Just recieved my package from Alberta hail and crop. Since they've lowered the spring insured prices on every crop, ie brly to $2.50, I'm having problems trying to justify taking the SPE option on any of it. To have a payment trigger the fall price must be 10%or less than this. That puts brly at less than $2.25u to trigger a payout. The other component is the revenue ins, but on that end do you not recieve only half of any payment? Anyone have any thoughts on the spring price endorsement or am I missing some obvious reasons why I should be gambling another $3-6 per acre?
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Your comments on Alberta SPE barley and for that matter canola are accurate. Not necessarily worthwhile today (keeping in mind there is still 1 1/2 months to make a decision). Wheat (crop insurance price under the revenue insurance level) and some of the smaller crops that have less developed price risk management tools should be looked at over this same period.
Keep in mind there is also a plus in Alberta on the variable price benefit. Your crop insurance premiums are based on these lower prices. If prices increase by over 10 % this next fall, then your coverage on claims will also increase. Everyone will have a different set of management/risk factors but my thoughts in general would be to keep crop insurance coverage levels up versus spending money on SPE. Again, everyone has to the end of April to make a decision.
There is also a tie in between crop insurance/CAISP but there are so many uncertainties right now (only 3 provinces have signed on for negative margins) that I have been holding off making comments. Again, stay tuned.
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Charlie;
Stats Canada asked my CFO today if we had recieved CAIS income for 2003...
FUNNY GUYS...
Capping on Crop Insurance.
How many folks have seen the caps on indexes for Alberta for 2004?
If a farm seeds more than the Crop Insurance specified maximum acreage, then an index of area average (the township average for that risk area) is blended into the index to lower coverage.
What did you hear about this Charlie?
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Think you've hit it close Tom. But I don't think(?) this applies to expansion acres. It's supposedly to keep guys from pouring in all thier inputs into 100 acres of a new type of crop for a couple years to get a big index then seeding the whole farm and letting it collapse. Of course it's about 7(?)years too late because the guys that were going to scam the program have already ****d most of the list of crops. Know of at least one guy that worked it that way, he thinks I'm the idiot. Guess financially I am.
Not sure if you go over your "acres limit" if it's blended down or just the over acres are adjusted to area averages. My take is they've plugged the whole after it sunk.
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Guess I'll ad this to the list of questions as well for crop ins. How do they come up with this "acres limit"? Was just noticing on my field peas the "acres limit" is less than what i've actually been seeding the past few years. How's that work? They average it over the last 20 years??
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This is a bunch of bull, they told me even if I double my acres my canola limit is my limit!! I'm not very happy since I picked up more acres! To top it off SPE is a joke and also my coverage went down this year to where its not worth my time! The only reason to take it is for my land payment which they make you take it. Kind of funny letting both operations be run by the same company!!!
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The issue you are talking about is dealt with in the most recent AFSC Crop Insurance Newsletter (page 2).
http://www.afsc.ca/NR/rdonlyres/e576dtm67uxvddkk5p2sdaxlazrh53frwz2sgcrbpupu4nkeqd 7g3k3b3qdeih5qrlqi5qcptthxcgeodw2thyaux4f/CI_Newsletter.pdf
The issues are the ones frustrated1 talked about in terms of someone building yield history on small acres and then trying to apply to larger acres.
I also hear your concern about lower canola prices used in coverage. Unless things change, this will not be the year to use spring price endorsement on canola (similar to last year). I go back to my comment that the variable price benefit allows you to buy an in the money call (keeping in mind you only collect in a claims situation). Even if you don't like crop insurance/a benefit to your farm, I would still buy a lower coverage level and use this feature to backstop any forward pricing you might do this spring (protect against a total crop disaster).
What are others thoughts?
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Charlie;
It is a real shame that BSE has coloured crop insurance risk tools so much.
THe acreage cap, the removal of high produtivity years (over 1.5 X the area average) from indexes... using over 10 years of production history to skew the index lower (because of technology increases in capability to grow more now)... these all have been implemented at our expense. With out our input.
How could the system survive last year... without any of these restrictions... and Crop Insurance lost no money from 03 claims.
Sounds just like private insurance crying wolf... then making billions....
"Canadian insurance companies make record profit
Last Updated Tue, 16 Mar 2004 21:40:38
TORONTO - Canada's insurance companies are coming off a record year, with $2.63 billion in profit in 2003, a 673 per cent increase over the previous year."
http://www.cbc.ca/stories/2004/03/16/canada/insurance040316
THIS SUCKS... THE LIFE OUR OF OUR FARM COMMUNITIES.
CHARLIE;
Talk about gov. encouragment to STOP risk management.
THE SPE was a one year wonder... will go the way of GRIP... unless a BIG change occurs... within management of this plan.
Why can't AFSC get innovative and offer a decent product... that is affordable... and covers a value that is avaliable 10-20% higher than 04 SPE prices through options today... at the same premiums that are being offered. ALL with better transparency... and education of how to manage risk?
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