Timeline for Risk Management

January 23, 2009 06:00 PM
Timeline for risk management
Watch for the following reports to direct your views of the season ahead, Jamie Wasemiller of Strategic Marketing Services told Top Producer Seminar attendees:
-         Feb. 6 USDA's initial baseline for 2009
-         Feb. and March Supply and Demand estimates
-         Early March: private analysts' acreage estimates
-         March 30 USDA's acreage report
"If corn acreage is more than 84 million, it will be bearish; consider hedging or buying puts to protect your downside,” he sai8d. "If 83 million or less, fundamentals may be a little more positive than we see them right now.”
"Crop insurance terms announced at the end of February can actually affect crop choices,” Wasemiller said. "Guarantees may favor one crop over another and sway acreage in that direction.”
This year, USDA provides a higher subsidy if you insure enterprise units rather than optional units; neither Crop Revenue Coverage nor Revenue Assurance has any limit on the size of price drop from spring guarantee to harvest price and both have a 200% limit on the upside; requirements to qualify for biotech discounts are less stringent, he reports.
Based on a spreadsheet program developed in conjunction with Silveus Insurance, which estimates profit or loss at various prices and yields under various crop insurance products and with or without marketing moves, Wasemiller noted, "There are a lot of potential red ‘hot spots' (losses) this year. Crop insurance removes some, but marketing strategies need to be added to remove most (see corn table for one example, where red indicates losses, green, profits and blue profits over $100/acre).

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