Ontario Risk Management... to counter subsidies?

[charliep]

I will leave AFSC to address how they cover their risk on the revenue insurance/spring price endorsement. My only comments would be:

1) It is not an ad hoc program but rather has been around for 3 years. WRap had comments about how well working but regardless is part of the governments farm programs to stabalize income.

2) It is not a free program - it has a cost and a farmer decision attached to it.

[TOM4CWB]

Charlie;

I asked the question because Risk management done on our farm have real and identifiable costs that have no contributions from any government programs.

I agree that the premium based programs have a small contribution from the grower, but it would be very interesting to know how much these Revenue P.I. programs cost.

Then I could do analisis to see if what I spend on true risk management is a good investment; or if I need to turn more of my risk management investments over to you folks because the true and real costs are lower through your programs!

On AFSC Revenue protection, is the price offered a basket of October prices? For instance on wheat are the October recent Fixed Price CWB wheat prices key; the CWB PRO that comes out this week?

How do I manage risk to attain the average price that is used as the benchmark this month by the AFSC PI Revenue Protection program?

[charliep]

Tom4cwb

Not sure of the question you are asking. Payments are based on the average October prices as outlined in the following (page 12 and 13).

http://www.afsc.ca/NR/rdonlyres/ezo2e5jbz5hemwihe6ah6fyjstvwlb3wg4uuo5o2royvnjmmka e2lhalkk567er73i5r4wd3mu62uayw43o7jtylgyh/SectionI.pdf

I interpret your questions as to whether the programs are actuarily sound/does not involve government support. The answer this year is likely no. I will leave the other comments to discussion other than to highlight a private sector risk management project funded by the federal government and I think being directed by the Manitoba canola growers (canola options pilot project). There are currently as well as potentially some private industry alternatives to provide a similar risk management tools.

[TOM4CWB]

Thank You Charlie; that was a helpful link!

[TOM4CWB]

I must chuckle Charlie that AFSC says:
"Note: Where no basis adjustment is indicated, it is because it is not required." (Last statement on page 15)

One could really question that statement from numerous perspectives!

[charliep]

Setting basis is the biggest challenge/problem with the fall price forecast. The basis of $45 under the converted MGE price did not conconcieve of a $38 over adjustment 1CWRS 13.5 for the fixed price contract. Similarly the spreads (both grade grade and protein) are wider than normal. There are substantial differences between the 2CWRS 11.5 protein wheat PRO and the calculated AFSC fall price.