West of Lincoln a little bit | Don't have a hedge account, only HTAs I've ever done were at the coop to try to capture basis improvement. They do allow us to roll forward.
Trying to learn about rolling HTAs to gain carry, too. Think I've got it figured out using this: https://www.agweb.com/blog/marketing-against-the-grain/scheve-how-to...
but there are fees for all those HTAs, right? Our coop is usually 5c per HTA sold... is there usually also a 5c fee to buy back the position during the roll?
I might try to cut my teeth on this process for 2019, I'm good at record keeping.
I ran the math both ways: declining CBOT and increasing CBOT. curiously I came up with the same net gain vs just selling cash to begin with (assuming basis improves a little, which it almost always does). Would that be right? I'm thinking since the net result is just to capture carry and basis, then it should be correct, right?
FOR AN INCREASING CBOT
Today Sell Dec19 @ 3.95 HTA (basis 35c today)
a year later market has climbed to $4.50, buy Dec19 HTA @ 4.50, sell Mar 2020 HTA at 4.59 (assuming we keep same 9c spread)
In Feb of 2020, sell cash bushels off Mar20 CBOT, which has climbed to 4.65 (basis is now 25c)
buy Mar20 HTA to offset, also at 4.65
55c trade 1 loss
6c trade 2 loss
10 cent fees (5c for each sold HTA)
10c basis improvement
$4.40 cash sale at the end (4.65-.25 basis)
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net is $3.79 cash vs $3.60 if I had just sold the bushels for cash to begin with.
FOR A DECLINING CBOT
Today Sell Dec19 @ 3.95 HTA (basis 35c today)
a year later market has fallen to 3.46, buy Dec19 HTA @ 3.46, sell Mar 2020 HTA at 3.55 (keeping same 9c spread)
Feb 2020, sell cash bushels off Mar20, which has climbed to 3.65 (basis is now 25c)
buy Mar20 HTA to offset, also at 3.65
+49c trade profit
-10c trade loss
-10c fees
+10c basis gain
$3.40 cash sale
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$3.79 net vs $3.60 if I had just sold the bushels for cash to begin with.
If there is a 5c fee for each boughtback HTA then reduce the net by another 10 cents. Which means $3.69 net cash vs $3.60 if I hadn't done all these trades. Seems like an awful lot of work to gain 9 cents (for 19c I'd say much more worth it). Is this typical for these kinds of trades or am I thinking wrong? Would it be better doing it outside the coop? I'm not big on creating a hedge account, I want that cash available for farming so I don't have to use as much of my operating note. But I'm willing to learn and be open minded.
Would I always have to wait until the end of November to do the buyback on the first trade? Or do some guys do it earlier in the year?
Edited by ruralHusker 11/25/2018 16:27
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Questions about rolling HTAs at the coop to capture carry/basis
