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| the guarantees provided by revenue based crop insurance policies guarantee price and yield in equal portions. An APH policy is based only upon yeild where as CRC, RA-HPO, GRIP-HPO are all based on yield and price, thus if either price or yeild(or both) drops your revenue suffers and thus you may be due a claim.
Otherwise, you are correct about what Art Barnaby is saying about option prices. CROP INSURANCE IS CHEAPER!! consider this...
85% CRC in Sangamon County IL is ~$37/acre for enterprise units(maximum discounts). If we assume a 180bushel APH = 153bpa guarantee, then that would cost 24.2 cents per bushel. If you wanted to protect 85% of your bushel w/ a $5.10 dec put it would cost you 42 cent/bushel or $64.26/acre. And you are only getting the put for $64.26/acre. W/ your crop insurance policy you get a call option as well--that is because it pays you at the higher of the spring or fall price. Oh and you get yield protection w/ crop insurance as well--153bpa in this example. | |
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On the Road Again, (and GRIP no HO)
