As good as Federal Crop and Livestock insurance is, there are still gaps. In todays market, those gaps equal large sums of money. Weather Insurance and Weather Derivatives are private contracts between the Producer and the Insurance or Derivative company. They are simple, there are no claims adjusters, and no proof of loss is needed. Since these contracts are based on weather, weather events are tracked using weather stations across the United States. Each weather grid is 12 X 12 miles; you pick the weather event that may adversely affect your operation and the provider will write a contract for that peril.
For example, a Producer has a cattle feeding operation within a confined area. If a Client wanted to protect themselves from extreme heat, they could apply for a contract that will indemnify them against losses if temperatures were to reach above a certain degree for an extended period of time. Lets' say temperatures were higher than 85 degrees for more than 10 days in a row, that may cause a death loss in the cattle heard; a derivative will pay a Producer a sum of money based on the contract details if this were to happen...for more details on how this product works, please speak with one of our Ag. Risk Consultants.
The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Sitter Commodities / Dakota Solutions believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.