What is in this article?:
- CBOT Corn Price Higher than Insurance Guarantee; Put Marketing Plan in Gear
- Take Advantage of Price Rallies
Take Advantage of Price Rallies
Johnson is a big advocate of using your crop insurance – not as a yield guarantee, but as an opportunity to manage your revenue by taking advantage of price rallies to bolster income, “The key to RP is that if the harvest price increases (October average for December futures contracts); the revenue guarantee reflects the higher of these two prices. That’s a real advantage if there’s a shortfall of contracted insurance bushels since that higher harvest price will be reflected in the final indemnity payment.”
So how do you know prices will remain above the spring guarantee? You don’t, but Johnson says look at the history of where they have been relative to the spring and fall prices for the past dozen years.
- Only in five of those 12 years is the harvest price higher than the projected price, but it is in each of the last three years. Note that for all 12 years the December corn futures price high was above the Projected Price. Only the years of 2006 and 2010 did this high not exceed the Harvest Price.
- This period of time is referred to as the spring/summer high price, or the seasonal highs. Note that for all 12 years the December corn futures price high was above the projected price. Only the years of 2006 and 2010 did this high not exceed the harvest price.
Johnson says if the 2012 highs were not hit with your marketing plan, this is a new year and a new opportunity to take action. “For corn and soybeans in 2013, many missed the opportunity to sell new crop bushels last August or September at high prices. A new goal might now be to sell a portion of your guaranteed insurance bushels in the spring and summer months. Cash sales can be made using forward cash or hedge-to-arrive (HTA) contracts. Both contracts require the delivery of a specific quality and quantity of bushels. The forward cash contract fixes both the futures price and the basis when the contract is initiated, thus the cash price for delivered bushels is known.”
The corn market has moved into positive territory with regard to the crop insurance guarantee. This allows a policyholder to not only be guaranteed the minimum revenue of $5.65, but also sell corn for more than that level. This should be part of your marketing plan. In recent years, the high for December futures has been above the projected price.
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