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Ontario's middle east | Trouble with a basis contract is it is often misused. When it gets employed as "free storage" or a license to procrastinate at harvest it does not end well in carry markets. I have seen that strategy by other elevators and it has brought us new customers. It goes particularly bad when the contract gets rolled forward in a carry market. Say you get set at -20z and you roll at -12 to h then -10 to k and -10 to n to stay unpriced until May. You are now -52n.........if that's not bad enough(I think we can all agree basis will follow the spreads now?) the spot market is something like +10n in May. You price the contract out, then sit in the shower and cry for a while. Sometimes they even add in 3c/roll for paper work.......... Would seem to me buying you dinner first would be more appropriate. I have seen some guys pretty ugly when they figure out what happened and other guys that just have to do it again. | |
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basis contract?
