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| I think your approach to the question is good. The $5.54 and higher scenario is very "questionable". The other aspect to remember is, you will also need less bu than your guarantee to "collect" enough to overcome the additional premium at prices above $5.54.
In other words, if your guaranteed bu were 100 (for simplicity), and the ending price (average of DEC futures thru the month of Nov for RA) were $6.04, your yield must equal 86 bu or less before you make up the premium difference (50 cents above CRC limit, divided by the $8.00 additional premium of RA over CRC) at the 80% level.
With the downward price move scenario, the difference is made up very quickly, as long as the price average is below $2.54 (during the entire month of Nov). If you feel this scenario may play out (say $2.30 fall futures), then a high level of RA (or CRC or GRIP) will pay an indemnity almost any yield scenario.
Plug in different scenarios in the attached CRC/RA spreadsheet and test different combinations.
My opinion is I would rather own the next higher CRC level over a lower RA level if the premiums are close. It all comes down to your opinion of where yields and markets are going. Good Luck with 07, Rob Heyen
Edited by robheyen 2/24/2007 00:02
Attachments
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 CRC-RA Mkt Example.xls (32KB - 444 downloads)
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CRC vs. RA-HPO on corn
