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garyl

Posted 3/12/2019 07:41 (#7375100)
Subject: Very little chance for price recovery. Why buy Fall price protection ?

ECIL

If there is so slim of a chance of the harvest price being above the established spring price why are you paying for the fall price option?
Just asking.

Edited by garyl 3/12/2019 07:41

J P

Posted 3/12/2019 07:49 (#7375120 - in reply to #7375100)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

garyl - 3/12/2019 07:41

If there is so slim of a chance of the harvest price being above the established spring price why are you paying for the fall price option?
Just asking.

I didn't. edit...Even if a bigger rally did occur, it didn't really help much, and I would need to cover my sales in other ways. Cuts the premium about in half.
Take care

Edited by J P 3/12/2019 07:51

Tank2516

Posted 3/12/2019 07:54 (#7375127 - in reply to #7375100)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

It is revenue insurance, with a big drop in price it can give you some benefits as well.

J P

Posted 3/12/2019 07:57 (#7375134 - in reply to #7375127)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

Tank2516 - 3/12/2019 07:54

It is revenue insurance, with a big drop in price it can give you some benefits as well.

Tank,
I might be misunderstanding the OP's question, but I assume he meant why take the standard RP policy which you get the higher of the fall price or the spring price. You can elect to take HPE (Harvest Price Exclusion) where you accept the spring price no matter what. Both policies offer the same revenue safety net to the downside, but the RP policy offers more help if price rallies into the fall and its price is higher. Maybe the OP can elaborate if I misunderstood.

Take care

Edited by J P 3/12/2019 07:58

garyl

Posted 3/12/2019 08:02 (#7375144 - in reply to #7375134)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

ECIL

Yes you made the correct assumption . That is exactly what I am questioning.

Tank2516

Posted 3/12/2019 08:07 (#7375159 - in reply to #7375134)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

Well I might be wrong, but I thought it was either RP or what basically what was the old multi- peril where yield is only insured at the spring price that is being offered nowadays.

AGDEAL

Posted 3/12/2019 08:12 (#7375168 - in reply to #7375159)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

Illinois

There are so many different products from so many different companies that what one guy has another one might be totally different.

85% basic units for revenue protection is under $12 here

ruralHusker

Posted 3/12/2019 14:59 (#7375841 - in reply to #7375168)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

West of Lincoln a little bit

Ack! It's over $35/acre for our fields here. And hail/wind is another $25+ on top of that!! This is for fields with APH ranging from 195-215. We did 80% coverage as a result, brought that down to $20ish for the revenue side.

workinonjunk

Posted 3/12/2019 16:50 (#7375993 - in reply to #7375841)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

I don’t know how you guys do it with those rates plus your taxes. I don’t think this is sustainable.

J P

Posted 3/12/2019 08:16 (#7375179 - in reply to #7375159)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

Tank2516 - 3/12/2019 08:07

Well I might be wrong, but I thought it was either RP or what basically what was the old multi- peril where yield is only insured at the spring price that is being offered nowadays.

Tank,
Well there are lots of flavors offered now in the addon but the HPE has been an option on RP for years. I have elected HPE several times before. If you wanna see your insurance agent squirm, ask him about HPE. They don't like writing it and will be quick to remind you of 2012. But when I looked at the coverage matrix it takes a heck of rally plus a major loss in bushels before the fall RP price really does much good "here".

Take care

Tank2516

Posted 3/12/2019 08:35 (#7375222 - in reply to #7375179)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

Looking at the two policy options in my hand book given to me from my insurance agent that deal with revenue protection that the government offers, one gives you yield times the spring price for revenue protection you have neither upside or downside price protection. The other is RP Harvest Price which gives both upside and downside price protection. The HPE you are talking about is old terminology and is no longer used.

doathlon

Posted 3/12/2019 08:39 (#7375236 - in reply to #7375222)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

Always take RP. In 2012 the fall price was $7.55. I don’t remember what the spring was but it must have been in the $4 range. That difference in money will probably pay the cost of the premiums for the rest of my life. It’s relatively cheap and rarely pays but when it does it’s a life saver

J P

Posted 3/12/2019 08:42 (#7375242 - in reply to #7375222)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

Tank2516 - 3/12/2019 08:35

Looking at the two policy options in my hand book given to me from my insurance agent that deal with revenue protection that the government offers, one gives you yield times the spring price for revenue protection you have neither upside or downside price protection. The other is RP Harvest Price which gives both upside and downside price protection. The HPE you are talking about is old terminology and is no longer used.

