Death comes to us all. Life's but a walking shadow | If farmers refuse to sell you respond by raising basis which effectively raises your costs. In the meantime the price of ethanol declines to reflect the decline in corn price. At some point the extra basis you pay collides with the lower price of ethanol and you reduce production. One of three things has to happen. Farmers capitulate and lower their price of corn, you operate at the minimum profit with reduced production or the price of ethanol increases allowing you to pay more basis. Any others?
In all likelyhood you have already purchased enough corn and priced the ethanol so that you can continue to operate for some time. I'm curious is that one month, two months, less, more?
Is there a point where the futures price becomes so low as to be irrelevant to the cash market? Are we anywhere near that point? |
Okay from the beginning..
