JOHNSTON, Iowa — Corn growers in 10 states who worry about contracting to deliver grain for ethanol now have opportunity to sleep at least somewhat better at night.<br>
John Deere Risk Protection (JDRP) is offering what it calls the industry’s first ethanol policy, as an optional rider with its multi-peril crop insurance (MPCI) Crop Revenue Coverage or Revenue Assurance policies (the latter type of policy must include the fall harvest price option). If a grower falls short on contract delivery to an ethanol processor, rather than bear the loss of sale and financial liability to the processor, the JDRP Ethanol Policy would kick in to cover that shortfall.<br>
Dennis Daggett, a JDRP executive, briefly explained the policy is intended to help cover contract shortfalls when the price of replacement corn goes above federal crop insurance coverage levels. The rider must be purchased by the MPCI acreage reporting date.<br>
“Most farmers, we believe, contract about 30 percent of their MPCI corn on a forward-price basis,” Daggett said.<br>
The policy, he said, makes certain the farmer is paid for his or her shortfall on contract delivery price, plus any difference on those lost bushels if the market price at the time of sale is higher. But, payment will not cover anything above a 75-cent-per-bushel difference, Daggett said.<br>
It also enables the farmer to pay the ethanol producer any extra cost they incur by having to buy those shorted bushels elsewhere – and the policy does require the ethanol producer locate those bushels, rather than leaving the farmer having to do it, Daggett pointed out. In this way, he said the burden of finding replacement bushels is lifted off the farmer, but allows him or her to maintain a good relationship with their ethanol customer anyway.<br>
JDPR began offering the policy earlier this year and, so far, Daggett said there’s been some interest among growers. While he wouldn’t make a guarantee on the premium cost of the policy, he estimated perhaps between 2 and 3 cents per bushel, explaining individual premiums may vary based on acreage, how much corn contracted, type of primary insurance and the like.<br>
“What I’ve heard is that folks are pleased when they’ve seen the price,” he said, adding many have remarked it’s less than what they expected.<br>
So far, the policy – underwritten by Westfield Insurance Co. – is only being offered in Iowa, Illinois, Indiana, Ohio, Wisconsin, Missouri, Kansas, Minnesota, Nebraska and South Dakota. <br>
“Our goals are very modest for this first year,” Daggett said of anticipated sign-ups.<br>
“It’s fundamentally different than anything else that’s in the crop insurance marketplace.”<br>
To learn more, contact a local John Deere Crop Insurance agent, call toll-free 866-404-9057 or go online to www.johndeereriskprotection.com