Posted by john in la on July 06, 2008 at 11:56:06 from (72.150.30.250):
Being someone that comes from a dairy background I have never dealt with pre selling crops and would like to learn. So please excuse me in advance if I say something and step on your toes.
From what I understand as a farmer of say corn or beans you have the option of selling your crop in advance of harvest or waiting till harvest time. This is your choice and it is a game you may loose or win big bucks at by choosing the right timing. If you choose to sell at harvest time that makes it simple because you have a set price on that day and know your output or bushels per acre average. But if you sell in advance; how is that contract worded???????? We can assume the price is set on future price markets and the yield is set on past years harvest. But what happens on a year like this one when many that have sold a crop they can not deliver because of some disaster????????
As a grain elevator I have a contract with you (the farmer) to deliver said amount of grain for a set price. I may have even sold it on the open market in advance but because you can not deliver the grain I am stuck trying to fill my pre set orders.
So what happens now. Am I and everyone else just out in the cold or do I have a recourse against you the farmer to protect my investment. I guess the real question I am asking is does the grain elevator or who ever buys grain in advance from a farmer have a insurance option he could have bought to protect him from a farmer not delivering a sold in advance crop. Lets compare this to something else... I am building a complex. I have a contract with someone to deliver my goods to the job site on a set day for a set price. If he does not deliver I can sue him.. Right. How does this work in farming???
Also if we can do it without hurting anyone's feelings can we discuss how a farmers crop insurance works. Most of us non farmers assume that a farmer balances his risk and buys insurance based on the cost of it to his needs. A farm is expected to produce X amount but the farmer needs Y amount to survive and make it to next year. So he insures for Y and hopes for the best. Much like I can choose to buy car insurance with a $500 or $1000 deductible based on how much of a hit I can handle on my own in a loss situation. I think many city people do not understand crop insurance because they feel you are trying to insure a set profit rather than a disaster’s loss. Much like a hardware store wanting to insure that 100 people buy something every day. Any day that sales do not meet a set profit is a insurance claim.
Once again I do not mean this in the wrong way. I just feel many will take a bigger hit than having a flooded house this year because there income has been removed. It is not like they can quit there flooded out job and get a new one somewhere else. Thanks for taking the time to reply.
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