Heartland Hedging Process

We have been following the Facebook Grain Discussion Page of late.    Some comments are commiserating about missing the high of the market move.  Or complaining that all that goes on with option premium is lost money.  Having been in the hedging and commodity world for over 30 years, trying to figure out where the market is heading next or where the high of the market is going to be is simply tough.  Period.

Our objective in working with clients is to build a road map to their revenue of their farming operation.  At the end of the day, it does not matter what % of your crop you sold at xx price per bushel.  What matters is when you are done combining and have delivered your crop to your end buyer, what is your revenue.  The biggest question that is needed to be answered is not where the market is heading, but what is your yield.  With the weather conditions that they are yields seem to be somewhat precarious.  As a farmer friend of mine said, we will not really know much until we get into the field.

If you were to come to us and ask what would you do to assist us in this revenue management picture, here is what we would do:

  1. What is your production estimate based on APH and acres?
  2. Do you have a per acre cost estimate by crop?
  3. Do you have a worse case estimate of yield given current conditions?
  4. What kind of coverage do you have now
    1. Forward cash sales?
    1. HTA’s?
    1. Futures and option positions?
    1. Any futures and option closed gains or losses?
  5. Crop insurance details

With an answer to these questions, we input this information into our system and generate for you the following:

  1. A summary of your expected revenue
  2. A shock analysis of your revenue based on APH or current yield estimates and current open hedges
  3. A price yield matrix including possible insurance indemnification payment levels

We are not market magicians.  However, through our proprietary analytics, we can be a voice of reason for your revenue forecasts. 

We are now looking at hedges for the 2022 production year.  With where the market is vis a vis potential higher input costs across the board, let us paint your revenue picture.

We view hedging as a three dimensional aspect of the complex farming operation. Please give us a call and we can show you your revenue picture.

John Ohman

(320) 761-0406

john@heartlandcom.com

Leave a Reply

Your email address will not be published. Required fields are marked *