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| the soybean futures market has a carrying charge all the way out meaning each trading month is higher than the one before it. In a flat or falling market when the front month, in this case Aug 2006, goes off the board the new front month,SEP 2006 falls to the level that Aug 2006 expired at. If the market stays flat for a year then the long Nov 2007 at 6.32 is now trading at 5.76. Let's say the basis is even with the board and the board stays flat for the next year. You are going to get 5.76 for your your beans when you take them to the elevator whether it is today or next August but the futures position has lost 6.32 minus 5.76 or 56 cents. Some times the futures market will trade the far out months at prices lower the the front months but that is not the case currently. A basis contract works the same way. | |
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Can Soys be safely stored for a second year?
