|
| Not sure what your situation is, so I will use basis levels I am familiar w/(remember its all relative)...
Most of our hedges are established prior to Harvest--this is the toughest part for most as "you can't sell until you got it." Rev based crop insurance changes the need(within reason) to "have it."
I will hedge corn in the Dec contract using the local elevator & HTAs or my own hedge account. HTA's provide more discipline and I would suggest using them first as the elevator is your built in accountability partner and they will margin the position for you. Problem is most elevators are charging lots to do HTA's now(after last year). The hedge account can easily become a "speculative" account if you aren't disciplined--this is why I suggest a mentor to help you stay on the right path.
currently I have 2009 hedges in the dec rather than selling cash for harvest delivery. So I could have sold harvest delivery cash corn @ $5.00 futures - basis(at time hedged = -35) making my sale = $4.65. Instead the hta/hedge kept me long the basis and at harvest I drive past the elevator line and dump at my elevator/bin. When futures carry(difference between dec and march or dec and july) gets to between 80 & 90% of full carry I buy back my dec hedges and sell the desired deferred month(usually july).
So now my hedges are in the july and I added roughly 35 cents to my 500 hedge by holding the grain off of the market, but in a hedge position. So then I watch for basis spikes. Around here my basis goals = -10 at my bins. So if/when the terminal is bidding +10 july for Jun/Jul delivery and freight costs me 20cents to get it to the terminal, the bid at my bins = -10 july. Those basis goals have served me well, but took a great deal of research to establish. occasionally I have been biting my fingernails hoping to get there, but trust your research.
Now we have our hedge in the July futures (at $5.35) and we are going to exchange future w/ terminal or trade out of hedges and sell cash at a +10 july basis.(broker should be able help w/ mechanics of transaction) After freight(20 cents) your cash sale is $5.25 vs a harvest sale of $4.65. So by jumping through the hoops we just added 60 cents to our cash price. That isn't all profit because it take a bin, electricity, quality monitoring, etc to get the grain from harvest to july. I think 60 cents or 6.5-7.5 cents per month will cover the costs plus some profit.
Bottom line, I have heard some "hot shots" talk about storage doesn't pay--they will just "buy a call." My response is always, "Gosh, I wonder why we have built elevator all over the country if storage doesn't pay."
Feel free to ask more question, normally I will post in the market section, this post just caught my attention.
Hope it helps! | |
|
Acres per Combine
