NDSU Assists With Price and Yield Risk Management Decisions

Production costs per acre were the highest in history in 2006 and probably will be higher in 2007, says Andy Swenson, North Dakota State University Extension Service farm management specialist.

The NDSU Extension Service has an Excel computer spreadsheet, RiskMGT, which provides information to assist producers in making price and yield risk management decisions. RiskMGT is available at http://www.ag.ndsu.nodak.edu/aginfo/cropmkt/cic.htm.

"The program simulates gross revenue for different crop insurance and marketing strategies for a range of harvest prices and yields," Swenson says. “The largest risk to producers is revenue. Prices and yields are more variable than total costs, so producers are faced with challenging decisions because of this uncertainty."

Producers have until March 15 to sign up for crop insurance and decide on coverage levels.

“Fortunately, given the high cost scenario, the crop insurance protection this year, generally, is very good because prices at which producers can insure are at historically high levels for several crops,” Swenson says.

For example, the price per bushel used for revenue insurance on wheat, soybeans and corn are $5.23, $4.06 and $8.09, respectively. Also, market prices for crops have shown a strong increase from last year, but are volatile.

“Although the revenue outlook, at this time, looks good on paper, no one knows what yields or market prices will be at harvest time,” Swenson says. “It makes sense to look at the revenue outcomes of different crop insurance and marketing strategies for a range of harvest time prices and yields.

NDSU Agriculture Communication