a better conspiracy theory
As discussed here before, apparently the federal crop insurance regulations don't permit the underwriting companies to engage in futures trading but they don't forbid OTC derivatives. If I was one of them I wouldn't DIY on it anyway, I'd go to one of The Usual Suspects and get them to write some sort of price banding instrument to limit my price exposure.
They (Goldman, for instance) could then lay off their risk with futures or options or other OTC arrangements with major counterparties.
The effect would be a near perfect neoliberal closing of the circle. The tendency would be to dampen price moves outside of the intitial boundaries around the set price unless something major goes wrong. Government exposure to rising countercyclical costs would also probably tend to be reduced.
BTW, if something does go wrong every 5 or 10 years then then the gubmint picks up the tab anyway, as insurer losses are reinsured by the gubmint.
Which actually is a all fine and good as far as that goes. Other than I'd like to point out that it is sort of a classic privitization scam where the profits are privatized and the risks are laid off on the public or "the recipients".
Re: a better conspiracy theory
It sounds like a great idea. Except when the balloon doesn't expand or shrink enough to hold the contents, and then it can get kind of messy.