| I agree with your basic premise.. However, again this is not without RISKS.. Going into 2011 I had these Contracts on.. This is THE ACTUAL DATA..
| CONTRACTS | | bushels | price | basis | cash price | delivered | bal to del | | # 2011-103 | | 10,000 | 3.61 | | 3.61 | 10,000.00 | 0.00 | | # 2011-104 | | 5,000 | 3.75 | | 3.75 | 5,000.00 | 0.00 | | # 2011-108 | | 10,000 | 3.65 | | 3.65 | 10,000.00 | 0.00 | | # 2011-109 | | 5,000 | 3.80 | | 3.80 | 5,000.00 | 0.00 | | # 2011-118 | | 5,000 | 4.10 | | 4.10 | 5,000.00 | 0.00 | which only totaled 35,000 bushels or 33% of my expected production. As you may recall it was the Mother of all Droughts that summer with 50 days over 100 degrees.. I had purchased 70% APH coverage and made some more sales at higher levels during the season near the end of Harvest.
However, I had to buy back some corn at $6.75 to cover my shortfall on contracted bushels $2.99 higher than my average locked in prices on about.. 7% of my actual production which came in at 72% of my APH's thus I did not have an insurance claim.
Yup that was fun.
A few years earlier on our wheat we had a late freeze which after I paid off my forward contracts it TOOK EVERYTHING over my seed wheat production just to cover my hedged losses. The WHOLE CROP!!
Yes.. there are years like this which Will occur some time in your career. Yes you can lock in a weather premium.. but just understand the RISKS which you are taking.
We followed 2011 up with 2012.. which wasn't much better.. fortunately I didn't have much forward contracted that year... hmm looking.. actually I did but due to the inversion.. prices Also rallied through the year..
I locked in about half as much.. around $5.50 due to the inversion (never have back to back droughts do we?) where the spot prices were around.. I sold 10,000 bushels at $8.34 that fall.
Yup. That's what happened.
Edited by JonSCKs 10/15/2018 16:54
|
Help me understand “futures market”
