Integrating Crop Insurance and Marketing Decisions
Producers often hear Extension economists and other market advisors talk about the importance of a marketing plan. The point of such remarks is that it is a good idea to give some careful thought to how a crop will be marketed at some point in time before the crop is actually produced.
When most people think about a marketing plan, they think first about when and how to price the crop. Too often, the central goal of a producer’s marketing plan is to pick the highest price. However, the effective management of price risk should be the central goal of producer marketing plans. Common price risk management tools such as forward contracts, futures contracts, and/or options on futures contracts generally figure prominently in these plans. This is entirely appropriate, as risk management strategies employing these tools have proven effective for countless producers over many years.
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