Crop Insurance Launched

An Gof · Feb 8, 2019

AndyBridgeFarm said:
Judging by today's FW he's now launched Stable - it seems live on his site too.

Official Launch 5th March

AndyBridgeFarm · Feb 8, 2019

CRM AgriCommodities said:
The ultimate test will be how competitive Stable's insurance premiums are relative to option premiums. It's a great concept as long as it is price competitive! The other main difference is that any gains on options can be taken at any point between purchasing the option (insurance) and its expiry, whereas the Stable policy will be paid out only at the insurance expiry (this is known in the industry as a 'European Option')

As a matter of interest, will you be offering Stable to your clients as an alternative to Options?

CRM AgriCommodities · Feb 8, 2019

AndyBridgeFarm said:
As a matter of interest, will you be offering Stable to your clients as an alternative to Options?

If the products suit the strategies and clients businesses then I am sure we will. Our job is to help farmers manage volatility. We do that through physical sales, tools offered by merchants, exchange-traded products or whatever is most suitable. We use our knowledge of markets/ tools to advise our clients on the best strategy to suit their business. If the insurance products are competitively priced and achieve the same outcome as other products available then I am sure they will be a useful risk management tools to have in the toolbox!

We don't hold a bias or have any financial/ commercial interest in the products available, the farmer is the only party which pays us, which allows us to implement the most suitable strategy for their business and the market conditions.

Renaultman · Feb 8, 2019

crazy_bull said:
Ensus was running on mostly imported gear so was actually displacing feed stuffs as remember something like 2/3rds of what goes in comes out as DDG's etc.

Northern premiums have shrunk right back though.

C B

I can't 'like' this post

Grain Buyer · Feb 8, 2019

AndyBridgeFarm said:
As a matter of interest, will you be offering Stable to your clients as an alternative to Options?

looks irrelevant for grain as exchanges exist for this.......other ag products like milk or meat might work, but with no exchange and subsequent lack of liquidity it'll be interesting to see how/if it works.

good luck to the team, looks like they have some big brains in the room.

Clive · Feb 8, 2019

Grain Buyer said:
looks irrelevant for grain as exchanges exist for this.......other ag products like milk or meat might work, but with no exchange and subsequent lack of liquidity it'll be interesting to see how/if it works.

good luck to the team, looks like they have some big brains in the room.

I think its relevance maybe its ability to present the existing tools / exchanges in a way that farmers are actually comfortable with

I had a little look earlier and tested a quote for some jan 20 wheat and on the face of it it looked an expensive way to buy an option ............... didn't do direct comparisons however so would need to look deeper before being 100% sure on that

Grain Buyer · Feb 8, 2019

I've had a look at the website. I might be wrong, but I don't think you can cash out the option when you want....from what I understand the "insurance" has to run it's full term, after which they will deem if a pay out is required (claim on your insurance). I could be wrong, but that's how I understand it, which if it is "insurance" is probably right, but not very good for covering volatility.

Hampton · Feb 8, 2019

CRM AgriCommodities said:
An option is simply insurance, your maximum loss/ outlay is your premium paid upfront, then you either claim on the insurance if the market falls (put option) or the insurance expires worthless and you have no further obligation. as @Clive says they have been used for decades by farmers around the world. As an example, a 'put option' to insure new crop wheat from further price falls between now and November -19 currently costs £9.50/T roughly £1/t per month, if it gets to November and prices are at £200/T then all you lose is the £9.5/T and you are free to sell your grain at £200 or hold it for a later sale. Farmers can open a demo account with someone like Saxo bank (https://www.home.saxo/en-gb) and see how simple purchasing this insurance is.

From what I remember, Richard seemed to think the premium to hedge at £150 was £3/t (the put option bit) with no upside limit. £3/t is a lot less than £9.50, and you would guarantee yourself an effective minimum price of £147/t (£150 - 3).

Hampton · Feb 8, 2019

Grain Buyer said:
I've had a look at the website. I might be wrong, but I don't think you can cash out the option when you want....from what I understand the "insurance" has to run it's full term, after which they will deem if a pay out is required (claim on your insurance). I could be wrong, but that's how I understand it, which if it is "insurance" is probably right, but not very good for covering volatility.

I think this is how it works: (please don’t think I am trying to teach you to suck eggs as you know more about this than me).
You pay the premium (eg £3/t based on nov futures of £150. You then watch the markets of the nov futures. You can sell physical Nov wheat at any time (so you could sell it for £200/t or more) but you have to sell the physical wheat for November (with whatever merchant you wish) the wheat is then moved in November, and if the market has collapsed and the merchant only offers you £110, you get £110 off the merchant, and the difference minus the premium from stable (£40 - £3 = £37) effectively giving you a price of £147 on a collapsed market. If market goes up, you just lose your premium.
That’s how I interpreted it anyway, and that makes it simple than an option to my mind

Steevo · Feb 8, 2019

That being the case surely you’d need quite a reduction on the option cost as a result of the lack of flexibility?

