Federal Crop Insurance

March 15 is approaching quickly. Many of you have already taken care of your Federal Crop Insurance needs. There is time for making adjustments. Normally I don't get involved in this decision making. I have been made aware of a management tool that can enhance the insurance and save you some input dollars. The Lewis DSMs had a conference call with Al Kluis last week and he wanted us to think of using the 70% insurance level and a $3.80 put option instead of only using the 80% level. Friday's close on a Dec. 2010, $3.80 put option was $0.325. Lets walk through an example for here is Keokuk County. If you have a established yield of 165 bushels per acre, an 80% guarntee level will cost you approximately $13.50 per acre. That gives you an insurable yield of 128 bushels per acre. At a 70% level the premium is approximately $7.50 per acre for an insurable yield of 112 bushels per acre. The cost difference is $6.00 per acre on the 16 bushel difference. That is $0.375 per bushels cost for the added level of insurance. The put option will cost you $0.325 per bushel. You will save a nickel and have the downside protected for those bushels on the market and all the upside available to you. If the cash market goes up then you have the added value on your cash crop and to make sure your option doesn't expire worthless, you can role it over into another management level to protect yourself more.

I want to make it perfectly clear that this is a suggestion not a recommendation. I want to work hard to help you out as much as possible. To get recommendations, I will be hosting another of Al Kluis' webinars on Monday evening. This will cover the Crop Insurance topic exclusively . It will begin at 8:00 PM and I will make sure to have treats to eat. So come and learn and eat to your fill.

Planting is about 35 days away for a normal year. We all know that this in not a normal year and many things must fall into place to make it a normal year. Hopefully, the weather will straighten out soon.

Perri