Posted 9/6/2014 18:26 (#4059407 - in reply to #4059250) Subject: RE: $3 corn and prospective planted acres, the driver.
Eastern Half of Ohio
Could you put some cash flow numbers to it for me to help me understand? I am thinking with two scenarios where the board moves 50 cents with and against you? Here is what I am struggling with currently and I am sure I do not have the costs exactly right. Let's assume a $3.50 ($4.00 futures less $.50 basis) for Fall 2015.
Variable costs excluding land on 180 BPA ground, $450 plus land cost of $300 is $750 total costs for fall CY 2015. Total revenue is 180 bushels expected production @ $3.50 bushel grossing $630 for the farmer and resulting in a $120 per acre loss. If the board goes higher $.50 and basis stays the same he still loses as he only grosses $720 losing $30 per acre. He loses $210 if the board goes down $.50 and basis stays constant.
Now if he buy the board at $4 and does not plant a crop and the futures market doesn't change he still has his land payment and he loses $300 per acre. If the board goes up $.50 he loses $210 ($90 gain on futures less $300 land cost). If the board goes down $.50 he loses $390 ($90 futures lost less $300 land cost).
Can you come up with a scenario in which a guy stays whole doing what you are saying short of a giant board rally?
$3 corn and prospective planted acres, the driver.
