Montana: Ag workshops review strategies to protect revenue
January 7, 2011
BOZEMAN – Producers will have an opportunity to learn about various strategies to protect their revenue stream using new insurance tools for grains, livestock, pasture and forage, new government programs and the Futures and Options markets. A series of 15 workshops is being held in Montana, starting Jan. 10 in Lewistown.
Each workshop will provide a review of the new Combo insurance policy for small grains; the relatively new Rainfall Index (RI) insurance for rangeland, pasture and hay; Livestock Risk Protection (LRP), a relatively new insurance product for beef producers which allows insuring everything from calves to fat cattle and also provides insurance for dairy, lambs and swine.
Agricultural prices have been relatively volatile in the last few years. Minneapolis Grain Exchange (MGE) spring wheat prices declined by about $3.50 per bushel from early spring through September of 2009. This time period also saw Chicago Board of Trade (CBOT) corn decline approximately $1.50 per bushel; CBOT wheat declined approximately $2.25 per bushel and Kansas City Board of Trade (KCBT) winter wheat declined approximately $2.75 per bushel.
Production risks also cause problems, and calendar years 2009 and 2010 saw distinct changes in historic basis values for different types and protein levels of wheat, which reflected poor growing conditions in those years. Prices for small grains have rebounded to relatively high levels and livestock prices have shown very good strength, rebounding about $20 per hundredweight (cwt.) in 2010. Both local and global markets have contributed to these prices swings.
LRP insurance coverage could have been purchased on Nov. 30, 2010 for 6- to 9-cwt. animals that would be ready the end of April 2011 for prices ranging from $116 to $108. Winter wheat could have been insured prior to the sales closing date of Sept. 30, 2010 for $7.15 per bushel based on the Risk Management Agency (RMA) Projected Harvest Price. The $7.15 was an average of futures prices prior to the sales closing date, but the KCBT futures have trended up and are currently trading around $8.80 per bushel.
Some questions that will be answered during these workshops are: What can be done now to help capture the higher prices currently being offered by the markets, even if you purchased insurance? What if you forward contract this spring, but end with very low yields? Is there a strategy to cover the risks of forward contracting and how can it be incorporated into overall risk management strategies? Since the new Combo Policy Plans are based on the futures and options markets, is it cheaper to use these markets rather than buy insurance? Are there ways to use both the new Combo policy plans and futures or options that provide better coverage than just the Combo policy plans?
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Protection levels offered by insurance plans for crops and livestock will be compared to levels available in the commodities markets. In addition the use of multiple levels of price, yield and revenue protection, strategies will be explored using combinations of insurance plans and the commodities markets. New government programs that help provide safety nets for producers will also be reviewed.
Current workshop cities and dates are listed below. Contact your local County Agent for further details about time and location in each city. Find County Agent contact information at http://www.msuextension.org.
• Lewistown, Jan. 10
• Great Falls, Jan. 11
• Havre, Jan. 12
• Shelby, Jan. 13
• Dillon, Jan. 19
• White Hall, Jan. 20
• Wilsall, Jan. 21
• Baker, Jan. 26
• Jordon, Jan. 27
• Miles City, Jan. 28
• Helmville, Feb. 8
• Billings, Feb. 10
• Sidney, Feb. 16
• Glasgow, Feb. 18
• Ronan, Feb. 23