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Sunflower growers get market price protection

By Staff | Jun 12, 2009

BISMARCK, N.D. – The federal government is expanding an insurance program for sunflower farmers – two years after almost killing it – in a move that could help protect growers against fluctuating prices and low crop yields.

The protection could be especially important this year as sunflower seed prices continue to fall, and some farmers contemplate planting fewer flowers. The U.S. Department of Agriculture projects an 18 percent decrease in the number of sunflower acres planted nationwide.

A small sunflower crop could mean higher prices at the grocery store for cooking oil, snacks and other items made with sunflower seeds.

The program, which guarantees farmers a minimum price for their crop, could encourage some farmers to plant more sunflowers, said John Sandbakken, international marketing director for the Bismarck-based National Sunflower Association.

“Having something like that helps you sleep at night,” Sandbakken said.

Sunflower seed prices, like those for other crops, have dropped during the recession. Farmers have lobbied for years to get protection from low prices as well as low yields. This year, the federal Risk Management Agency is expanding a program known as “revenue assurance” to most areas where sunflowers are grown in significant quantities.

U.S. farmers grew about 2.4 million acres of sunflowers worth just under $670 million last year, most in North Dakota, the nation’s largest sunflower producer.

While traditional crop insurance protects farmers from production problems, revenue assurance policies also provide coverage for price drops, although profits still vary with production costs.

Revenue assurance allows farmers to lock in the springtime market price and pay extra on their premium to have the option of taking the harvest price if it’s higher. If the harvest price is lower, they still get the spring price.

Mike Clemens, 52, who farms near Wimbledon in southeastern North Dakota, participated in the program last year, when sunflower prices in North Dakota dropped about 17 percent from the spring to fall. Since then, prices have dropped another 32 percent to $16 per hundred pounds.

“For our crop to be competitive, we need to have an RA formula that works,” Clemens said. “I carry RA on my farm on all my crops. The important thing is you’re protecting revenue – not only yield loss but also the price component.”

The federal government offers revenue assurance for eight major crops, including corn and soybeans. Clemens testified before Congress in 2006 to persuade the government to keep and improve the sunflower program instead of eliminating it.

Because there is no sunflower oil futures market, the revenue assurance policies for sunflowers were based on the Chicago Board of Trade soybean futures market. But both the National Sunflower Association and the federal Risk Management Agency said that formula was not in line with what the sunflower crop was actually worth.

The agency was going to eliminate what it said was a dysfunctional program, but sunflower growers persuaded it to change the formula instead. That’s when Clemens signed up.

“It would have been worthless,” he said of the earlier coverage. ”The change in the formula was really the key to making it an attractive option.”

Before the formula change, only about 12 percent of the sunflower crop insurance policies sold in the Dakotas, Kansas, Colorado and Minnesota – the main sunflower growing states – were revenue assurance policies, federal data show. When the formula was changed for the 2008 crop, the figure jumped to 36 percent. This year, the RA program is being expanded to Montana, Wyoming, Nebraska and Texas.

David Meyer, who grows about 500 acres of sunflowers with family members near the northwest Texas town of Dalhart, said he looks forward to having a new insurance option for his sunflowers. He has benefited from a revenue assurance policy guaranteeing him $8 a bushel on wheat – a commodity that has seen a steep drop in price from record highs two years ago to about $6.25 a bushel.

Meyer hopes he and other farmers in the Texas Panhandle will now have the same peace of mind with sunflowers.

“Other years, it was kind of an iffy deal,” he said.

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