Posted 4/11/2019 20:17 (#7434102 - in reply to #7433685) Subject: RE: Question for those who use bins
jsmo98 - 4/11/2019 17:10
It's just hard for me to sell something I don't what I will produce. I think we're the only industry that has to do this with weather deciding makes it hard for me to do. Sure we cant forward price but who knows if we'll get it.
Forward sales have treated me very well. To really make rolling HTAs work well in a market with this much carry you would be the most profitable by selling at a profitable level to start with and for a futures month before you need the cash.
This is an example using numbers that are somewhat realistic. So lets say you want the cash in July of 2020 so you did an HTA on September 2019 corn for $4.00. You wait for a $.05 cent spread per month on September to December futures and roll the Sept to Dec. So 3 months x $.05 = $.15. Now you are hedged at $4.15 December. You wait and roll again from December to march, $.05 x 4 months = $.20 additional cents so now you are at $4.35. roll again to may and then to July for another $.20 total cents. You finish hedged at July for $4.55. Now there are fees involved and you still have local basis risk. If you dont need the money you could roll to Sept assuming there is still carry in the market. If no Carry then deliver the bushels and cash the check.
you might not get $.05 and you might be able to get more than $.05.