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Jim Meade / Iowa City
Senior Advisor

Your Risk Management Outlook?

Dr. Elwynn Taylor is always entertaining and sometimes right in his weather prognostications.  He says this looks like 1947, with was the first of 25 years of volatile weather and yields.  He says risk management will be more important than ever to farmers.

My risk management has gone backwards since 2008.  I'm an old fashioned reactionary now.  I don't really have a marketing plan, though I have some vague price goals.  And, time goals seem to come to me when the piggy bank gets low.

My confidence in traditional price risk management is low.  And, Congress seems intent on playing games with crop insurance which has become a more prominent part of my risk management planning, even though I'll confess I don't know how it integrates into marketing as well as I should.

If the next Food Bill has a compliance clause in it, I'm out of the crop insurance.  Last year my return was about my premium.  This year I'm in it heavily, but no matter what this year may be the last year for me.

So - are you all ginned up to make a risk management killing in the coming volatile markets?

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14 Replies
c-x-1
Veteran Advisor

Re: Your Risk Management Outlook?

Jim,

thanks for your reference. i've heard of him before.....do you have his link or article you could post or if not, what was '47 like?

 

thanks,

c-x-1

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Palouser
Senior Advisor

Re: Your Risk Management Outlook?

Subsidized crop insurance has reduced the risk to manage in the market. With 85% crop revenue protection based on last years crop prices (for wheat) I have only a maximum of 15% of a normal crop to protect. On the other hand I seldom try to protect 100% of risk because it's simply too expensive. I'd have no trouble survivng and going on with 85% coverage.

 

Hedging is now too expensive and too risky (related) for me to be interested at this point. I just need to try and see the opportunities to develop to sell at best advantage.

 

 

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sneeky253
Frequent Contributor

Re: Your Risk Management Outlook?

Different country I know, but we never forward sell/hedge our production. Just too **bleep** risky. Problem is that if if our crop fails it generally means that a lot of crop had failed, grain prices sky rocket and we end up having a huge payout figure.........good way to lose your shirt in a hurry. Traders used to offer acre contracts, not anymore......I wonder why?

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jec22
Veteran Advisor

Re: Your Risk Management Outlook?

Why did Taylor stop at 25 years after 1947?..that would be 1972.  1974 was one for the record books.  Don't need any notes to remember that year, corn hit $4 that winter.  Which would be like $15 corn today.

 

Risk,  one could say that with all the wet acres, which have lost N, and the prediction for a hot, hot July, Aug.,selling new crop would be risky.
Might be the right move, but it is risky.   I mean, you are soon taking 1974 prices.   Somewhere, sometime, we are going to break the corn market hard for a while, just not looking like it might be in the next few months.  Got corn that is up and looks good, but this rain has to back off for a while and let the plant root down instead of drown.  Hopefully we miss the 4+ inches they say we have coming this weekend.  Still beans to plant,  we are doing a field trial on mudding in beans today.

 

 

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c-x-1
Veteran Advisor

Re: Your Risk Management Outlook?

1947 - corn yield was down 23% bpa from 1946

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Palouser
Senior Advisor

Re: Your Risk Management Outlook?

Except for 3 of the last 4 years I've never had crop insurance. But the new game in town is just too promising. And I only insure wheat which is usually only 1/3 of my ground. Spring wheat is included and can be up to another 1/3 of the ground but I usually grow spring barley now. If it's not wheat I don't insure it. I've never gotten a SURE payment because I don't qualify. I guess it's based more on the county and state yield and one requirement is everything has to be covered to qualify. Yup, you're just a poor **bleep** if you don't go all the way with welfare insurance. It's become the deepest trough around.

 

If prices do go down for wheat this year I'll be sure to decline insurance for the next. Even with high prices for most of the last few years I only collected once as the yields have been too high.

 

But I'm fully aware that this isn't Australia. It's not even the Plains. This is wheat paradise. I don't complain unless I'm being sarcastic and I always needle the farmers that do complain around here. I sympathize with those on the Plains.

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ray h.
Senior Contributor

Re: Your Risk Management Outlook?

    Crop Ins. A game not played all that heavely here in W.Ore.Except for the bigger time opps. Grains are produced more for rotation or cash flow.They(the grains) have become a larger part of the arsenal in the last several years,and the specialty commodities are realy feeling the pinch.My guess is the way things look is where is the weather acting normal,where are the acreages normal,this could get to being very interesting!!!!!!!!!!!!!!!!!

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dennymal
Veteran Contributor

Re: Your Risk Management Outlook?

We've had alot of rain here north of Aplington but the corn is up and thanks to yesterday got most of the beans in. 300 acres planted before the snow looks fabulous. As far as risk mgnt I've made a few early sales North of 6.00 on my 900 acres of corn I've planted. I also rented out a 120 that I own that was 9 miles away. The guy gave me 465.00 up front so I let it go. Don't miss farming it so far this spring. Probably should just retire and let someone take the risk but at 57 what would I do.

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Hobbyfarmer
Honored Advisor

Re: Your Risk Management Outlook?

I have lots of risk and it is managing me pretty well.

 

 

 

 

Btw, I see no change in the foreseeable future.

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