Corn and soybean projected prices for the 2017 crop insurance year were recently released by the Risk Management Agency (RMA).  Projected prices reflect the current value of a commodity for delivery in the fall at harvest.  They also represent an important component in determining how much liability (revenue per acre) can be transferred to someone else, which, in this case is the insurance company. 

The higher the projected price, the higher the amount of liability; however, an increase in liability also means higher premiums. Another factor influencing producer premiums comes from the volatility factor. The volatility factor provides information on the dispersion of where prices could end up when we reach harvest. Higher volatility implies a wider range of where prices could end up at harvest and therefore a higher premium. 

Due to the increase in both projected prices and volatility factors from 2016 to 2017 for corn and soybeans, producers should expect to see an increase in insurance premiums, primarily those coming from products protecting revenue, such as revenue protection (RP). Increases in premiums due to price increases indicate there is a larger amount of liability being transferred to the insurance company and in the case of the increased volatility factor, a larger probability of even lower prices come fall. 

Producers should consider the benefit of additional liability transfer and price risk (volatility factor) before switching to a lower premium product due to an increase in premiums from 2016 to 2017. 

Producers have until March 15 to purchase crop insurance for their 2017 crops.