If you say so.

Here is the coverage matrix for 85% RP and the 85% RPwHPE "here". I got confirmation in the mail already from the insurance company of my HPE policy request being accepted.

Edited by J P 3/12/2019 08:50

(RP - RPHPE coverage comparison (full).png)

Attachments
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RP - RPHPE coverage comparison (full).png (63KB - 179 downloads)

Tank2516

Posted 3/12/2019 09:00 (#7375274 - in reply to #7375242)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

Well I just talked to my insurance agent and I was wrong HPE is still being offered. One problem going that route though is if price would go up your yield guarantee could go down as your revenue protection is locked in at the spring price.

J P

Posted 3/12/2019 09:09 (#7375292 - in reply to #7375274)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

Tank2516 - 3/12/2019 09:00

Well I just talked to my insurance agent and I was wrong HPE is still being offered. One problem going that route though is if price would go up your yield guarantee could go down as your revenue protection is locked in at the spring price.

Hi Tank,
Agreed. That is spelled out in those martrix's I posted. Definitely the downside to taking HPE. But for me here, I have to swallow the first 40 bushel loss below my APH before the RP harvest price helps out in anyway shape for form - at any fall price and even then the payout just flat lines. I don't think HPE is for everyone though. Everyone needs to evaluate their risk levels, hedge levels, market outlook etc to determine what is right for them.

Take care

Edited by J P 3/12/2019 09:14

illinidirtfarmer

Posted 3/12/2019 19:33 (#7376344 - in reply to #7375179)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

WC IL

J P - 3/12/2019 08:16

Where is “here”?
Maybe the agents squirm because taking HPE is a bad choice for most people.
Seems the consensus on here is that it’s not a good idea.

J P

Posted 3/12/2019 20:36 (#7376516 - in reply to #7376344)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

illinidirtfarmer... Where is “here”?
Maybe the agents squirm because taking HPE is a bad choice for most people.
Seems the consensus on here is that it’s not a good idea.

I am in NE Iowa. Might not a good idea for most people. Rightfully so the agents should squirm. I am sure the toughest conversations agents have are the ones where they have to inform someone they are not covered for some loss.

Again each has to assess their own risk levels. But 99.9% here also think the next major price effecting event is random, will come completely out if no where without any warning of any kind. I do not share that belief. And this armed with the best information I have, will make the best decision I can.

Take care

humblefarmer

Posted 3/12/2019 18:41 (#7376202 - in reply to #7375134)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

indiana

Ask people who didn't have it in 2012 how things turned out?

J P

Posted 3/12/2019 18:54 (#7376237 - in reply to #7376202)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

humblefarmer - 3/12/2019 18:41

Ask people who didn't have it in 2012 how things turned out?

Hi humble,
I totally understand where you are coming from. It depends alot on where you were etc, in relation to the drought of 2012. For instance here, I had 75% RP. I collected a check for about .075 an acre. Yippee. I couldn't even buy groceries for a growing family with it. It was nothing. I had neighbors within a few miles that had record yields because they caught the stray shower...so it just depended on where you were. There is always risk in anything and you have to decide what risk you are willing to accept, just like any other insurance, house, car, liability, etc. For me, the market structure does not support a move anywhere near a 2012 event - and since price knows IMHO, I have decided it's not likely going to happen and I am not going to spend the money. If price starts to develop and show signs of something different, I should see it, and have have plenty of time to do what I gotta do, and it will be way more effective that taking than eating that first 40 bushels, and then really not getting anything out of it. If price went to 12 bucks in corn...and if I grow 39 bushels less than my APH, I would get nothing. And that would not be acceptable to me.

