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central illinois | The reason to do a HTA or hedge with a futures contract vs selling cash or forward contracting is that the optimum time to price futures and set your basis are not the same. So when you break things up into two transactions, you have the opportunity to optimize each one separately. In the examples you gave is seems implied that you were doing both transactions (pricing futures and setting basis) at the same time. If that is how you are managing the contracts you would always be very close financially to what you would have done just selling cash. Often the basis is strongest when futures are low, as farmers resist selling at a low flat price. And often basis is weak when futures are high, as farmers sell the higher flat price. | |
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Questions about rolling HTAs at the coop to capture carry/basis
