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Note: This post is intended to provide a robust discussion about risk management and not promote a certain point of view. There are some Barnabyisms contained in this diatribe!! So here goes.
Theme is that risk is rewarded. Transferring risk to someone else is a cost and reduces reward potential!! So now where is the balance? Also more money can be made with a pencil than a plow.
GRIP is a county revenue put. Next the crop insurance programs are risk management tools!! Now to utilize those tools effectively you need data about your own operation. Analysis of that data will guide you to the "best" tool or strategy.
What are your historic yields? How well do they correlate with the RMA's historic yields? If you are 0.85 or greater then you have results that support county level program consideration. If you are in the 0.9 or higher then you might have the option of lesser than 150% scale up and save some money.
If you have individual farm variability that is unacceptable, then county level programs are likely not for you.
Next is your location. Geography does makes a difference. In the ECIL area there is high correlation between yeid and price. Therefore there can be a case for using CBOT as revenue insurance without yield protection.
Also there is uninsured acreage. In IL about 25% of the acreage that is uninsured!! IN is 30% and IA is about 20%. (RMA data about insured acreage and NASS planted acreage data).
Using CBOT has some benefit in that you are not locked into a strategy for the whole year. You can change your positions during the year. This requires a higher level of management and some farmers just do not want that level of management.
Markets generally tend to be higher in Spring than harvest. Not sure about 2008 as there is just not enough information about this market to make such broad generalizations. But a business never went broke when making a profit.
Forgottonian
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Buying GRIP instead of puts