Take care

Edited by J P 3/12/2019 18:55

humblefarmer

Posted 3/13/2019 05:58 (#7377033 - in reply to #7376237)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

indiana

JP I read your comments and appreciate your input. But really , price already knows we are NOT going to have a 2012 event ? And to clarify I am not expecting a 2012 type event , based solely on the weather we've had this winter. Also there are several pieces to the insurance puzzle. Insurance level (70%-75%-80%-85%-etc)is a different discussion vs whether to HPE or not. I think we might agree that in the end we are talking about nothing more than "comfort" levels. Or what path we take to reach our comfort level.

AGDEAL

Posted 3/13/2019 08:21 (#7377264 - in reply to #7377033)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

Illinois

way to much cold and subsoil moisture for another 2012. Not saying we cant have a dry year but from spring of 2011 to fall of 2012 you could have been in the field each month if you wanted to. It was such an abnormal warm and dry winter

J P

Posted 3/13/2019 08:48 (#7377310 - in reply to #7377033)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

humblefarmer - 3/13/2019 05:58

JP I read your comments and appreciate your input. But really , price already knows we are NOT going to have a 2012 event ? And to clarify I am not expecting a 2012 type event , based solely on the weather we've had this winter. Also there are several pieces to the insurance puzzle. Insurance level (70%-75%-80%-85%-etc)is a different discussion vs whether to HPE or not. I think we might agree that in the end we are talking about nothing more than "comfort" levels. Or what path we take to reach our comfort level.

Hi humble,
Yep. It comes down to what you are comfortable with. "Here" the only choices are 85%RP or 85%RPwHPE. If I am not at that level, I might as well self insure. It's always possible that this year is the year we get a localized drought. But our soils hold water very well. And the odds of a localized drought taking more than 40 bushel off my APH - enough to trigger the lower coverages is pretty slim.

Regarding your other points, I would respectfully disagree and say its all on price. If you are in the camp that price will go up most likely because of a supply issue, then it's not that much of a leap to say a drought of the magnitude of 2012 isnt going to happen this year. Price movement is nothing more than the expression of energy. When I look at the weeklies and monthlies there is almost nothing outside of a higher low that I can point to and say its bullish. And on the dailies, the most recent move higher couldn't even reach the ML- on a flat fork to boot- and now it has fallen out of the LML. None of that is supporting a moon shot higher. And if you are honest with yourself, the best we will see is price staying range bound til it builds supporting market structure for a move higher which chews up precious time needed to get price substantially higher or we go lower.....neither of those scenarios promote a fall price substantially higher than we got this spring. 2012 supported the rally we got. Today if I was a betting man. I would say if you are going to trigger the revenue side of the RP policy, it will be because of low prices not high ones. And thus my decision to take HPE.

Take care

Bengal Stripes

Posted 3/12/2019 08:06 (#7375156 - in reply to #7375100)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

garyl - 3/12/2019 07:41

If there is so slim of a chance of the harvest price being above the established spring price why are you paying for the fall price option?
Just asking.

Because you will never buy an upside call that cheap. If you don’t want the upside protection, buy it anyway and sell it on the board, you can net the subsidy difference.

deere9510

Posted 3/12/2019 08:15 (#7375177 - in reply to #7375156)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

So Illinois

Ask the guys in 2012 that didn't take the harvest price option

motherlover

Posted 3/12/2019 08:23 (#7375194 - in reply to #7375177)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

NE IA

I for one did have RP in '12 and still didn't collect a single dime on federal crop. For that matter have never collected a dime from it. Minimum bushel guarantee only from here on out and to me the only guarantee is another bill to pay.

Baby Bull

Posted 3/12/2019 08:27 (#7375204 - in reply to #7375177)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

NE Iowa

Fall price paid huge in 2012. If we have a short crop nation wide the fall price will easily beat the spring price. I have a friend that was told by his agent not to pay for the fall price protection. He was out thousands of dollars that fall. Take fall price option.

