Contract price option now offered on organic, pedigreed seed and forage seed acres — and producers have until June 30 to sign on for higher dollar coverage.
Manitoba farmers have an expanded tool to tie crop insurance coverage to higher contracted grain prices.
The contract price option offered through Manitoba Agricultural Services Corporation (MASC) now includes organic production, pedigreed seed production and forage seed crops.
It allows producers to blend contracted grain prices into their insurance coverage, potentially increasing payouts if yields fall short.
The program can help producers increase dollar coverage when they secure grain contracts above the corporation’s insured values, said Jeff Legaarden, LPI co-ordinator for MASC.
“It’s flexible,” Legaarden said. “You don’t have to make a choice to join into the program till June 30.”
As volatile commodity markets and tight margins push more producers to think strategically about risk management, forward pricing and other grain marketing tools can help lock in profitable prices.
How the contract price option works
The program uses a producer’s eligible contracted grain prices that are higher than MASC’s base coverage to raise the insured dollar value attached to their crop coverage.
“Instantly, it’s giving you increased dollar coverage,” Legaarden said. “If you’ve got contracts above what MASC’s dollar coverages are, you’re going to have that represented into your coverage.”
More proactive marketing
More farmers are paying attention to pricing tools that help secure profitable margins before harvest, said David Drozd, co-founder, president and senior marketing analyst with AgChieve Grain Marketing Experts.
“Farmers are using them to lock in profitable prices,” Drozd said.
Adoption has gradually increased over time as producers become more proactive about grain marketing, he said.
“The ones we work with (are) more proactive, and we give guidance on forward pricing all the time.”
How aggressively farmers market grain ahead of harvest often depends on market conditions, expected profitability and individual tolerance for risk, Drozd said.
Some won’t lock anything in until it’s in the bin. Others are more willing to commit grain when prices rally.
“The higher the prices (become) … the more aggressive they get, because they know they’re locking in a more profitable price,” he said.
Canola has drawn particular attention this year because it remains one of the few crops still offering profitable margins for many Prairie farms, Drozd added.
“There’s not very many crops that pencil into profit today, canola being the exception,” he said.
Managing risk
At the same time, producers remain cautious about production risk, especially after drought years left some farmers short on contracted bushels.
“They didn’t get the bushels, and they had to buy back their contract elevator,” Drozd said.
While some producers use futures contracts or options strategies, many still prefer straightforward cash contracts because they avoid margin calls.
“Farmers would rather do it in a cash market, because they don’t get the margin call,” Drozd said.
Still, every marketing strategy comes with trade-offs.
“There’s always risk,” Drozd said. “There’s risk in doing something, there’s risk in doing nothing.”
Farmers sticking to a structured marketing plan generally see better results than trying to chase the market or making decisions based on gut feelings, Drozd said.
“The farmers that we see that follow disciplined marketing approach certainly do a lot better than those that have no plan.”
Source - https://www.manitobacooperator.ca
