|
| Wickett,
I read this that your guarentee is 120 and you have 80% coverage so your aph is 150? If so and you produce a 175 crop (actual yield) the fall CBOT price would need to be $3.89 before you receive an indemnity payment of any kind (at $3.85 CZ13 you will get $4.25 indemnity) keep in mind this is CBOT price not cash price. If your basis is lets say -35 under CZ13 (just a guess) and you sell at harvest for $3.50 on 175 yield your revenue is $612.50 per acre + your $4.25 less your premium. Smaller yield of lets say 150 actual then you will receive an indemnity payment of $100 but revenue from actual grain sales of $525 or 625 less premium. Granted you dont have to sell cash at these prices but just using as an example.
Now if corn wee to rally and you have the HPO (and if you did not take the exclusion you would) to last years price of $7.50 and you harvested 75 BPA your actual revenue would be $562. Insurance indemnity would re-set at the higher price so 150 (assuming this is aph) x 7.50 = $1125 x 80% =$900. Your actual was 562 so indemnity prior to premium is $338. If you did not forward contract any bushels and basis was + in the fall to lets say, +25 your cash price would be $7.75 x 75 or $581.25.your net income in a short crop/higher price year would be $919.25 compared to a big crop/low price year (above) at $616.75.
The challenge comes in as to how to sell the grain. No matter what you havefor insurance you still need to sell grain. The second scenario would tell you not to make a sle before harvest and the fist would tell you to make a slae before harvest. in 2012, alot of guys made sales before harvest and possily sold the 75 BPA they actually harvested at lets say $5.68 equivillent (spring price) and a -40 basis for $5.28. The talk was prices were to go down and better get crop sold. In example 1 that would look like this:
75 BPA x $5.28
100 BPA x $3.50
= $746 actual +$4.25 for $750.25 or $133.50 per acre better than if you waited to harvest to sell.
On scenario 2 it would look like this:
75 BPA x $5.28 =$396
0 BPA x $7.75
Indemnity = $338
= $734or $185 per acre less than if they were to wait. The big challenge came when a producer has too much 2012 corn sold and had to buy those bushels back and eat into the indemnity.
Hope this helps. | |
|
Market is depressing!!! Not looking anymore!!!
