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South Central NE | Sat,
The whole HTA fiasco was a huge nightmare for many farmers. It cost farmers, elevators, and some banks big money. Crazy part is I know of 2 cases where guys who were giving that marketing advice and went on to be lenders. Most of the marketing advisors walked away scot free... The problem I see with the "Premium Offer Contract" (selling a call, collecting premium on present delivery, and promising more delivery for next year) is that you do not know until a future date whether the corn is actually marketed. If the market is higher than the strike price on that date the grain is sold. If the market is lower than the strike price it is not sold. How then do you address that in your marketing plan when you really do not know the status of those bushels until it is too late? You can't. If the market goes higher than the call strike price you are mad because you sold too cheap and you cannot rehedge because that would be risking double selling those bushels. But, if the market goes lower than the call strike you have nothing sold and it is too late to hedge for the original price. So you may or may not be hedged on those bushels. But, you do not know until much later. How can you really manage around that. Premium Offers have been around for many years and every so often someone needs to try them again to find out how bad they are. I know several producers who have had bad experiences with these deals. | |
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Fancy Dancy Marketing
