markg

Commodities Are Not Stocks

Good points, more than crop insurance, which is a seperate purchase, you lock in a price for your crop. This is a definite plus when there are bumper crop years, as was the case until recently. Look at monthly commodity charts for grains, you will see weakness until 2007 in the last ten years.

Most savvy farmers will also use options to deal with volatility. If $5.00 for corn is a target, you buy put options that have a $5.00 strike price, or slightly higher. That way if the price does go higher than $5.00, you still make out. If it drops below $5.00, you still have your $5.00 crop price and little loss, relatively speaking on the option.