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South Central Iowa | +1
Hedging expected production is good risk management. I would add part of that risk management is also not hedging too much of your expected, both because you don't know what you will grow and you don't know what opportunities will arise. You mentioned up to crop insurance; I would add up to the prevent plant portion of your crop insurance. For me with 80% coverage, that would be 48%. But I wouldn't do that much over a year out, unless it was really good, 10-25%.
Also, another pseudo-hedge I will add to the discussion is reowning on the board. I prefer to sell most of what isn't forward contracted across the scale. I reown that on the board after it is sold. To me, this is no different than the old sealed grain loans. Then the FSA gave you a loan for a portion of the price of your crop and you agreed to seal it and sell later. In this case, I get the full value of my crop at harvest and the long position acts as the sealed grain. I get three benefits; the benefit of my full grain value now, no storage problems or costs, and I get to offset my short and lessen harvest pressure. Reownership is not a true hedge, but if I have already sold my physical, it behaves no differently than commercial storage, DP, GBS, or sealed grain loans. | |
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If you hedged next years crop, should that make an impact on what you actually grow?
