With the basis set, you can wait until a later date to set the futures reference pricing portion of your cash contract.
Basis contracts may also allow you to receive a payment advance on an estimated portion of the contract value for the grain that has been delivered. Note that entering into a Basis contract does not result in the seller opening a futures or options account or having a futures or options position. This contract is not a futures or options contract or a commodity pool agreement. What Does Fertilizer Really Cost? Due to poor fertilizer application seasons in , inventories are over-supplied, and prices are near historic lows.
Lock in your spring and fall needs. Historical trends in the market make a good. In the past, farmers had fewer choices. Now, there are dozens of grain marketing methods to work toward more profitable prices for your crops.
When it comes to spreading risk and planning for profit, the calendar is your friend. The market is carefully watching news about corn and soybean acreage, planting delays from flooding, and trade news. You need. One straight-shooter on the speaking circuit is Matt Bennett.
He grows corn. In either case, whether you choose to roll to the May CK20 today and price immediately, or if you choose not to roll and instead set futures today off the March, the resulting cash price on your contract would be the same. Just like the grain buyer adjusts their basis level to account for the spread between futures months to keep their cash bid the same after rolling, the basis level on your contract absorbs the spread as well if you decide to roll.
If you were to roll your March basis contract to May, you would now have the following components established on your contract:. For any of you out there who procrastinate who, me?! If you really have a bias that the futures market is going up, then rolling can be advantageous since it gives you time to capitalize on a futures move up. All in all, like any marketing decision, make sure you understand all your options and have a PLAN before you decide to give yourself more time to make a decision.
Fortunately that's not us. After several years of visiting with friends from other parts of the country I think this area tends to have less options available because there are very few true elevators around any more.
Pat H. Good explanation! For me stopping storage charges early, having cash to pay debt or price inputs works pretty well. However, if the basis contract can happen near the harvest low, there is good potential for a gain in market price that usually is orders of magnitude greater than the basis movement and you don't have trading costs. Personally, unless basis really goes wild, it's a non-issue ie: the basis might move cents where the market may move 50 cents.
I don't do it every year, but it can be a very handy alternative to paying interest. Thanks, Pat. They are HTA's in reverse.
I use them when the ethanol plants and elevators are out searching for bushles. Lock in a bunch in the lower 20's for this year.
Humeston, IA. Agree with the other posters in general about basis contracts. However, our local elevator just posted a 17 under basis for December delivery, a change from 35 under not long ago. I took advantage of this and sold 3K bushels.
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