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Breakout Sessions
To hedge
{ Objective is to manage price risk, an effort to … basis risk
{ you need to manage a margin account
y With …
August 21, 2014
intense and/or alternative cow management likely
necessary given … Profitable prospects for sound management
– Ongoing demand enhancement …
April 19, 2012
Examine Feeder Cattle Risk Management Alternatives
• “K-State … “K-State Feeder Cattle Risk Management Tool”
• Project Premium/Discount …
March 5, 2010
409.58$ 414.09$
Risk Management and Return Forecasting
Tools … Feeder Cattle Sales Risk Management Tool,
Compare expected …
February 15, 2007
Risk Exposure
DGS risk management? DGS riskmanagement?
Increases in importance …
April 7, 2016
Land Buying and Valuing
Co.
NET FARM INCOME
Returns to Farming
Source: KS Farm Management Association
Updated: Return … Returns to Farming
Source: KS Farm Management Association
KANSAS AG LAND VALUES
2015 Cropland Values
2015 Pasture Values …
August 30, 2017
Crop Insurance Papers
1
Margin Protection Crop Insurance Coverage Comes to Kansas
Monte Vandeveer (montev@ksu.edu)
Kansas State University Department of Agricultural Economics ‐ August 2017
A new form of crop insurance coverage is coming to Kansas for the 2018 corn and soybean crops.
USDA’s Risk Management Agency approved an expansion of the Margin Protection plan of coverage for
several additional states, including Kansas. The “margin” being protected here is defined as crop
revenue minus operating costs. This means that MP intends to protect against not only a decline in
crop price or yield (same as current revenue coverage), but also from an increase in operating costs.
MP coverage is a pilot program that was first available in 2016 for corn and soybeans in Iowa, for
spring wheat in the northern Plains, and for rice in the Mississippi valley and Gulf Coast areas, plus a
few counties in California.
MP coverage is an area‐based plan which uses county‐level estimates of yields and input use to
calculate expected crop revenue, operating costs, and the resulting margin. It does not use individual
farm yields or input usage. While it intends to reflect the general experience of most producers in a
county, it may not exactly match the results of any particular individual.
Margin Protection insurance coverage for corn and soybeans actually begins in the fall prior to planting
the following spring. Specifically, the Projected Price Discovery Period for both crops and inputs runs
from August 15 to September 14, with the Sales Closing Date coming on September 30. Once the price
discovery period concludes on September 14, expected revenue, costs, and margin can be determined.
MP works by calculating an expected margin (= expected county yield x projected price – expected
costs) at sign‐up time and then calculating a “trigger margin” by subtracting a margin deductible from
the expected margin. A margin loss occurs when the harvest margin (= harvest price x final county
yield – harvest costs) falls below the trigger margin.
Margin Protection coverage ranges from 70% to 95% of the expected margin – or said another way,
deductibles go from 30% to 5%. These low deductibles are another feature of MP coverage which may
appeal to some producers. The deductible is calculated by multiplying the expected revenue by the
deductible percentage, and that amount is subtracted from the expected margin to get the trigger
margin.
For example, with an expected corn yield of 130 bushels per acre and an expected corn price of $4.00
per bushel, expected revenue is $4.00/bu x 130 bu/a = $520/a. Using the 95% coverage level, the
deductible is $520/a x 5% = $26/a. Assuming expected costs of $280/acre, the expected margin per
acre is $520 ‐ $280 = $240. Subtract the $26 deductible to get the trigger margin: $240 ‐ $26 = $214
per acre. An indemnity payment is made when the harvest margin falls below this trigger level.
Kansas State University Department Of Agricultural Economics Extension Publication …
January 26, 2018
Price Risk Management
1 Bina is an undergraduate and Student Fellow in the Center for Risk Management Education and Research and Schroeder is
a professor. Contact Ted Schroeder, tcs@ksu.edu.
Kansas State University Department of Agricultural Economics Extension Publication …
April 19, 2018
Agribusiness Papers
Producers
in the Kansas Farm Management Association Data, 2016 … According to the Kansas Farm Management
Association (KFMA) data …