By now most of you (Alberta farmers) will have recieved your crop insurance forms. A new program that you haven't had access to before is the spring price endorsement. The revenue insurance component is also new but is irrelevant this year give the crop insurance prices established this winter are well above guaranteed levels. Variable price benefit is just a re-hash of something you have had before.
TO HELP YOU, THE SPRING PRICE ENDORSEMENT IS A PRICE RISK MANAGEMENT TOOL. It acts like a put option with a strike price 10 % below the crop insurance (eg. canola has a CI price of $340/t so the spring price endorsement would kick in at $306/t). It will pay if prices decline below this level on actual production up to your coverage yield you have chosen (60, 70 or 80 % of area average or your individual coverage yield). It is the same as the variable price benefit in that a trigger you the entire benefit (9.9 % decline - no payment whereas 10 % generates an entire payment).
Are you comfortable you understand this payment well enough to make a decision? What do you think of the premium on this price insurance? What strategies can you see coming out of the program?
TO HELP YOU, THE SPRING PRICE ENDORSEMENT IS A PRICE RISK MANAGEMENT TOOL. It acts like a put option with a strike price 10 % below the crop insurance (eg. canola has a CI price of $340/t so the spring price endorsement would kick in at $306/t). It will pay if prices decline below this level on actual production up to your coverage yield you have chosen (60, 70 or 80 % of area average or your individual coverage yield). It is the same as the variable price benefit in that a trigger you the entire benefit (9.9 % decline - no payment whereas 10 % generates an entire payment).
Are you comfortable you understand this payment well enough to make a decision? What do you think of the premium on this price insurance? What strategies can you see coming out of the program?
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