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Inside Iowa State, a newspaper for faculty and staff, is published by the Office of University Relations.

September 24, 2004

New on-line calculator used for risk-management decisions

Twelve times a year, hog producers can decide whether to buy USDA-backed insurance to protect against the loss of gross margin, which is the difference between feed costs and the market value (based on futures prices) of their pigs.

Farmers have a 12-hour window each month in which to make the complicated decision.

A new tool developed by Iowa State's Center for Agricultural and Rural Development (CARD) takes into account the interrelated factors involved in the decision. These include market prices, type and size of production system, number of pigs to be marketed each month in the insurance period, level of coverage, and calculated (not actual) feed costs.

A calculator posted on the CARD Web site allows farmers to determine what the insurance is worth on a given day and how much it will cost.

"It puts all available data in the hands of producers and their crop insurance agencies to help them make good decisions about managing risk," said CARD director Bruce Babcock.