Aquila Energy is developing what is believed to be the first guaranteed crop-yield derivatives for U.S. agricultural middlemen and plans to hedge the products in the weather derivatives market, said Ravi Nathan, general manager in Kansas City. The derivatives are due to be rolled out in time for the spring growing season.
The over-the-counter contracts will guarantee crop yields for agricultural end users, such as grain processors who are not covered by traditional insurance against yield variations. "Major processors of grain are concerned that if yields go down, there will be less grain moving through and so less processing costs," Nathan explained. "We plan to offer contracts that will allow them to choose a fixed yield for any province or county and guarantee that." Aquila plans to offer these yield guarantees to agricultural intermediaries that deal in processing other goods such as wheat and soybean.
