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Risk Management with Insurance Tools

RSS By: Jamie Wasemiller, AgWeb.com

Insurance tools have become an integral part of managing your farming operation. Stay current on insurance tools and how to incorporate them with your current risk management strategies to market your grains throughout the year.

2014 Price Flex - Attention Winter Wheat and Corn Growers - Must Read

Sep 17, 2013

2014 Price Flex is an RMA approved private insurance product that allows the producer the opportunity to "lock" a potentially higher 2014 Insurance Revenue Price Guarantee than the spring or harvest price set by the RMA for both the RP and GRIP policies.  

Price Flex is currently available for Corn, Winter Wheat, Spring Wheat, Soybeans and Cotton. Price Flex has a limit on the difference in price between the highest Price Flex additional price discovery price designated and the price determined by the RMA. The limits are $1.00/bu for corn, $1.50 for wheat, $2.00/bu for soybeans and $.20 for cotton. Producers may choose from several options for price caps that are less than these policy limits. 

September Deadline:

Since 9/30/13 is the sales closing date for Winter Wheat this is the last month that you can purchase 2014 Price Flex. 

For corn the deadline to sign up for the month of September is Friday, Sept. 20, 2013. There will be additional opportunities to buy corn for 2014. 

Available States for Corn and Wheat 

Corn: AL, CO, GA, IA, IL, IN, KS, KY, MI, MN, MO, MS, NC, ND, NE, OH, SC, SD, TN, TX, VA, WI

Wheat: KS, IA, ID, IL, IN, NE, OH 

Winter Wheat: Winter Wheat has a government spring price average of $6.72 in IA, ID, IL, IN, OH, $7.02 in KS and $7.11 in NE. 

We know what the spring price is for winter wheat. There are 7 month timeframes that have an opportunity to be higher than the government prices listed above in your respective states. The cost for ALL 7 months is about $.15 per bushel. That is just over 2 cents per month period to try and lock in a higher price for your insurance guarantee. It is almost impossible to find a better opportunity for that kind of price. Read below for an example of how this works. BUY THIS!

Available month timeframes: (2013) Sept 15-Oct 14, Oct 15-Nov 14, Nov 15-Dec 14, (2014)Jan 15-Feb 14, Feb 15-March 14, March 15-April 14, April 15-May 14 

Corn: The September price average for corn is currently at $5.02. If you had purchase the month of Sept. then this will act as your 2014 Insurance Revenue Guarantee Price if the government spring and harvest prices in 2014 come in below $5.02. If the government price comes in higher than $5.02 (or whatever the Sept. average is) than the Sept. average will expire worthless. You will then go ahead and use the higher government price like you have done every year and you will be out the premium you paid for the Sept. average. Due to the $1.00 cap in corn if the government price happens to go below $4.02 then it will bring down the September price along with it but you are assured at that point that your Revenue Insurance Guarantee Price will still be $1.00 higher than the price set by the government. 

Soybeans, Wheat and Cotton work just like the example shown above for corn using their respective prices and limits. 

Contact your agent for more information or you can reach me at 707-365-0601 or email me at Jamie@gulkegroup.com.

There are substantial risks involved with both futures and options trading. While risk is limited to purchase price when buying an option, it is not limited when selling an option. Commodity trading and other speculative/ hedging investment practices involve substantial risk of loss. Past results are not necessarily indicative of future results when utilizing the commodities markets. This material and any views expressed herein are provided for informational purposes only and should not be construed in any way as an endorsement or inducement to invest.

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