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February 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.

Why is Crop Insurance and Risk Management Important?

Feb 23, 2011

Tuesday was a tough day for the grains with both corn and soybeans going “limit down” during the day session. At current prices, I spent the majority of my day talking with clients as if I was their shrink.

It also showed another example of the benefits for crop insurance. While we saw corn and soybeans go limit down on the CME board it only decreased the average of our spring price guarantee by 1 cent in corn and 6 cents in soybeans.
Although yesterday’s closing price in soybeans was $12.74 the spring price guarantee average is currently at $13.60. In corn the closing price was $5.82 and the insurance average is at $6.03. There are only 4 days left to determine the spring price guarantee.
Once we determine what the spring price guarantees we can add another piece of the puzzle that we call risk management. It will clarify what our floor is for a percentage of our grains from an insurance standpoint. It is then up to us as producers to determine how much exposure we want in a market that is already experience limit day movements even before we have anything in the ground.
If you have any questions about insurance or how to incorporate insurance and grain marketing feel free to either ask me in the comment section of this blog or 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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