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Did your elevator Raise it's basis this morning?
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Brandon SWIA
Posted 8/31/2007 14:10 (#196301 - in reply to #196245)
Subject: RE: Did your elevator Raise it's basis this morning?


Typically, elevators hedge all their grain. So, when you contract 5000 bu of wheat, they go and sell a contract on the board of trade. As prices go up, they have to margin all those lower priced bushels. About up to $3/bu on those $5 contracts. That's a lot of margin money and a lot of interest on margin money.

Elevators typically make their money on basis and carry. If they are speculating on futures direction, they typically end up broke.

Brandon
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