Some words of caution about the crop insurance hedge

Farm and Ranch April 6, 2009 When you talk with northwest wheat grower organization leaders about the economic situation for their members this year they usually express concern about 2010 rather than 2009. They point to the price guarantee most producers will have on their wheat crop this year from Crop Revenue Coverage insurance. That base price is $8.98 a bushel. Mike Krueger of M-K Commodities in Oregon says that is a wonderful hedge but it is a hedge that will come off. Krueger: “If it is at their APH yields at 85% it is $7.63. At your APH yields you have used up the deductible on the price. At 80% it is about $7.06 and so forth. Know what that number is. Know that you are hedged there from now until August. However, in August when they calculate the final harvest price that hedge will come off. If we are at five bucks they will be writing checks. But if we are at five bucks going to four it won‘t help you anymore. So be aware when that hedge is going to be offset and I wouldn‘t care to forward contract below those prices, until at least it looks like a large world crop is made. That will take a while.” Mike Krueger of M-K Commodities. I’m Bob Hoff and that’s the Northwest Farm and Ranch Report on the Northwest Ag Information Network.