NEIAAG - 1/8/2025 14:39
Agr723 - 1/8/2025 13:13
Thanks for the clarification.
I agree that people need to buy the product that allows them to sleep at night. For me, if I’m going to hedge a significant portion of my crop I’m going to carry RP. Seeing the results of HP-RPE in 2012 for guys with any grain contracted/hedged changed my views on that policy permanently.
I also believe that an RP policy is a very poor way to manage price risk on a crop. A 15% yield/price deductible is just too much to give up before a claim is generated. And that doesn’t take into account how a yield over APH affects price loss coverage.
Very poor is an understatement. And I think you may still be drinking the Kool aid of conventional wisdom. Let's say you are a hedger and you are gonna buy RP. The idea that it helps you if you are a hedger is only the case if you do not produce the bushels. But any bushel you actually produce, does not get helped by RP. It's a myth. Let's say you have a 100 bushel APH, bought 85pct RP, corn is 5 bucks on July and you decide that you are gonna sell up to your guarantee or 85 bushels. August comes along and it gets hot the market rallies and we post an average price of 7 for fall price. You get the honor and privilege of sending in your RMA premiums to collect absolutely nothing, because you grew your guarantee and they value that at $7. It's a sham because people think they are gonna collect big. They aren't. They will get paid for every bushel below 85 at 7 but nothing for every bushel from 0 to their yield. So you will be delivering 5 dollar corn that you thought was protected for 5 dollars minus the part of the Policy premium that you were charged for RP.
Take care
The case for harvest price exclusion (RP-HPE)
