Cory Walters

Commodity marketing has its jargon. Common phrases you may hear are “nearby,” “deferred,” “new crop,” and “old crop” contract.

The events of 2020 caused large fluctuations in the Nebraska corn market, with cash prices reaching levels rarely observed. From cash prices in some areas approaching $2.50 following planting, to bids around $4.50 immediately following harvest, 2020 certainly had its up and downs. This variation in cash price is a result of changes in both futures price and basis. In this article, we will look back at the influence this year’s events have had specifically on Nebraska corn basis.

The United States Department of Agriculture, Risk Management Agency (RMA) partners with private insurance companies to deliver the federal crop insurance program through agents who sell policies directly to producers. The government subsidizes producers in the form of premium discounts and reimburses private insurance companies for administrative and operating (A&O) costs. The government provides further assistance to the industry by offering a cooperative reinsurance agreement that reduces loss exposure for insurance companies (Appel and Borba, 2009).

Improving our understanding of the influence of risk-preferences on decision making represents an important objective for understanding behavior, designing policy and decision making theory. A natural place this problem persists is in the marketing of grain (Kastens and Dhuyvetter, 1999). Grain marketing research has primarily focused on the use of different marketing techniques that result in lower price risk and, therefore, lower income risk (Musser, Patrick, Eckman, 1996).

COVID-19 is causing us to experience events that have always been possible, just not yet observed. For farmers, these events may have a big negative financial impact, or they may not. The impact on each individual farm has to do with how that individual farm has prepared for rare financially devastating events. Preparing for unseen events represents a logical approach. We call this approach stress testing. Just because you have not seen an event, it does not mean it does not exist. Or said another way, absence of evidence is not evidence of absence.