Risk Solutions Grounded in Results
THE KCA Approach
Kluis Commodity Advisors offers flexible plans based on a farmer’s risk tolerance.
With a proven track record, our risk management plans have allowed farm managers to take the guesswork out of difficult marketing decisions. For over two decades, our plans have provided producers with the peace of mind found in protecting themselves in a risky marketplace.
Many producers and consultants make sales decisions based on prediction. No matter how accurate predictions may have turned out in the past, there is always a guessing component – something unknown and emotion-based.
At Kluis Commodity Advisors, our marketing plan is predetermined and mechanical. Our staff works to lead you through our system, all the while keeping your best interests at heart. We manage price risk and opportunities, and focus 100% of our efforts on implementing this system.
BASIC KLUIS PLAN
The Basic Kluis Plan focuses on the buying and rolling of puts in a conservative plan:
Buy Put Options on 100% of your expected production
Sell cash grain on rallies
Offset (sell) Put Options equal to bushels sold in the cash market (as market allows)
Roll Put Options up or down to manage equity and opportunity
Bring cash sales to a minimum of 25% of expected production if Option roll up is allowed
Consider re-owning bushels sold in the cash market, with Call Options
ADVANCED KLUIS PLAN
The Advanced Kluis Plan uses the same risk management philosophy as the basic plan but utilizes more complex strategies:
Get the right RP Crop Insurance
Get hedges in place before harvest
Get Puts bought on unprotected bushels
BASIC KLUIS Plan FAQs
The best time to start is immediately after you have identified what you will be producing. We recommend that this activity be initiated no later than March 1st.
You can hedge corn, soybeans, wheat, cotton, rice, milk, cattle, and hogs. We recommend that you use the program to cover only the production which has price risk on your operation. In most cases, this will be 100%.
Market observations have allowed us to use our seasonal sales recommendations for each commodity to best manage your risk, your equity, and your position relative to the marketplace. As we approach those key months when a roll-up or a roll-down is required, we will contact you in preparation for taking action.
We suggest making cash sales on rallies and on option roll-ups. During this time, the purchase of calls on those sold bushels may be a viable compliment to your sales.
When you know your production numbers or yield will be significantly reduced, we will assess how this impacts your marketing plan. You may need to sell a corresponding amount of the options you previously purchased, and either move aggressively or address prior contract commitments on/for physical product, or roll the sales ahead to the next year.
This sounds good, but I still don't full understand it. Is there someone in your organization who can walk me through this?
One of our greatest privileges is coaching our clients through the Basic Plan and making sure they feel comfortable. We will work with you on an individual basis until you have a commanding understanding of the program and feel comfortable on your own.
I would like to get involved in the program, but I don't think I can explain this to my banker. Will you work with my banker?
Absolutely! Kluis Commodity Advisors has strong relationships with bankers and ag lenders across the country. We will explain the details and benefits to both you and your banker. In our experience, lenders are more willing to lend after gaining an understanding of the program.
ADVANCED KLUIS Plan FAQs
The best time to start is right after harvest as you are putting together your crop and risk management plan for the next marketing year. November or December of the year before you plant your crop is the best time to get started.
We work with corn, soybeans, wheat, and sorghum producers across sixteen states.
We are not crop insurance agents and we do not work for a crop insurance agency. Revenue Protection protects against both price risk and production risk. This insurance product also gives you a “license to sell”. We are able to use futures hedges with less financial risk to your farm if you hedge your crop and end up with a production shortfall.
This will vary from farm to farm and it depends on where you farm, how much storage you have, and when you need the money. The minimum range is usually 20-40% of your crop. We have some farms that will hedge 80-100% of their insured bushes.
First, you need to commit to learning more about marketing and how hedging works if you want to stay in the farming business. Second, most of our new customers will often start out using hedge to arrive contracts with an elevator that holds the hedges and makes the margin calls for you. You need to manage price risk and also stay within your comfort zone.
That is why we recommend RP crop insurance. If you lose a crop it is frustrating and scary. With RP crop insurance it does not have to be a financial disaster for your farm. If you lose your crop you will need to arrange to buy back the short positions or work with the elevator to possibly roll the hedges ahead to the next year. When putting together your marketing plan you need to balance production risk with price risk.
The studies we have put together show that a marketing plan using hedges and puts over the long-term results in a better and more consistent outcome than hedges or puts alone. Also, when you are using puts you are controlling price risk without making a delivery commitment.