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| Pete, it is one reason. Also did I say the big commercial companies? No.
If they buy grain today for 09, hedge the grain and the market crashes they get the margin $$ back and collect the intrest. So given your reasons if they knew the markets were going down they would be buying like crazy. Your theory is wrong.
Yes they are concerned about higher prices and meeting margin calls and many banks treat "new crop" differently than "old crop" since in order for the elevator to get the new crop the FARMER MUST PERFORM ON HIS CONTRACT! As an elevator you then have margin risk, increase intrest and many banks may look at the 2009 and finance only a % of the value and the rest comes out of working capital. This means less $$ to buy corn today. Then add the risk that the farmer walks away. Also as a farmer we have somwhat of an insurance if we dont have a crop. Yes if we need to "buyback" those bushels we have the insurance $$ but nothing stating that the $$ goes to the elevator.
Creeps walking away from contracts will hurt the financial integrity of the local elevators and coops and ARE one reason many have stopped buying 09 grain outside of basis only.
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Walked on corn contract
