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Crc crop ins inplace ofPuts
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farmn4$
Posted 3/10/2008 17:23 (#330789 - in reply to #330780)
Subject: Re: Crc crop ins inplace ofPuts


If your objective is to hedge your cash grain sales then you COULD by "in the money dec puts on those bushels to protect" yourself. However, you could simply sell cash corn to the elevator as well. If you are trying to protect yourself from the price cap that CRC has built into the policy, then you would have to buy $3.90 dec puts(way out of the money) to protect against a major market collapse. Technically you would only need to buy the $3.90's if you were NOT going to make any forward sales to hedge your production. If your attempt however is to have unlimited downside protection through your crop insurance, then RA would be the best(GRIP if you want to use the county average). What you will find is that CRC w/ the $3.90's puts is a small amount cheaper than 85% RA(assuming RA costs $18/acre more than CRC). The CRC & put route would be about $5/acre cheaper. 180 bu aph * 85% = 153 * 8cents($3.90 put cost) = $12.25/acre.

Again the important thing to ask your self is what am I trying to do by buying the "in the money dec puts?"
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