Buy up crop insurance, tune out market noise?

[BA Deere]

That`s what I`m thinking and not worry about contracting & hedging.  Because traders keep the market up without (what I would call good reason)  it`s my experience unless you contract on a special day in late winter, you`ll do just as well or better pricing right off the combine.  One year that won`t work, that`s why you don`t shun the spendy crop insurance, to bail you out when that year shows up.  

I think farmer bins have been build and his pockets are deep & full, he will not give his crop away (for as long as his pockets are full).   Then you have Mr Professional Bigshot who run trucks every week off his 20,000 acres, regardless.   The little guy who contracts (then listens to Mark Gold "buy put, sell call") .  You sign the dotted line, you no longer have possession if it drops 25¢ you`re happy, by if it rallies $2 you are sick to your stomach... not a fun way to spend your summer.  

Here`s Chip talking to Shawn Hackett, says 2023 could be the "big one" (drought)  neither NaNina nor ElNino, rather "LaNada" 

https://www.agweb.com/agritalk   

[rsbs]

Last year I was all bulled up and thought the markets were going to go up, and stay up and that I would grow big crops and not need crop insurance. So I went as bare as I could, and still sleep soundly at night. No revenue protection, just bushel protection, but at the 85% level. With enterprise units, I got pretty good revenue insured for just over $10 an acre. The only exposed area was if crop prices dropped.

This year I am feeling a lot of fear, and probably will go for a revenue protection product and am prepared to pay up to get it. Like you posted, BA, it encompasses a lot of puts, calls, sells, etc. and you know your costs up front. I hope the markets go up for a strong spring price guarantee so we can do what we do as farmers....grow crops.....and not worry so much about the marketing. 

Like Hobbyfarmer says....GBS! Grow it, Bin it, and Sell it. 

[timetippingpt]

Hate to rain on your approach BA but the statistics just don't support your position. The seasonal is pretty simple and highly frequent. High in April/May/June and low in October. Lots of ways to sell a few bushels in April and a few in May and a few in June and then just don't worry about it.

The big one? Drought? It is raining on most of the dry areas (well accept SW area), if this continues we'll enter the growing season with a recharged subsoil which makes "The Bin One" virtually impossible. It will happen someday, but it doesn't happen every year.

jmo and everyone has a different experience that is also valid.

[rsbs]

Time, how high will corn go in April, May and June this year? How about beans?

These are the questions my inquiring mind wants the answers to.

[BA Deere]

Time, I agree.  However like I believe it was Ted Seifert said about a month ago, if he spent the last year on Mars and came back to comment on the actual fundamentals, he would "Yes, those are good fundamentals, so what is corn $5.50 and $12.00 beans?"  There`s a desire to buy this market that`s $2 above the fundamentals, IMO of course.  I realize that can dissapear in a week and also go lower than what it should.  But look at the last report demand down, yields up, yet it rallied because acres were down 😀

Last year Profarmer said "be 25% sold at <$13 Nov beans"  beans rallied over a buck and I felt smart/safe starting sales above Profarmer, yet the damned things went 2 bucks above that, stayed strong off the combine AND then had this awesome post harvest rally, defying fundamentals!  Somebody knows something and they have the money to buy it.  It`s on the board and basis as well.  They say it`s "hard to catch a falling knife" but it`s equally hard to grab on to a accelerating rocket  😀

The tight hands, deep pockets explain the strong basis, but somebodies are also buying any and all dips on the board.   Each year is different `23 will be different than `22 which was different than `21 but `23 might rhyme?

[rsbs]

$5.50 corn works fine with decent yields and 2021 equipment, seed, chem, fuel, and fertilizer prices, and $7000 per acre cost on 200 bushel per acre land, and 3.5% interest.

The hard part is when you switch to $15000 per acre land costs, 7.75% interest expense, and inputs rocketing up. This is where it gets dicey.

[roarintiger1]

It’s great to go with the traditional April-June forward contracts, but what are the odds that October-December sales won’t be better? Likely, no. Possible, in this weird world environment, yes.

[WCMO]

Some interesting comments here today.  Took some '22 crop soybeans off the table just now, still maybe a little over 1/3 of my crop left to sell.  I'm mostly an old grow it, bin it, then sell it kind of farmer also.  Had a few fall-delivery cash contracts last year, but none of them were as high as the price out of storage today -- even with storage fees, still better than my early contracts were.  Tempted to just sell all the rest today, but the gambler in me wants to give it some more time, inputs all prepaid, not much for debts anymore.

And, what I thought was going to be a marginally profitable '22 crop yield, actually turned out much better than anticipated.  Was prepared for 40/acre total average, ended up much better.  Replanting the creek bottoms and bumping up the populations there definitely paid off, not sure about the seed treatments or fungicide application (untreated and no fungicide fields yielded essentially same as others, at least for me, but the anticipated prices seemed to justify the extra 'protection' cost).

Continually have mixed feelings about crop insurance.  It's 'comforting' but expensive for a policy that might actually pay something beyond the replants.  If young, tight cash flow, lots of debt, etc., that's a different picture.

[rsbs]

Unless something drastically happens with the crop insurance programs, I am essentially playing with the house's money for the next decade or so from what I collected in a couple of years where the price collapsed and/or we had heavy crop losses.

This seems like a high risk year, and I will plan accordingly.  Is the program too sweet and does it involve too much taxpayer exposure when it comes to subsidizing premiums? without a doubt it does. By rights, producers probably should not be able to go up and down on coverage and game the system.

But, you have to play the cards that are dealt, not the ones you want dealt out.