Put Crop Insurance to Work for You
Planned properly, crop insurance combined with forward grain marketing is a smarter risk management plan, helping you to make more informed decisions.
1. The Foundation
The basics you need to know to begin using crop insurance as the floor for your risk management plan.
2. Seasonal Decisions
These valuable “Marketing Minute” insights from ADM Crop Risk Specialists can help you make the right decisions now.
3. Resources and Contracts
Discover the different types of grain marketing contracts that align with your risk preference and how to execute your marketing plan.
Connect with a Crop Risk Specialist
ADM does not sell crop insurance, but we do offer complimentary help with crop risk planning. We combine our knowledge of the markets with risk management tools and information to ease your stress and enhance your success. We can also refer you to a Crop Risk Services agent in your area.
Contact the ADM Crop Risk Specialist in your area. You can also subscribe to our Daily Market Insight Text by contacting a Crop Risk Specialist or your Crop Risk Services agent.
Crop insurance should be considered a revenue-adding component, not just a safety net against disaster.
Mark Lipcaman, Regional Origination Manager
Latest Market Trends
Thoughtful Examination of Choices
Harvest time comes with many opportunities and lots of decisions to make: when to start harvest; what field to start in; what to do with unpriced grain delivered to town. Making those decisions can lead to even more choices. For instance, if you deliver unpriced grain, what do you do with the grain? You could sell it, store it (delayed price/warehouse receipt) or put on a basis contract. Those are just some of choices, but what should you consider about each of them when deciding what to do?
First let’s look at a cash sale. A cash sale locks in the current futures price and basis level. You know your exact price, with no additional exposure to price moves. You now have the money available for use.
The second choice is a storage contract (delayed price/warehouse receipt). With this choice you pay a service fee that gives you the opportunity to establish the price for the grain later. This contract allows you to participate in the price movement on the futures and the basis. If the futures price goes higher or basis levels improve you could achieve a higher price for your grain. The hope is prices increase more than the cost of storage. If prices decrease, you will receive a lower amount for your grain and you still have the expense of the storage contract.
Finally you could do a basis contract to lock in the basis level prior to or at delivery of the grain. You now have a contract where the basis is set, but the contract can still gain in value if futures move higher. Normally there is no fee associated with this type of contract, but you are exposed to lower prices if the futures decline in value. Talk with your local ADM representative to understand the historical basis patterns and whether the current basis is weak or strong. If the basis is traditionally weakest at harvest, it may be best to lock in the futures and let the basis float instead. This is especially true if there’s a carry in the market.
All of these contracts have their own distinct value. In preparation for harvest, research the current storage fees in your area, and write down your expectation for prices going forward, considering both futures and basis. Use this information to decide what to do with your harvest-delivered grain:
- Make a cash sale if you want income and think prices are going lower.
- Put grain on a storage contract (delayed price/warehouse receipt) if you believe prices will increase more than the fees you are charged.
- Use a basis contract if you think futures will rise and the basis will weaken.
View August, 2021 Market Trends View July, 2021 Market Trends View June, 2021 Market Trends
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From early crop-year planning, ‘til your money’s in the bank, we pledge to be the best grain marketing strategists you can find. Ask for ideas anytime.
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