Formerly NE North Dakota, now NW MN | vailcat - 11/19/2015 14:51
1.) After all that hall I am taking the entire cookie plate if it comes around on basis. These spring wheat deals the last few years have been hard and fast and if you missed them you went from a decent profit to really ugly negative territory.
2.) My question to you is should I roll from March to May for +10 then roll back when that goes even(if it goes) or does the basis do all its work before then?
1.) You are not doing a very good job talking me out of breaking every bin door open. Now you got me thinking start stepping in sales now and just keep adding as basis improves. You're right though, the pattern has been for these basis rallies to be relatively short lived. Also, if as I theorized, the pop is due to surplus freight on the market, that makes the basis pop contingent on railroad performance.....which is kinda an uncomfortable place to be (wish that thought had occurred to me earlier).
2.) I've been humbled enough times marketing, I've learned to apply this philosophy- If a move has the potential to make me look like a genius, it probably has the potential to make me look really silly too. One thing that I appreciate about my local elevator is that while it costs me 5 cents to roll to the next month, if my HTA is parked in (for example) May, and he's still bidding on the march, he will just subtract the spread... I don't get hit with that 3c commission. I don't know enough about his book to know if that's an oversight on his part, a gift to me, or just really doesn't affect his life. Because of that, I tend to be trigger-happy with the roll to avoid inversion danger. In your situation it sounds like you are getting hit back on the roll back side. That makes the calculus more complicated, makes me think that might be a complicated place to squeeze a few pennies.
The deeper question is how long is this basis rally going to last? Well, the assumptions i'm working with are basically untested, so this idea should be taken with a giant helping of salt.... but if this is a "freight-push" rally and not a "demand-pull" rally as I suspect it is, at least we have El Nino', and a general improvement in rail service, on our side. However, COTs are fungible to a large extent, so.... maybe soybean export demand or corn export demand could increase demand for trains? |
So, someone curb my enthusiasm- HRSW
