Prevented Plant Feature Becomes DeFacto Set-Aside Program – Distorting Grain Markets, Providing Major Benefit to Non-US Producer
Normally crop insurance has a propensity for overproduction. These are not normal times. This year it is the opposite. A feature of crop insurance covering nearly 90% of Midwest farmers is creating a paid set-aside which is distorting the grain market. It is forcing the market to bid against the prevented plant (PP) payment to offset the damage created by Mother Nature. The impact is unintentional and is only exposed by the extreme delays in 2019 planting. Those of you under the age of 40, google set-aside policy to see how US Ag programs of the 1970’s and 80’s promoted production for non-US producers. South America is a major benefactor of the recent market rally, as they were back in the 70’s and 80’s. PP forces the market to bid until enough planting is complete. Will planting proceed enough this week or will it push into July? What will Mother Nature dictate? More importantly, what happens to prices once the bidding is done? How many will suffer “Buyer’s Remorse”?