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The market doesn't owe you a profit
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Posted 9/1/2014 09:01 (#4049933 - in reply to #4049902)
Subject: RE: And a farmer doesn't owe you a meal


Illinois Steve - 9/1/2014 07:48

Okay, I want to be sure I understand where you are coming from. You are pining for the good old days of LDP's? I'm sorry, but I've made far more money the last seven years than I ever did during the glorious LDP days of the 90's. I made money just not near as much. The whole LDP thing was just another huge subsidy. Kind of like the governments share of our crop insurance premiums. I can assure you that I received far more money in LDP's than I have in subsidized premiums over the years. During the last several years when things have been pretty good on most farms everyone has been proclaiming that they want less government involvement. Do away with the crop insurance subsidy. Blah, blah, blah. Now that things are getting lean again you want to go back to the LDP system? The crops insurance subsidy was established to get away from disaster payments doled out by Congress. It was supposed to be a safety net that would keep farmers in business when a disaster struck. Unfortunately the way it was written and the way the market evolved let it become a guarantee of profit for many. It was never intended to be that way. With lower markets again, I think crop insurance will return to what it originally was. A safety net. We can still debate whether or not the premium should or should not be subsidized but I think crop insurance will once again function more like it was intended.


Pardon my comparison Steve, no I am not one of these guys hoping for $2 corn. The LDP was a better safety net to me than crop ins. ever will be as far as overall price. Crop ins. only protects my first 120 bu. I can only market that many up front. Options is the only way to protect the remaining amount if you have any (2012) or you have much more (2014). It can be a big cat an mouse game as to when to purchase options, when to exercise them, or let them expire. The LDP by comparison protected every bushel for $2. I knew I could sell on the high on June 21st or in April on the spring high for $2.30 and capture a $.20 LDP later most likely. Reference CZ prices from 2001, 2003, 2004, 2005. 2002 being the only exception. I still had crop insurance that protected my bushels.

Fast foreword to 2014 the only guarantee for price is the first 120 bushels of the RA ins. policy. Nothing after. And it really doesn't protect the bushel price only the gross $ per acre. So just saying each bushel does not have a floor more or less.
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