursday, February 15, 2007
filed under: Marketing/Risk Management
Good news for sunflower growers: the USDA Risk Management Agency has increased multi-peril crop insurance price elections for both types of sunflower in the 2007 planting season.
The price elections have been adjusted up to $14.20 for oils and $18.70 for confections.
Sunflower price elections were initially set at $11.55 for oils and $16.05 for confections. The NSA appealed to RMA to raise the levels after they were announced, pointing out that the initial prices were well below realistic new crop pricing opportunities. This now makes multi-peril a realistic option, along with the revenue based option.
Revenue Assurance (RA) coverage for sunflower is also available in Colorado, Kansas, Minnesota, Montana, North Dakota, and South Dakota. RA provides dollar-denominated coverage, rather than the production coverage, offering additional protection for price fluctuations during the crop year.
The price guarantee for RA is based on the simple average of the final daily settlement prices in February for the CBoT October soybean oil futures contract, divided by two, then subtract one.
Thus, let’s say the CBoT October contract in February averages $30.20. That would put the RA price guarantee for sunflower at $14.10.
The RA offers a fall harvest price option, also which is designed to provide additional assurance to those producers who market their crop before harvest.
RMA is developing a Combination or “Combo” Policy which would provide both revenue and yield protection for certain crops in the future. To the dismay of the NSA, the RMA has proposed the elimination of sunflower from this new policy, and the RA coverage option, after the 2008 crop year.
The NSA asserts that excluding sunflower producers from this new policy would not allow them to consider and determine the best risk management tool for their operations. It would leave them with only one option to insure sunflowers, which may not reflect market values and would put sunflower at a disadvantage to other competing crops, explains John Sandbakken, marketing director for the NSA.
Sandbakken says RA would be a more attractive crop insurance product for sunflower growers, if it more accurately reflected sunflower market prices. The problem with the present RA policy is that the formula to obtain a sunflower ‘strike’ price is outdated.
The old formula of taking the Chicago Soybean Oil Futures contract and dividing that number by two and subtracting one no longer represents the true market value of sunflower, says Sandbakken. This formula worked reasonably well with traditional or linoleic sunflower in the past, but not anymore, with the change in sunflower market dynamics during the past decade.
Most oil sunflowers grown in the U.S. today are either NuSun or high oleic, both of which are valued higher in the marketplace than the traditional linoleic price, which thus undervalues the sunflower RA price. The evolving biodiesel market is also changing the old pricing rules.
Sandbakken says the NSA is working with policymakers to try to save the RA option for sunflower, make the crop eligible for the new combo policy, and change the pricing formula to more accurately reflect sunflower market prices.
One modification is to take the Chicago Soybean Oil Futures contract (per the RA formula) and simply divide that average number by two. The other choice is to divide by two and add one. That second alternative has the best relationship to the annual average of new crop NuSun prices offered at the Enderlin, N.D. crushing plant, notes Sandbakken.
New rules on narrow rows
Starting with the 2007 growing season, the RMA has revised crop insurance rules to allow narrow-row sunflower planting in areas where it previously was not permitted without a written agreement.
Planting sunflower in narrow rows is commonly referred to as solid seeded sunflower, or in crop insurance jargon, NIBR – “Not Intertilled Between Row”. The RMA has insured solid seeded sunflower in the Dakotas, Minnesota, Montana and Wyoming for a number of years now, after it was determined that yields and quality were not impacted using this practice. This had not been the case outside of these states, however, including Nebraska, Kansas, and Colorado.
Dark roast continues to be eligible as a quality factor for sunflower seeds that go into human consumption as kernels or in-shell. Dark roast usually occurs in relationship to Sclerotinia head rot. The harvested seeds look fine until the kernels are roasted in hot oil. It is at that point that the kernels turn dark and have a bitter taste. Processors test each load for dark roast and have a very small allowance for sunflower seed that turns dark when roasted.
In North Dakota this year, growers also have the option in a new pilot program to build personal T (transition) yields – the option of using one’s own crop yield history on similar land for insuring the crop on another unit that doesn’t have a yield history.
It’s an option that could be beneficial for building yield history for rotation crops such as sunflower. For example, let’s say you planted sunflower in 2004 and it performed poorly, yielding 1,200 cwt/acre. If you’re interested in growing sunflower again, maybe you consider planting it in 2007, hoping for a better yield that will replace that lower yield in 2004 and put you in a better spot for building your personal T yield to be used on land where you don’t have a yield history.
Maps of final planting dates for the Dakotas, Minnesota, Texas, Oklahoma, Kansas, Nebraska, Montana, Wyoming, and Colorado can be found on the NSA web site, www.sunflowernsa.com. Go to the “growers” link, then “Crop Insurance Planting Maps.” The final planting date as listed on these maps is the last day that you can plant the crop and still get full coverage. After this date the coverage is reduced by 1% per day. The actual final date that RMA allows the crop to be planted with reduced coverage is anywhere from 20 to 25 days after the date listed on the NSA maps, depending on the county.
Growers are encouraged to consult with their agents about crop insurance policy matters related to sunflower. The USDA RMA 2007 Crop Insurance Handbook can be accessed online at:
www.rma.usda.gov/FTP/Publications/directives/18000/PDF/07_18010.pdf
– Tracy Sayler