AFSC Actuarial Department Feb 3/11

[TOM4CWB]

Dear Charlie,

How in this world... could the AFSC Actuarial Dept... pretend that prices for Cereals and Oilseeds have not gone up since October?

Do they think we grain farmers are all crazy? How does this happen? This is actuarily sound?

http://www.afsc.ca/doc.aspx?id=4420

Background:

2CWRS Oct 2010 $6.15 - Spring 11 THE SAME

2CWRW DOwn 2% @ $5.25/bu from Oct 2010

Specialty Canola Down 4% @ $11.68/bu

Flax Down 1% @ 12.45/bu...

[charliep]

Not the AFSC actuary department that does this. A process where the federal
government, the western provinces crop insurance agencies and provincial
governments agree to a forecast price. Could the forecast be wrong?
Absolutely. Perhaps why both Saskatchewan and Alberta have the variable
price option/benefit respectively.

From the other side, you also have to realize the premiums would be higher if
coverage levels had increased via prices. People complained about cost last
year about premium and this year will be worst. Look at coverage dollars per
acre.

[charliep]

For those Albertans that haven't got their crop insurance letters, here
are the posted prices that will be used to determine coverage levels.

[URL="http://www.afsc.ca/doc.aspx?id=4420"]coverage prices[/URL]

Here is the link to the fall prices.

<a href="http://www.afsc.ca/doc.aspx?id=4166">fall 2010 prices</a>

With some research, could post Saskatchewan and Manitoba levels. Will
let someone do it, however.

[TOM4CWB]

Dear Charlie,

I simply cut and pasted the bottom 'signature' on the spring price sheet for 2011. IF AFSC actuarial department on Feb 3/11 doesn't want to take 'credit' for their own program... they should NOT put their name at the bottom of the page!

I don't buy the premium cost argument. If I want less coverage... I take a lower percent coverage... there is close to an exponential decrease in premiums and it costs way less proportionally... It is not quite as good as a 70% coverage gives less chance of collecting than 80%... but for SPE this makes the program almost useless.

[charliep]

SPE is a risk management alternative among the many that will lock in a quaranteed minimum price. You will have 2 and 1/2 months to evaluate whether SPE is worthwhile.

I would observe prices are extremely high relative to history. Could they go higher - yes. Could they be lower - the risk exists if bumper crops and the demand side softens.

[TOM4CWB]

Dear Charlie,

I am REQUIRED to give you a hard time... sorry about that!

This will be a big issue in rural Alberta this spring/summer. IT Will make it to the election circuit no doubt!

Just giving you a heads up.

Much like the power lines... if you get caught in the head lights..... it will be very embarrassing...

[charliep]

Way off topic but AFSC could look at its current fed cattle price insurance program (will be offered backgrounders and cow calf shortly) as model for crop price insurance. Could offer a crop product based on the market and a daily premium reflecting risk.

[FarmRanger]

Tom, just buy futures options, (PUTS specifically).

They are cheaper than the SPE, and far more flexible. You can sell them again, cash them in anytime before they expire, or if they become worthless because the price has stayed high, they aren't any worse the the SPE.