I watched a webinar not too long ago offered by three College of Illinois ag professors through the Farmdoc web site. The purpose of the webinar was to offer producers an replace on how the Russian-Ukrainian battle could influence commodity costs and crop insurance coverage choices, earlier than the March fifteenth crop insurance coverage deadline.
Farmers who had been taking part within the webinar had been involved about many issues together with fast inflation, provide chain disruptions, recession within the U.S., and the Russian invasion turning right into a wider battle. The truth is, over 90% of the webinar individuals polled felt that inflation was a significant concern.
The presenters imagine that the worldwide wheat provide might be impacted way over different crops. Russian Federation and Ukrainian wheat accounted for practically 30% of worldwide wheat exports over the past 5 years on common. Russia is the #1 wheat exporter on the planet, and Ukraine is fifth. They account for a smaller portion or corn exports, however nonetheless important, at round 17%. (Soybean exports from these two international locations had been solely 2% of worldwide exports.)
If the breakdown of relations continues between Russia and the west, Russian and Ukrainian wheat provides could also be bought solely to international locations pleasant towards Russia. It will clearly change who’s shopping for wheat from whom in some ways, and Russian tanks driving round on the Ukrainian winter wheat crop will not be going to assist world provide for 2022.
Fertilizer costs rising around the globe
The presenters mentioned that fertilizer costs had been rising around the globe, and provide shortages of fertilizer might spell bother for sure international locations. Surprisingly, Brazil will get over 90% of its nitrogen and potash from imports and about 75% of its phosphate. And, a big portion of these fertilizers comes from Russia and China.
The U.S. is simply importing 9% to 12% of its nitrogen and phosphate, however we’re importing 93% of our potash. Fortunately, 83% of that’s coming from Canada and solely about 12% is coming from the mix of Russia and Belarus, which is principally managed by Russia.
The Farmdoc people acknowledged, “fertilizer shortages are actual,” and so they count on excessive fertilizer prices not less than via 2023. Some producers have locked in decrease fertilizer costs upfront of this planting season, however I’ve to marvel if all provides might be the place they’re imagined to be after they’re imagined to be there (no matter authorized contracts).
Anhydrous ammonia, which requires pure gasoline, has roughly doubled in worth per ton over the past yr. This clearly raises present yr corn manufacturing prices. Nonetheless, the presenters mentioned that corn costs and anticipated yields imply that corn is the favored crop in all areas of Illinois, despite nitrogen provide considerations.
Throughout the webinar, producer individuals had been polled, and 58% of them anticipated no change of their planting methods for 2022. This is sensible as a result of it is getting late within the season to vary plans.
What does all of this imply for crop insurance coverage?
The presenters mentioned that insurable costs are excessive, which favors income safety crop insurance coverage. Insurance coverage premiums are up attributable to greater grain costs however value it to cowl the chance. They advised the best way to play crop insurance coverage this yr is to get 75% to 85% protection on a income safety coverage. You possibly can plug in several variables and work out what is sensible in your operation utilizing a slick crop insurance coverage evaluator instrument that yow will discover at farmdoc.illinois.edu below the heading “Instruments”. They’ve six totally different crop insurance coverage instruments, and plenty of different useful merchandise, together with element of CBOT futures pricing.
Backside line, the world is altering extra quickly than we have seen in many years, and you are going to must be nimble with planting, buying, and insurance coverage choices.