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Prairie Home MO | I've read and read and read some more and every time I think I have it down a different aspect gets mentioned and I get confused again. All contracting I've ever done previously is straight forward contracting or store at elevator and sell when I want/have to but I'm kicking around the idea of a basis contract.
My real world scenario: local crush plant for Jan25 delivery is -.09 Jan25 board.
1st:So if I do a basis contract that means I lock in the -.09 basis for January, then deliver the bushels in January, and then lock in the Jan25 board price at some point in the month of January. I will be paid the January board price -.09 basis from the contract. If I understand correctly I can't lock in the futures price until bushels are delivered. Correct or no?
2nd: I have delivered the bushels in January and have yet to price. I get to the end of January and decide I want to roll to March board. If March board at the time I want to roll is higher than the January what happens? Do I keep my -.09 or does it have to be "updated" if basis has widened since I made the contract?
3rd: Is an HTA the opposite of a basis contract? Basically instead of locking basis I lock in the futures price and then lock basis in after bushels are delivered?
4th: If you believe locally and the US as whole is sitting on a monster crop which would you rather do a basis contract, HTA, or some other type of contract?
Locally basis isn't terrible but I could see it widening significantly in the next 30 days when combines get to rolling. If here in the US were sitting on the crop some are predicting I could see futures also nosediving. Hope this made sense. Thanks for any help/advice. | |
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Basis contract for dummies