Walton Farms

Posted 3/12/2019 22:10 (#7376770 - in reply to #7375204)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

SW Indiana

Baby Bull - 3/12/2019 09:27

Fall price paid huge in 2012. If we have a short crop nation wide the fall price will easily beat the spring price. I have a friend that was told by his agent not to pay for the fall price protection. He was out thousands of dollars that fall. Take fall price option.

I was one that didn't take the harvest price in 12. That was an expensive education on crop insurance. You NEED the harvest price option when prices are low. The time to let it drop is when the spring price is astronomically high, like in 2013.

wade garrett

Posted 3/12/2019 08:45 (#7375251 - in reply to #7375100)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

Central IL

Cause no matter how smart we are and how many forks we draw.....sometimes were wrong.

Edited by wade garrett 3/12/2019 08:45

thereaper

Posted 3/12/2019 09:25 (#7375334 - in reply to #7375100)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

Ol’ Wisco

Because it’s a FAR cheaper strangle than what you can buy in the market.

garyl

Posted 3/12/2019 09:43 (#7375381 - in reply to #7375334)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

ECIL

Yes

mconzemius

Posted 3/12/2019 09:33 (#7375357 - in reply to #7375100)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

WC MN

How much can the fall protection really be. Seems like a good way to penny yourself to death.

garyl

Posted 3/12/2019 09:41 (#7375378 - in reply to #7375357)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

ECIL

It basically doubles the insurance cost for me in corn. I do like Bengals stripes comment about sell it off and collecting call premium. However a little more cash flow
risk.

Tank2516

Posted 3/12/2019 12:22 (#7375600 - in reply to #7375378)
Subject: My premium does not Decrease that much with HPE.....

I had the insurance agent run numbers for me to go HPE in corn for enterprise unit coverage it decreased the premium for 70% coverage about 40 cents per acre. Soybeans with optional unit coverage @ 70% it decreased the premium $1.40/a. I guess for that little savings I will stay with the harvest price option.

Hanktbd

Posted 3/12/2019 12:52 (#7375648 - in reply to #7375600)
Subject: RE: My premium does not Decrease that much with HPE.....

Central IL

Did not take HPE in 2012. Had me sweating bullets but turned out OK as yields ended up about 82% of APH and would not have collected. Have taken it every year since and will continue as long as gov subsidy puts the odds in my favor. Will self insure if that ever ends. Have never actually had a claim to date on either crop insurance or my life insurance and hope that continues.

Abelsron

Posted 3/12/2019 20:17 (#7376472 - in reply to #7375648)
Subject: RE: My premium does not Decrease that much with HPE.....

NC Iowa Thompson

I just had my take with my agent today. My thinking is we have ( 900+ ) carryover. Even if we have a bad crop the market is not going to be chasing beans as have plenty. I can go for 80% to 85% for right at the same price. If I look at corn I use the same logic. I will move my coverage from 80% to 85% for the same money. I do not farm for insurance, but it is a tool. If you want all the bells then you can buy ramp coverage and go to 95% for another $ 23.00 an acre. If I do that even with my small acres I basically can get A vacation or new a pickup every with what a save or gamble. When I use to sell fed crop they showed us a chart at training in a 10 year period the times you will collect with HPO or full coverage. In my area and my history of losses H P O works best for me .

Meangreen85

Posted 3/14/2019 02:49 (#7379286 - in reply to #7375100)
Subject: RE: Very little chance for price recovery. Why buy Fall price protection ?

None of you guys seem to know that RP covers for the price going down too from Spring to fall... not just going up like 2012 did.

Take 2018 for example:
Say your APH is 55 and insured at 80% spring price was $10.16
55 X .80= 44bu guarantee X $10.16 = $447 per acre coverage

You raised in 2018 50bu per acre THIS IS 6 bushels over your 80% guarantee. Harvest price dropped to $8.60. Sooooo, 50bu raised X $8.60 = $430 revenue then we take $447-$430= $17 per acre claim. And that’s outyielding your guarantee by 6bu. We had guys that raised at or slightly below their guarantees this year that got paid significantly.

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