Centre county Pennsylvania, USA | We've been using the GBS (Grow Bin Sell) marketing plan for many years. We store 100% of new crop corn at harvest in on-farm bins, unpriced and unhedged, then sell it on the local cash corn market in late May of the following year (seasonal peak) for delivery in June. In theory, storing corn on-farm ,unpriced and unhedged, adds risk, in practice that risk has rarely been realized, here.
We've considered using futures for hedging price for our, unpriced, on-farm stored corn. However; number crunching years of historical corn futures prices suggests that strategy has high risk and low reward, here.
We are now considering using futures options to hedge corn price for our ,unpriced, on-farm stored corn. We have no experience with that strategy, only number crunched data.
The attached charts show examples of that number crunched data. One chart is a graphical representation of a put price hedge (selling price floor) for March 2017 corn options. The other chart is a graphical representation of a call price hedge (buying price floor) for those options. Data source for those charts is BARCHART Sept 19 end-of-day corn option quotes.
What am I missing in those charts?
Edit: charts have been updated to fix error in drawing bottom panel. Thanks to H3f for catching that error.
 (CH17_put_hedge.png)
 (CH17_call_hedge.png)
Attachments
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 CH17_put_hedge.png (81KB - 272 downloads)
CH17_call_hedge.png (79KB - 263 downloads)
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Hedging corn price for GBS corn farmers? (update)
