Trim Risk of Forward Contracting Corn for Ethanol
Deere offers replacement bushel coverage if your crop comes up short.
John Otte
Published: Jan 28, 2008
John Deere Risk Protection is offering the industry's first-ever Ethanol Policy. It provides coverage to corn producers, who have delivery contracts for the purpose of ethanol production. This new policy insures yield shortfalls below contracted volumes in the event the price to replace the corn rises above the federal crop insurance coverage.
Farmers are eligible to buy ethanol coverage once they have multi-peril crop insurance policies including Crop Revenue Coverage and Revenue Assurance with the harvest price option in place with JDRP.
In a nutshell the ethanol policy pays an indemnity if:
* A farmer's corn production comes up short of the number of bushels he's forward contracted to an ethanol plant
* And the price to buy replacement bushels is higher than all three of: the price at which the farmer contracted with the ethanol plant; the spring crop insurance price and the fall crop insurance price.
"We are excited to introduce this new Ethanol Policy, a crop insurance industry first, and will do our best to continue providing solutions to producers who are supporting renewable energy initiatives," says Don Preusser, president of JDRP.
Ethanol policy highlights and requirements. Dennis Daggett, John Deere Credit - John Deere Risk Protection, Senior Vice-President lists highlights and requirements of the ethanol policy:
1) The policy provides additional coverage to the farmer/producer for bushels of corn contracted for the purpose of ethanol production.
2) The policy is a supplemental insurance coverage to a Crop Revenue Coverage (CRC) or Revenue Assurance - Harvest Price Option (RA-HPO) crop insurance policy written with John Deere Risk Protection. Farmers can apply for the ethanol policy any time up to the MPCI acreage reporting deadline, which is June 30 or July 15 depending on the location of the farm.
3) The policy will cover delivery contract shortfall's if the farmer's total production is below the contracted volume... AND... the price to replace the crop is above the contract price AND above both the spring and harvest MPCI revenue price.
4) The policy replacement price is capped at $0.75 above the higher of the harvest revenue price or spring MPCI revenue price.
5) The farmer must have a delivery contract with an ethanol plant executed prior to the MPCI acreage reporting date. The ethanol contracts must be sent in with the application.
6) Any old corn crop in storage will count toward the fulfillment of the ethanol delivery contract unless the farmer requests John Deere to come and measure the old corn crop in storage prior to harvest of the 2008 crop.
7) The policy requires the ethanol plant to procure the replacement bushels, thereby simplifying the process for securing replacement corn for the farmer.
8] The policy does not cover bushels above the farmer's aggregate MPCI yield guarantee for all the policies the farmer may have. Please visit about this feature of the policy with your John Deere crop insurance agent.
9) The policy is available only in Iowa, Illinois, Indiana, Kansas, Minnesota, Missouri, Nebraska, Ohio, South Dakota, and Wisconsin.
"With the importance being placed on renewable fuels, we're proud to be working with an industry leader in crop insurance to offer this new policy," says crop insurance agent John Keister of Minn-Iowa Crop Insurance Services in Blue Earth, Minn. Travis Keister, another crop insurance agent with Minn-Iowa, adds, "The new policy is a simple tool that addresses an industry-changing sector of agriculture. With so much focus on renewable fuels and ethanol, it couldn't have come at a better time."
As another benefit to producers, the policy requires that the facility offering the ethanol contract procure replacement bushels, eliminating the need for producers to find the replacement grain themselves.
Ron Kibble, a John Deere dealer, farmer and strong supporter of the ethanol industry says, "This policy is a win-win for growers and ethanol plants alike. JDRP's new Ethanol Policy provides more security for everyone involved."
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Tagged: ethanol, insurance, the farmer, Deere, John Deere
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