Grimes has moved most of his farming operation to the south-central Nebraska region from Lincoln. His mostly irrigated ground will likely produce 180-200-bushel corn and 50-60-bushel beans, based on regional irrigated crop averages. He will depend on RP insurance and the government’s production hail insurance for major loss protection.

The USDA Risk Management Agency set the RP price levels based on the average February futures prices for December 2014 corn futures and November 2014 soybean futures (final prices were unavailable at press time).

Grimes went with 70% or higher RP insurance protection. “I usually go at 70-75% coverage,” he says. “I go with Enterprise unites (which considers all fields of one crop in a county) to cheapen the premiums.”

Hurt reminds farmers that their RP insurance most likely will not cover their breakeven levels, meaning sound marketing is needed to generate any type of reasonable profit. He says some growers likely used RP insurance to at least cover all or much of their “cash costs.”

If a grower locked 75% coverage on soybeans, based on an $11 RP level, “that might cover cash costs,” Hurt says. “But even 85% coverage on corn may not. So again, farmers need to watch for market rallies to secure higher sale prices when they can.”

It may come down to cutting production costs and tightening the belt on other expenditures. “They should work diligently to reduce costs,” Hurt says. “Try to negotiate.

“Farmers should look at a few of the activities they were doing when corn was $7 that they might not do now, such as the use of micronutrients, fungicides and other inputs that could have lower returns with low grain prices.” 

For example, can fertilizer costs be cut? Gary Schnitkey, University of Illinois agricultural economist, says lower nutrient costs may help improve profit margins. “Fertilizer costs likely will decline, but cost decreases will not be of the same magnitude as crop-revenue decreases,” he says, noting that corn fertilizer costs may decrease by $60 per acre, while crop corn revenue may be down by more than $300 per acre.

Some fields may have sufficient residual phosphorus and potassium. “If the soil nutrient analysis is high enough for their conditions, it may be the year to draw out of the nutrient soil bank,” Hurt says.