Centre county Pennsylvania, USA | Richard, buying 450 corn calls now, while they are very low priced, is a proxy for crop insurance. Like crop insurance, low cost courage calls don't pay off in years that have normal or above normal national production. However; in years when mother nature overheats the corn belt during critical June through July growing season, corn production spikes lower and market prices spikes higher. When that happens, those courage calls can indemnify for production loss. Think of it as crop insurance, not profit.
No human can see the future, but we can sleep better this summer if we are (low cost) hedged for crop failure, while the crop is growing. If the summer of 2016 turns out to be a bin buster, as USDA and current NAT sentiment seems to favor, then those courage calls will expire worthless, but we will sleep well all summer.
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Betting on below trendline 2016 corn production.
