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Farm Business
Agricultural Matters
Crop price insurance - Poll
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<blockquote data-quote="TOM BARCLAY" data-source="post: 4473794" data-attributes="member: 65014"><p>Very good point i agree. if there is little volatility then you lose out on the premium you pay - cash flow is key and it can be viewed as an unnecessary added expense. If you have cover (buy put options) over 10 years and you exercise the option (make a claim) a handful of times of that period you are smoothing the peaks and troffs. you are taking risk off the table and taking the upside too (minus premium) so in your example above - (£200 minus premium). Farmers dont mind missing out on £10 per tonne - but £20-30-40-50 - they do! Selling forward periodicly which is what farmers do do is a handbrake on the upside and downside! if there is no volatility/uncertainty then dont buy options.</p></blockquote><p></p>
[QUOTE="TOM BARCLAY, post: 4473794, member: 65014"] Very good point i agree. if there is little volatility then you lose out on the premium you pay - cash flow is key and it can be viewed as an unnecessary added expense. If you have cover (buy put options) over 10 years and you exercise the option (make a claim) a handful of times of that period you are smoothing the peaks and troffs. you are taking risk off the table and taking the upside too (minus premium) so in your example above - (£200 minus premium). Farmers dont mind missing out on £10 per tonne - but £20-30-40-50 - they do! Selling forward periodicly which is what farmers do do is a handbrake on the upside and downside! if there is no volatility/uncertainty then dont buy options. [/QUOTE]
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Crop price insurance - Poll
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