May 26, 2022
With hail season upon us, it’s time to think about your current coverage. Watch Kevin McNew, Chief Economist at FBN® and Director of Crop Insurance, Eric Sorenson talk current market conditions and how this can affect farmer's decisions when it comes to crop insurance for the rest of 2022.
How weather and the war in Eastern Europe have affected wheat markets
The threat of hail and how to protect against that risk
The effects of La Niña
Connect with an agent today to get your questions answered and learn how a crop-hail insurance policy can protect your profit potential this season.
Eric Sorensen (00:00):
Kevin, good to talk to you again. Let's catch up a little bit. There's been a lot that's happened since the last time we spoke. I know the markets have really been on a tear for a long time now. It just seems like there's no end in sight here. We've had a few blips up and down lately, but it's still holding in there pretty strong. Do you mind just giving us a little bit of a summary of where we're at now in the markets for some of the major quality crops?
Kevin McNew (00:26):
Winter wheat's getting close to getting cut, you know, as we enter harvest pretty soon and wheat prices are screaming. Prices obviously respond to the outbreak of war in Eastern Europe that shows no end in sight. And the issues that we highlighted two months ago are still firmly in place. So we definitely look for wheat values to stay at record highs, if not continue to push higher. And, you know, there's hints of problems in the Southwest Plains around the crop. But you know, it's spring, it's gonna be summer, it's stormy weather season and, you know, there's hail happening out there. I see hail alerts pretty much every day and you know, Eric you're in crop insurance and you know, I'm a wheat grower, that's got $11 wheat sitting out there looking nice and plump with big heads. What do I need to think about here?
Eric Sorensen (01:18):
You basically hit, hit the nail on the head there. You really need to be thinking about hail coverage. I think what we're gonna see this year and what we're already seeing in some areas are those producers that have some wheat out there, especially if it's in good condition. It doesn't have to be in great condition, but if it's in good condition where there's some meat on the bone, there's something worth protecting. We're seeing some hail sales, certainly there's places where people actually have some very good wheat where they've got the right precipitation, the right weather for it. Obviously with these kinds of prices, pretty unforeseen in some respects, a little bit of hail goes a long way as far as hail coverage goes. I always try to look at as a risk consultant, what can go wrong?
Eric Sorensen (02:06):
And is there anything I can do to protect against that risk? And right now, you know, the closer and closer we get to harvesting wheat I just think about hail and the risk out there right now. I know a while back, it's probably been several weeks ago now, Kevin, but you were talking about the effects of La Niña and how that's kind of lingering on. You said that in some areas of the U.S., it's gonna call for some kind of extremes in the weather. I think we've seen that in a broad part of the U.S.. Look at that drought monitor and it's kind of the, the haves and the have nots for moisture, right? The Western doesn't have it, the Eastern wishes the spigot would shut off so they can get some crops planted.
Eric Sorensen (02:51):
We need to look at some hail coverage. The other thing that I think could take people by surprise is that, you know, hail coverage in a lot of areas where wheat's grown isn't that expensive for what you get for coverage. You might be like a 1, 2, 3% type rate, definitely worth looking into. The other thing I'd say is to make sure that you look at what your multi-parallel coverage is and make sure you’re properly covering the value of that crop.
Kevin McNew (03:21):
Eric, you mentioned that, you know, the haves and have nots this weather season. I think what that's setting up is this kind of battleground at the, in between places, which is kind of, you know, Oklahoma, Texas, Arkansas, where we're seeing hail outbreaks that are pretty sizable because of that confluence of dry and wet and cold air that's all coming to head kind of at that epicenter there. And so we are seeing regular outbreaks of hail and you're right, La Niña is fading. But that just means more of this back and forth weather pattern. It can't decide if it's a little bipolar right now. It can't decide whether it wants to stay on the lawn or drift out of the sun a little more neutral. And so it's gonna be a lot of back and forth, I think, over the next couple months, which is important for winter wheat guys, you got $11 wheat sitting out there. That hail damage if it hits can be so detrimental when you have prices as high as they are right now.
Eric Sorensen (04:22):
That's right. I've seen so many times when farmers might be out there putting up storage for a big crop that's on the way, or maybe even buying some new harvesting equipment, not only to have those plans change or their perspective change when a big hailstorm comes along. So it's definitely important to think about the other thing I'll say is, you know, a lot of our customers, a lot of farmers we've talked to have kind of punted this year on the hail conversation. And I think the reason they have is because they knew that the markets were on a tear at the time we were making crop insurance decisions on the multi payroll and, and that multi was not cheap this year. Probably a good value because of the guarantees out there, but still expensive.
Eric Sorensen (05:06):
I know we talked to a lot of farmers that were having a hard time making decisions on, on hail. Andwe said, you know, you have the luxury of waiting until there's a risk. And so we certainly don't want to go out there with, you know, a crop that’s peeking up above the ground for the growing point and introducing risk in it without having hail coverage. Butyou know, a lot of people are still struggling with planting, but I think some areas are starting to dry up a little bit and we're seeing some more acres getting planted, particularly corn and beans. I think when they do, they need to make sure they don't forget about that hail because a lot of those conversations it's been weeks now since they've had with their agent.
Kevin McNew (05:46):
Farmers are looking at their budgets going man fertilizers through the roof and where do I save money? But maybe this year, it's not the year on, on insurance.
Eric Sorensen (05:56):
Well, that's right. And that money has already been spent, right? All those input costs. And so to your point, Kevin, you know, the way we look at it is we're not trying to add to the cost, but we are trying to cover the cost. And I think that's really important because there's just a lot more to gain this year and there's a lot more to lose.
Kevin McNew (06:13):
Yeah, absolutely. So good times. And, and a lot of uncertainty ahead, but you know, I think, I think this is a great time to be in agriculture and you know, hopefully farmers will have a good growing season and insurance is probably a big component of what they need to have in their arsenal.
Eric Sorensen (06:30):
You bet. That's all very important this year. There's a lot riding on things, no doubt. So appreciate it, Kevin. Thanks for the update.
Kevin McNew (06:37):
Thanks Eric.
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May 26, 2022