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“I have had good experiences with guaranteed accumulators,” says farm Kurt Lehman, Slater, Iowa. “The best thing about accumulators is that it forces you to make sales when the price is going up… One of my rules has been not to make sales when the price is below crop insurance levels ($5.65 for 2013). But if the price goes down, a lot can be left on the table.
“One problem with crop insurance is, we don’t know the crop insurance price until March. Before, we would make a lot of sales six to eight months in advance of planting. It has taken away some of my aggressiveness.”
With corn prices in the doldrums, farmers might revisit accumulator grain contracts or other so-called new generation contracts for 2014. But with their high risk-and-reward nature, beware of getting too many bushels tied up.
“With prices where they are compared to last year, we’ll probably see more accumulators used for 2014,” says Ron Groskreutz, grain originator, Heartland Co-op, headquartered in Des Moines, Iowa (with elevators in more than 60 locations).
“But you don’t want to be oversold. A good rule of thumb still applies; sell one-third before planting, one-third while it’s growing and one-third after harvest.”
Accumulator contracts took off about 10 years ago as part of new generation marketing aimed as helping farmers manage their price risk. But with $7+ corn futures and volumes of volatility, accumulators have been scarce, as farmers didn’t feel the need for any additional premium type contracts.
Kurt Lehman, Slater, Iowa, has used accumulators. He wonders whether they’ll fit into his 2014 corn-marketing program. “With futures at near $4.90 per bushel, if there was an accumulator price offered at $5.40-$5.60, I would sure think about it,” he says. “It depends on what the double-up is and what the knock-out is.”