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Ridgway, IL | You are definitely correct Brad. It’s not exactly a slam dunk per se to be in the Feb for these couple loads. The big gains came from rolling from oct to dec.
I was Initially hedged in oct, rolled to dec then on out to Feb.
But by setting my basis vs dec futures at -1dec futures, then catching a little pop in the dec/Feb spread like we saw yday, I clipped an extra dollar by having my hedges in Feb vs being in the dec.
In reality though, I’m just speculatively short in excess of my inventory. I didn’t lift any hedges when I priced these fats. I feel like there will be better times to re-own... I will admit that style of play might not be for everyone.
I set the basis too early on these, we went through some foul weather early nov and I was thinking I wanted to get them gone ASAP. I missed a 2-3$ improvement in basis.
If you recall back in October cash was trading at something like 8-9 under dec futures, so you can get a sense of how much improvement we have seen.
I didn’t execute it just right.
I wonder how much fund unwinding we are going to see here? I was told that the funds have reduced their short corn position by approx 5% this week, they also hold big feeder cattle positions and live cattle positions. Those positions are correlated in my opinion. I wouldn’t be surprised if we see profit taking on those positions into year end, which could be combined with a softening cutout.
I know, I know... only bullish comments are to be allowed here, but being bearish leaning has served our farm pretty well. I am biased.
I will add though, I’ll get bullish sometimes. we have been 100% sold on our crops for 17 and 18. I reowned all of 17 using 360 mar calls, and shorted 3.60 mar puts against our 18 sales. I think corn has obvious value here, shoot corn was 120/ton... from any feeders perspective that’s pretty good. I can see corn rallying 25c here, fats being weak and feeder cattle coming under pressure from cattle crush spreads deteriorating and also find selling. Not to mention there are piles of feeder cattle to move in jan. Or at least that’s the feel I get from the SE
Edited by LKM 12/1/2017 06:49
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Hauling my first load of fats
