Is anyone going to take the SPE on anything? I don't think I am. Well not CWRS OR Canola anyway. I think the spring prices are to low. Barley, however, might have some potential if any. Where on earth did they find a price of $3.70 for barley this spring? I sure never saw it!
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Will be interested in comments as well.
Price forecasts that are used in calculations are done mid winter
based on the best information and interpretation at that time
which is not a lot. Is barley aggressive relative to the what the
market - could be but that would be a market opportunity to
use SPE to manage risk and lock in a decent price on your crop
insurance coverage yield realizing the prices have to be 10 %
below $3.70 ($3.33/bu) to trigger.
Have also seen SPE used as a way to guarantee a gross
revenue/acre. Assuming 70 % crop coverage, use SPE to lock in
effectively no less than $8/bu (using canola and realizing
triggering pushes you to $8.95/bu) and locking in $10/bu on
the remaining 30 %. I know the numbers aren't exact but based
on a 30 bu/acre coverage, that would guarantee a gross
revenue of $260/acre with the real $280 if SPE is triggered. 20
bu/acre @ $8/bu and 10 bu/acre @$10/bu. Any yield over 30
bu/acre is your benefit and will increase the above. You
naturally have to look at the cost of doing this which is really
your original question (and mine) - will farmers participate.
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I see what you are saying charlie, however, I still don't know if it is worth it. It is interesting to note that I would be locking in a min $10 for 10 bu. I was trying to figure out if buying options would be a better deal but I couldn't get it to pencil out.
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Sorry folks.... the Rutherford interview was set back to Friday at 9:30.
Basically the class action suit is certified. That means that it will either be settled --- or go to court. Once a class action against the feds has been certified; in other words once the feds have exhausted every appeal attempt, they are pretty much screwed.
The only option to settling out of court is a lengthy court battle and an eventual payout.
This is the choice we must give to each of our politicians. Every one of us must approach our MP, or Senator, and let them know what's happening.
Go to the BSE class action site and read some of the documents. I know that they are long, but there are summary pages.
Our discussions yesterday led us mostly away from trying to convince groups like ABP to come on board and more toward reaching the individual producer and passing the word that way. By the time these organisations have meetings to discuss the thing, we could have the government convinced of all the good a settlement could create.
That being said ---- Lori C ---- we could use your help in any way possible. An updated email list or at least a note to all ABP delegates letting them know of the progress being made. How about a couple of sentences on your weekly grass routes page before the newpapers beat you to the punch.
Good luck everyone and let the networking begin.
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vvalk
Just questioning where you got your $30 to $35/tonne from. I suspect includes everything (production insurance, hail endorsement and SPE).
Examples from the Red Deer area at 70 % coverage (AFSC provided me this information).
Canola - Crop insurance yield - 37 bu/acre. Coverage yield 70 % - 26 bu/acre. Production insurance premium - $12/acre (need for SPE). Hail endorsement (your choice - not required SPE) - $10/acre. SPE $7/acre. Total cost - $27/acre. To compare to a put, the equivalent cost/tonne SPE would be about $12/tonne for a 380 November canola put.
Barley - PI yield Red Deer - 70 bu/acre. Coverage yield - 52.5 bu/acre. PI premium - $5/acre. Hail - $5/acre. SPE - $7.50/acre. Total cost - $17.50/acre. Converting to a put equivalent would be $6.50 to $7/tonne. Futures last quote yesterday (don't know if traded) was $145 December.
Everyone (Albertans at least) have to work the numbers to determine if worthwhile.
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charlie you wrote
To compare to a put, the equivalent cost/tonne SPE would be about $12/tonne for a 380 November canola put.
Just out of curiosity, why are you going with a 380 put? Any particular reason or just one out of the hat? I see today that a 380 nov put would cost $10.50 thereby making the put more cost effective than the SPE, correct?
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Actually took the $8/bu trigger and added the $20/tonne basis in the fall calculation. The number should actually be be closer to $12/tonne for a $370 put.
When comparing, you have to also include the fact that when SPE triggers, you get paid out at $390/tonne (note I have been $5 out in previous examples). In the case of the put, you would trigger if futures fell below $370/tonne with the note the put retains time and volatility value so you can trade out/retain some value by selling early. I.e. SPE only alternative in options terms is to exercise which if I remember is European option.
Other considerations are you have to set up a trading account for an options with a broker whereas SPE is add to crop insurance/deals with an agency you are already working with.
Other considerations may include things like markets. From the district meeting in Wetaskwin, one farmer like to do futures/options instead of a fixed price contract (referrin to the goofy process talked about earlier of only allowing FPC pricing after the market closes) and then using the CWB alternative of doing an exchange of futures for physicals (fancy way of transfering ownership of the futures contract). You would have to excercise on option by the way (take the futures position) - you would only do this if beneficial.
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