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| When visiting with my crop insurance agent from time to time the discussion of prices/COP/forward contracting always seems to come up and without fail he says "i wouldnt be afraid to sell up to your bushel guarantee" and " because you are guaranteed the bushels". Meaning if we come into prices that work for me (no it hasnt happened) I should be confident forward contracting up to my bushel guarantee on my MPCI-RP policy. I can store maybe 25% of my production on the farm so forward contracting for fall delivery is something I have to do/ try to do year round however, I have never "sold up to my bushel guarantee" before the crop is made. I forward contract for fall delivery for new crop before I put any seeds in ground sometimes. Also- I have a fair share of my "bushel guarantee" borrowed on an operating note each year (ive farmed for 5 years and unfortunately still have to use an operating loan). So my question to others on here is should a person really have no fear in selling up to their "bushel guarantee" long before the crop is made? I can't seem to wrap my mind around that advice. I've had crop insurance claims in years past, but fortunately I have never been short of meeting my forward contracting obligations with physical crop. Scenario: Lets say I do "sell up to my bushel guarantee" and then have a localized crop failure on my acres and come up short on physical bushels to fulfill my obligations and yet still have a sizable operating note to pay back. Wouldnt I have been better off by not forward contracting so many bushels? Using the insurance proceeds to pay back operating note vs using insurance proceeds to pay off contracts I cannot deliver upon AND my operating note? If i am truly "sold up to my guarantee" and raise 0 bushels- the insurance proceeds would go entirely to buying out of contracts correct ?and there would be none left over to pay off operating correct?
I fully understand how MPCI revenue protecion works or atleast I think I do, but I get confused every time hear that advice. Is my thinking flawed? Is there something I am missing? or am i too cautious? I would appreciate any feedback.
Edited by Lotts_Valley 6/23/2017 04:00
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"Sell up to your bushel guarantee"
