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Last-minute insurance checkup

DANIEL LOOKER 03/08/2011 @ 3:14pm Business Editor

If you’re still considering changes in crop insurance coverage before the March 15 deadline that applies to the Corn Belt, Kansas State University is offering a webinar this Friday, March 11, at noon CST.

If premiums seem high, you might want to compare the cost of options to see that they’re a relative bargain.

“The fact is the cheapest option out there is inside the insurance contract,” K-State economist Art Barnaby tells Agriculture.com.

According to Barnaby, who will lead the webinar, “With current higher market prices, there is a significant amount of price protection built into Revenue Protection” (RP replaces crop revenue coverage and revenue assurance with the harvest price option.)

The Webinar will explain how to separate the premium cost for yield risk, downside price risk and increasing price risk.  In many, maybe most, cases corn farmers are paying less than 2 cents per bushel for the yield adjusted put option built into RP vs. 75 cents for CME puts.  This is also true for sorghum, soybeans and wheat. However there are significant differences between the Chicago and Revenue Protection options and that’s a focus of the discussion in this Webinar.

Here’s what the webinar will cover:

  1. Understanding what is a yield adjusted Asian (YAA) option built into RP.

  2. How to calculate the YAA option premium cost set by the Risk Management Agency in your RP insurance contract and then compare YAA option premiums with Board traded options.

  3. Comparing the difference in price protection provided by YAA options vs. Board traded American options in Chicago, Minneapolis or Kansas City.

  4. How farmers with option trading experience can use the RP contract to write covered options and possibly gain additional profits.

Here’s more info.

You can register here.

The webinar costs $25.


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