Dr Scott Irwin, who is the chair of agricultural marketing at the University of Illinois, joined us on the Irish Farmers Journal’s Tillage Podcast to chat about grain trading, futures markets and crop insurance.
He explained that in the United States crop insurance is a mixed system which is offered by private companies, but is substantially subsidised by the federal government. Scott explained that the crop insurance contracts are fairly straightforward.
“They started off as insurance on yield directly,” he explained.
“You would insure so many bushels at a given price and then that evolved naturally towards revenue insurance where you simply establish some kind of indemnity level. In the US, it’s done in February before planting.”
For example, Scott explained that you can say you have an expected revenue of $1,000/ac. You can then insure 70%, 75%, 80%, or up to 85% of that at a given premium and the premiums are subsidised by the federal government.
“Those programmes are extremely popular and widely used throughout the United States. I think something like at least 90% of the acreage of corn and soybeans in Illinois is covered by some kind of revenue insurance product in that hybrid federally subsidised crop insurance programme. It’s definitely become a bedrock of farmers’ price and revenue risk management strategies,” he added.
Cost
These policies, Scott noted, cost about US$20-40/ac (€19-37/ac), depending on the level of coverage.
“Even with the subsidies it’s not inexpensive because the dollar amounts of the revenue that’s being insured are really high. I think 85% coverage in many areas of Illinois this year was covering over US$1,000 of revenue,” Scott added.
More risk in the US
That’s a lot of money. However, it should be noted that in the US there is a lot of risk related to weather.
“It’s more natural. We’re here in the middle part of the North American continent. Something like one out of every eight or nine years we will have a fairly substantial drought. It’s normal. There were some parts of the US this year that were hit really, really hard with dry weather, particularly late.”
Scott noted that his own family farm in Iowa was hit badly and explained that it is a constant risk, so the insurance makes sense.
Dr Scott Irwin recently wrote a book, Back to the Futures: Crashing dirt bikes, chasing cows and unravelling the mystery of commodity Futures Markets. The book helps to explain grain marketing and futures markets through stories from Scott’s life and childhood.
Full interview
You can listen to the full interview with Scott here.
Dr Scott Irwin, who is the chair of agricultural marketing at the University of Illinois, joined us on the Irish Farmers Journal’s Tillage Podcast to chat about grain trading, futures markets and crop insurance.
He explained that in the United States crop insurance is a mixed system which is offered by private companies, but is substantially subsidised by the federal government. Scott explained that the crop insurance contracts are fairly straightforward.
“They started off as insurance on yield directly,” he explained.
“You would insure so many bushels at a given price and then that evolved naturally towards revenue insurance where you simply establish some kind of indemnity level. In the US, it’s done in February before planting.”
For example, Scott explained that you can say you have an expected revenue of $1,000/ac. You can then insure 70%, 75%, 80%, or up to 85% of that at a given premium and the premiums are subsidised by the federal government.
“Those programmes are extremely popular and widely used throughout the United States. I think something like at least 90% of the acreage of corn and soybeans in Illinois is covered by some kind of revenue insurance product in that hybrid federally subsidised crop insurance programme. It’s definitely become a bedrock of farmers’ price and revenue risk management strategies,” he added.
Cost
These policies, Scott noted, cost about US$20-40/ac (€19-37/ac), depending on the level of coverage.
“Even with the subsidies it’s not inexpensive because the dollar amounts of the revenue that’s being insured are really high. I think 85% coverage in many areas of Illinois this year was covering over US$1,000 of revenue,” Scott added.
More risk in the US
That’s a lot of money. However, it should be noted that in the US there is a lot of risk related to weather.
“It’s more natural. We’re here in the middle part of the North American continent. Something like one out of every eight or nine years we will have a fairly substantial drought. It’s normal. There were some parts of the US this year that were hit really, really hard with dry weather, particularly late.”
Scott noted that his own family farm in Iowa was hit badly and explained that it is a constant risk, so the insurance makes sense.
Dr Scott Irwin recently wrote a book, Back to the Futures: Crashing dirt bikes, chasing cows and unravelling the mystery of commodity Futures Markets. The book helps to explain grain marketing and futures markets through stories from Scott’s life and childhood.
Full interview
You can listen to the full interview with Scott here. 
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