northern edge of north central Missouri |
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?
Assuming your basis contract is indeed off the january futures and also assuming the basis contract says january delivery.....
All you have with a basis contract is a contract to deliver x amount of bushels to that buyer at -9 cents the january futures price. Now you will need to set futures on that basis contract by about december 25th-27th depending what it says on your basis contract. You can set futures any time between the signing of the basis contract and the december 27th deadline (approx)
At that time you will have a known final price. You will deliver in january, assuming that is what your basis contract says.
Should all be stated in the basis contract.
Thats #1 of your questions.
You do a basis contract if you think basis is better today than it will be when you set the futures price. That would be the reason to do it. Its mostly a guess as buyers dont show their hand.
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Basis contract for dummies
