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Ok, here is what worries me a bit in #cotton and other #ag #commodities. This is an example of a #Texas High Plains cotton farm with an 800# APH yield and a $0.68/lb insurance price. At $0.55 you could still make as much as near 650# and not receive an indemnity. (1/n)
So, given that price has fallen about 20% since insurance price discovery time, producing an average crop results in no revenue protection. Now, that is the deductible that was chosen by the producer (70% revenue coverage here), and that is the doughnut hole that results. (2/n)
But, normally, we expect yield and price to move (at least somewhat) in the opposite direction. So what? you ask. Well, let's just consider revenue. The revenue at the ins price is about $600/ac but about $440/ac at current price. That is a 26% decline. (3/n)
So even if the producer went from 800# to 950# at the same price, added revenue from yield does not compensate for the loss in price since Feb. (4/n)
So, the worst possible place to be is producing a decent crop and have the price rise a little from here to the 60 cent range. Even at $0.65, the producer has to yield closer to 900# to achieve similar revenue per acre as with the APH and ins price.
This isn't a "pity story" for farmers. There are programs that will help. But it is an illustration for those that think insurance will bail out farmers because of the market price crash due to #COVID19.
