An interesting tidbit on canola

[charliep]

SCREWED UP - WILL TEACH ME TO COPY, PASTE AND MODIFY

VARIABLE PRICE BENEFIT - Increases coverage level price if prices increase by more than 10 % on CI claims (same as varible price option last year except now a standard feature with crop insurance). EG. 22 bu canola CI yield 70 % level. Actual yield - 12 bu/acre. Crop insurance loss - 10 bu/acre. Current CI canola price $7.73/bu. Prices increase to $8.73/bu. (NOT $6.73 IN PREVIOUS) in the fall calculation. Payment/acre increases to $87.30 (would have been $77.30).

[TOM4CWB]

Charlie;

I would much rather have the Spring Price Endorsement(SPE) work as the Revenue Insurance (RI)does....

Think about this for a second...

We could have a 50/50 risk share on the SPE and the RI portion would remain the same.

Example;

Canola is worth $7.73/bu... spring price...

If the price drops 8% or $.60/bu... the SPE would pay $.30/bu.

If the price dropped below $6.69... the RI coverage... then the second 50% would kick in.

Let us say that the price went to $6.00/bu.

$6.00 to $6.69 50% of the owing 50% would be paid by the SPE... giving 75% of the $.69/bu or $.51/bu... plus... 50 % of the $1.04/bu ... or $.52/bu more.

THe total payment would then be $7.03/bu

On a year when the drop was only 8%... say $7.11 then the SPE payment would make back 50% of the lost 8%... or $.31/bu for a total of $7.42/bu

THIS type of system should be more reliable and average income better over the long run.

The all or nothing 10% deductable attitude of the present SPE is a gamble in itself... I don't really understand the logic!

Wouldn't Crop Insurance be smart to talk to farmers in the Safety Net Coalition a little before rolling these new options out?

[TOM4CWB]

Crystalball on Canola: Caution is advised on hedging, options and basis contracts until at least late April. Moisture conditions and # of seeded acres are very much in doubt as we write this and need I mention World economics. Oh a small war is on two horizons.

My advise is to hold any decisions until some smoke clears. My own personal strategy is to hold until I know there is a good chance of a crop to market ( maybe late july) and then place some GPOs with a reasonable markup on the fall price.

I can't see gambling on a hedge or a basis anytime this year as I see the large carry at this point as being alot of low grade crop needing a blend to be marketable. Options are very tricky unless you have a understanding of how they work like Tom4cwb does. Options work far better for buyers of grain than for sellers. To work options right your shouldn't buy a put or a call without selling in the opposite direction. Basis is like 60 day storage tickets the buyer knows he owns you' and that knowledge will weigh on the market if enough basis contract is done by sellers.

If more farmers would ask for a price (GPO) rather then taking a price we could push the market some.

Look for $8.50 canola come the fall.

Flying by the ass of my pants. The Kernel's Marketing Club, membership one

[TOM4CWB]

Crystalball on Canola: Caution is advised on hedging, options and basis contracts until at least late April. Moisture conditions and # of seeded acres are very much in doubt as we write this and need I mention World economics. Oh a small war is on two horizons.

My advise is to hold any decisions until some smoke clears. My own personal strategy is to hold until I know there is a good chance of a crop to market ( maybe late july) and then place some GPOs with a reasonable markup on the fall price.

I can't see gambling on a hedge or a basis anytime this year as I see the large carry at this point as being alot of low grade crop needing a blend to be marketable. Options are very tricky unless you have a understanding of how they work like Tom4cwb does. Options work far better for buyers of grain than for sellers. To work options right your shouldn't buy a put or a call without selling in the opposite direction. Basis is like 60 day storage tickets the buyer knows he owns you' and that knowledge will weigh on the market if enough basis contract is done by sellers.

If more farmers would ask for a price (GPO) rather then taking a price we could push the market some.

Look for $8.50 canola come the fall.

Flying by the ass of my pants. The Kernel's Marketing Club, membership one

[rain]

Kernal you are not right on the basis action all the time. In Canola this year since harvest booking basis and being forced to deliver has been paying $10-$45 dollar premiums over the cash. You do not like basis contracts I have noticed this in your wrightings. I find GPOs strange. All have there places though.