Demand Destruction versus Demand Rationing - Monday, 06 August 2012

This Friday the entire globe will be watching to see what the USDA’s first survey-based yield estimates will say.  The last USDA report dropped its estimated corn yield from 166 bu./acre down to 146 bu./acre.  If it drops again to levels anticipated by Informa, we could be facing a demand nightmare according to Jerry Gulke.  There is an important line that we don’t want to cross between Demand Destruction and Demand Rationing and to avoid crossing that line we need to keep the pipeline open for livestock.  Cattle slaughter is up 12% from last year already, which is not a surprise when you consider that it takes 5 pounds of corn to put 1 pound on a cow, likewise it takes 3 pounds of corn to put 1 pound on a hog!  If livestock producers are forced to liquidate their herds we will see demand destruction, if they are able to cut back on numbers or substitute feed usage demand can be rationed.  The same is true for ethanol plants, if they are able to cut back on production versus completely shutting down the turn-around time to reach full production levels will be much quicker once the supply improves.

 Photo from McHenry County, Illinois

Over the weekend 50% of the Corn Belt finally received a measurable, beneficial rainfall.  Rainfall totals varied in most areas from an inch all of the way up to 4 inches in some lucky spots in the Eastern Corn Belt.  There is a saying that “Good Prices are the Cure for Good Prices” and I was reminded of that when I read that South America is ramping up production acres for next year, clearing current prairie ground for crop production! 



Drought relief deferral

To assist policyholders impacted by the severe drought conditions, RMA is allowing AIPs to defer interest accrual for 30 days.  This means for the 2012 crop year, accrual of interest on unpaid spring crop insurance premium is deferred for 30 days.  For all policies with a premium billing date of August 15th, November 1stinterest will accrue.  Without this change interest would have attached on October 1st.


With the large number of claims anticipated for this year, we want to make your claim process as simple as possible.  If you anticipate a claim over $200,000 for a crop in the county, there is additional information that is required by RMA, see #3 below. 

In order for your claim to be processed in a timely manner we will need the following information:

1.  Signed Notice Of Loss

2.  If Harvest Loss:

              A. Production and yield report.

              B.  Obtain all production records for adjuster ( settlement sheets, load records, scale tickets that have the unit number on each one) or we will measure bins if stored on farm.       

              C.  Mark all production by unit number as reported on the production and yield report.

3.  Claims exceeding $200,000 will require the production & acreage evidence for 2009, 2010 and 2011 marked by unit as shown on the production and yield report.












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