David. · Feb 8, 2019

If it is that simple I think even I would give it a go, with only £3/ton downside?.. and shed-space available for Christmas.

Clive · Feb 8, 2019

average farmer said:
Anyone know what the usda report had to say today ?

Not sure but my demo account was in profit !

Clive · Feb 8, 2019

Hampton said:
I think this is how it works: (please don’t think I am trying to teach you to suck eggs as you know more about this than me).
You pay the premium (eg £3/t based on nov futures of £150. You then watch the markets of the nov futures. You can sell physical Nov wheat at any time (so you could sell it for £200/t or more) but you have to sell the physical wheat for November (with whatever merchant you wish) the wheat is then moved in November, and if the market has collapsed and the merchant only offers you £110, you get £110 off the merchant, and the difference minus the premium from stable (£40 - £3 = £37) effectively giving you a price of £147 on a collapsed market. If market goes up, you just lose your premium.
That’s how I interpreted it anyway, and that makes it simple than an option to my mind

That’s exactly how an option works apart from you can cash out of the option at any point and don’t actually have to deliver physical wheat

I like the way stable simplifies it though so think it will bring these tools to many more. I have been in touch with Richard today about a TFF member rate that could give users here a discount on the premiums ....... watch this space

AndyBridgeFarm · Feb 9, 2019

Clive said:
That’s exactly how an option works apart from you can cash out of the option at any point and don’t actually have to deliver physical wheat

I like the way stable simplifies it though so think it will bring these tools to many more. I have been in touch with Richard today about a TFF member rate that could give users here a discount on the premiums ....... watch this space

That would be great - I noticed someone just used Stable to insure 100 tonnes of feed wheat against AHDBs index price of £150 per tonne in November, so it's started to trade.

AndyBridgeFarm · Feb 9, 2019

Hampton said:
From what I remember, Richard seemed to think the premium to hedge at £150 was £3/t (the put option bit) with no upside limit. £3/t is a lot less than £9.50, and you would guarantee yourself an effective minimum price of £147/t (£150 - 3).

Hampton said:
I think this is how it works: (please don’t think I am trying to teach you to suck eggs as you know more about this than me).
You pay the premium (eg £3/t based on nov futures of £150. You then watch the markets of the nov futures. You can sell physical Nov wheat at any time (so you could sell it for £200/t or more) but you have to sell the physical wheat for November (with whatever merchant you wish) the wheat is then moved in November, and if the market has collapsed and the merchant only offers you £110, you get £110 off the merchant, and the difference minus the premium from stable (£40 - £3 = £37) effectively giving you a price of £147 on a collapsed market. If market goes up, you just lose your premium.
That’s how I interpreted it anyway, and that makes it simple than an option to my mind

I've just been through the quote system and is is far simpler than that from what I can see. I just received a quote to insure 100 tonnes of fead wheat for £5.23 per tonne till November which protects me from a potential loss of £6,522.65.

Crucially, if the market goes up, I gain. So I'm only protecting my downside and I'm not having my upside capped. Quite neat.

AndyBridgeFarm · Feb 9, 2019

Hampton said:
From what I remember, Richard seemed to think the premium to hedge at £150 was £3/t (the put option bit) with no upside limit. £3/t is a lot less than £9.50, and you would guarantee yourself an effective minimum price of £147/t (£150 - 3).

I just received a quote to insure 100 tonnes of fead wheat for £5.23 per tonne till November which protects me from a potential loss of £6,522.65. Pretty good, especially as I benefit from the rise.

David. · Feb 9, 2019

Are they regulated in any way, what is to stop them collecting premiums until harvest, and then going into administration just when everyone is looking forward to a £20/ton payout?

AndyBridgeFarm · Feb 9, 2019

David. said:
Are they regulated in any way, what is to stop them collecting premiums until harvest, and then going into administration just when everyone is looking forward to a £20/ton payout?

I checked that - they are regulated by the FCA and covered by Lloyds. So legit.

Chae1 · Feb 9, 2019

Clive said:
I just gone long on wheat it's not gambling when its other peoples money !

seriously you shroud give it a try with a demo account - even if you never have any intention of trading futures or opinion for real with actual money its a great way to learn how it all works

Demo accounts are strange.

I've a igc demo account trading cfds. With a fortune in it. Meanwhile in my real life account ive lost a lot of money. I dread to think what my wife would say if she found out.

Looked like easy money harvest 2018 with drought and market climbing by large amounts daily.

AndyBridgeFarm · Feb 9, 2019

Chae1 said:
Demo accounts are strange.

I've a igc demo account trading cfds. With a fortune in it. Meanwhile in my real life account ive lost a lot of money. I dread to think what my wife would say if she found out.

Looked like easy money harvest 2018 with drought and market climbing by large amounts daily.

Weirdly I'm also loaded on my demo account but not sure if I've got the stomach to go live and gamble with the family farm's cash! The insurance route seems quite a bit safer. I'll leave my gambling to the GGs!

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100% I’ve had enough of farming!

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