The 2012 budget will likely include modifications and reductions to the farm safety net. Policy makers should consider 12 essential strengths that make crop insurance the corner stone of the farm safety net programs. In this on-going series, we’ll introduce one strength of crop insurance per month and explain how the sum of these strengths has given us the successful program we have today.
Strength: Producers can use crop insurance to improve their pre-harvest marketing plans.
Many producers fail to take full advantage of price increases prior to harvest by using forward sales, fearing that they will have insufficient production to cover the full contract or have adequate financing to close out a futures option.
Should a natural disaster strike or prices plunge, crop insurance can provide the income needed to settle forward contracts or futures and options open positions.
Crop insurance provides the financial back-stop needed to optimize a farm’s marketing opportunities, allowing farmers to take full advantage of all options available to help hedge their risk or maximize their returns.