That is the way I look at it also.

First of all, I do not want to sound like I am saying Sat made a bad decision because that is not how I look at it all. He may have made a very wise decision and be very well off in three years looking back. That situation has certainly happened in the past (selling multiple years out being a good move) and may be the case again.

So when I speak, I speak of my own perspective. It in no way criticizes what someone else decides. It is merely giving my point of view. We are all big kids here and make our own decisions.

That said, to me it looks like a choice of locking in a price to ensure a profit being the positive aspect of multiple years sales. But the profit could be fleeting should events cause all prices go go up including inputs. So yes, a person could guarantee a certain income to meet certain obligations, but what if expenses exceed income? So that is one risk traded for the safety of knowing the price element of income.

The other risk is production risk. Crop insurance can mitigate a lot of that risk now days so that one is probably manageable as long as a person does not get too carried away with percent of sales.

Counter party risk is a big deal to me. If forward contracts, the company I am contracting to will honor their obligation. Or if the company is belly up, a bankruptcy court ordering me to deliver grain and stand in line with unsecured creditors to try and get some of my money. With futures there is counter party risk with brokerage accounts. Yes it is probably a slim risk, but still a risk.

So for me, it is the choice of having a paper promise that someone will pay me an agreed amount at one, two and three years in the future. I have to work three years on a paper promise. Or I can raise the grain and put it in the bin and then try to market it for what I can get. To me that security of having physical possession of a physical commodity seems less of a risk to me than having a paper promise and someone has title to the fruits of my labor and capital investment. I'm with you. I would sleep better at night with grain in the bin than someone else owning my production.

The other thing I always try to ask myself, is who is taking the other side of any trade. If Sat thinks the price he received was a good one all the way three years out, the party on the other side of that trade thought is was a good time to buy so they would not have to pay higher prices later. Trades do not happen in a vacuum. There is always someone on the other side of the trade taking the opposite position. Are they smarter than me? Do they have better information than me? Why are they taking the position they are taking?

If I sell my grain cheaper in three years than what I get today I will still be in business. I may take less for my grain and forgo some profit or even have a loss. But I still see grain in the bin being no more risky than selling something I have not produced yet with a Federal Reserve having a 4 trillion dollar balance sheet and likely to be much worse in three years. Kind of like ammo. I'd rather have ammo on hand than a paper ticket saying I can get some ammo at some future date.

John