Talking about cost of production this year is like spending Christmas in a cramped house with the in-laws. No one's dying for conversation.
But here's one discussion that won't be so painful: Crop insurance.
Tom, our crop insurance representative in Healy, Kansas, stopped by last week to lay out our options for our wheat crop we are just now finishing planting.
He brought good news. Crop insurance this year will cost us considerably less than what it did in 2008.
Insurance rates for wheat last year soared along with the price of wheat and every other commodity, which only makes sense. If the value of something goes up it's going to cost more to protect, just like insuring a BMW versus a Chevy.
This year, the price of wheat has gone the opposite direction and is sinking like a ton of bricks in quick sand. The abysmal price of wheat, though, has a bright side. The resulting insurance premiums are a huge discount to the year prior.
On a CRC contract that insures field by field, our insured price level for the 2010 crop is $5.42 a bushel. Now compare that to the 2009 crop rate of $8.77. That's a 38% reduction – and right when we need it the most!
While we'd much rather sell wheat at higher prices than low, writing the check for insurance is going to be a lot easier. Along with lower fuel and fertilizer prices, it's going to help a lot in taking the sting out of the dirt-cheap price of wheat.