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April 2011 Archive for 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.

Weather Update Important to Weather Contracts

Apr 06, 2011

 

As we have seen, Canada and the Northern Plains have seen record or near record precipitation amounts and the likelihood of flooding from the Red River all the way south through Iowa has increased which continue to suggest excess precipitation at planting weather hedges in the North and Eastern  Grain Belt.
 
As I suggested in my WeatherManager Weekly (in conjunction with eWeatherRisk) last month, the strong warming for winter wheat has delivered as scheduled and wheat is rapidly emerging from dormancy. This warm up will increase the dryness and with the lower dew-points, greatly increases the chance for a freeze later this spring as well as extreme dryness for any double crop or replacement crops for the wheat everywhere from Eastern Colorado, Western Kansas and through to Texas where precipitation guarantees or excess heat hedges are generating considerable interest. The recent record cold and wetness in the Pacific Northwest create greater likelihood of these conditions persisting into the summer. This  puts fruit production at risk  as well as hamper hops and grains in the Pacific Northwest where weather hedges to  protect against excess precipitation as well as cool summer/insufficient growing units are attractive.
 
Texas has its hot and dry forecast for rangeland and grains during emergence and the critical early growing season shows that it will be lingering for this year. Remember that a warm and dry spring will increase the likelihood of the drought persisting and hot temperatures going into summer and they offer protection against these as well.   Also, with the focus on additional corn acres and the large spread between corn and soybean profitability, excess precipitation at planting in the Dakotas and Minnesota would force them to switch to beans and the margin can be protected with an excess precipitation and/or cool spring weather hedge.   
 
If you have any questions about weather insurance or how to receive my WeatherManager Weekly report you can contact 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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