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Ontario's middle east | It would appear to me that a fairly effective hedge against a stronger Canadian dollar eroding unsold grain is to buy a call at a strike, a couple cents above the market. One contract covers $100k. I wouldn't buy any more then 6 months time at once to minimize time premium. If the dollar continues to weaken, you at least get own a lower strike on the next go round. So for new crop, you might look at buying a June call in Jan then replace it with a Dec in June. It looks like that should cost you about .75% per trade. To put that in perspective, our 8c run in the cad of late, just ate up $1.37cad/bu in cash price. On $100k worth of beans that is $12k or 12%.... Ouch. The other advantage over just selling basis at this point in the game, is your upside on basis is open if the dollar rout resumes. Good luck. I know people that hedge it with non deliverable forwards through their banks. To expensive for a tight wad like me. I trade the 6c CME contracts. I run it all in the front month and roll it near expiration when volume starts to build in the next futures month. | |
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Maize and others Canadian Dollar hedge?
