| Author |
 Topic Search  Topic Options
|
Sandknob 
Orange Level
Joined: 12 Sep 2009
Location: Oblong, IL
Points: 2456
|
 Post Options
 Thanks(0)
 Quote  Reply
 Topic: Can someone explain buying on futures
Posted: 02 Dec 2009 at 8:43am |
|
|
 |
|
Sponsored Links
|
|
|
Farrell(Utah)
Orange Level
Joined: 11 Sep 2009
Location: Springville, Ut
Points: 517
|
Post Options
Thanks(0)
Quote Reply
Posted: 02 Dec 2009 at 10:27am |
|
The Chicago Board of Trade used to have some nice practical publications explaining how to hedge or speculate on the futures market. A web search should locate a phone number. Good luck
|
|
John (C-IL)
Orange Level
Joined: 11 Sep 2009
Location: Illinois
Points: 1654
|
Post Options
Thanks(0)
Quote Reply
Posted: 02 Dec 2009 at 10:33am |
Adam, I'm not wanting to discourage you from using the futures markets, but, at your size you should let the elevator assume the hedging risks for your grain marketing and stick to cash contracting.
If you really want to use the futures to hedge your selling decisions you should look at options. They will let you hedge your risk at a much better cost/risk.
CME has publications for you to read. You should also subscribed to a service like Agrivisor, it is free for Farm Bureau members.
|
|
Gerald J.
Orange Level
Joined: 12 Sep 2009
Location: Hamilton Co, IA
Points: 5636
|
Post Options
Thanks(0)
Quote Reply
Posted: 02 Dec 2009 at 10:36am |
|
The pundits tend to say to sell a fraction of your crop each month. In past years the crop prices were best in June to August, but the last couple years they were best in February. Last year I sold a third of my anticipated crop in February for $4.02 cash (central Iowa) for Jan 10 delivery because I did not want the income in 2009 having just sold my 08 and half my 07 crops. In March or April I sold another third for $3.89.
A month before harvest I sold about a sixth for $3.55 and right after harvest I sold the rest for $3.57. I paid a lot for drying and storage of that two thirds of the crop to deliver in Jan 10.
For next year, I have just sold just under a quarter of the anticipated crop for $3.99 for October-November delivery. Yesterday during the morning CBOT was up ten, but closed down 4. Had I not been busy with other things, I might have sold more harvest delivery corn at $4.11. To get close to the daily peaks you have to watch the market constantly, most of us have other things to do.
Selling a bit a month keeps you from selling in a panic.
What you really have to do is work up your costs (including your own labor) and decide what price makes you a profit, and try to sell in groups so the average price is above your costs.
Since I have rented out my land on a crop share basis, I have a good handle on my costs and $4 cash corn looks pretty good to me. I can remember in the last 20 years taking a $1.98 per bushel check to the bank and smiling all the way. May have been a wry smile though.
I look for prices to be highest in February with a secondary peak in June, but that is just from the last two or three years of history, earlier history put the big peak in June. Hedge fund speculation has modified the market making prices leap and fall ignoring fundamentals of world supply and demand. Grab a good enough price when its available and dont sweat the high prices you missed. Be glad you were not cornered in low price times.
Gerald J.
|
|
Gerald J.
Orange Level
Joined: 12 Sep 2009
Location: Hamilton Co, IA
Points: 5636
|
Post Options
Thanks(0)
Quote Reply
Posted: 02 Dec 2009 at 10:44am |
|
As a practical matter you won't grow enough crop to cover a CBOT contract. You can play the options board, but you don't need to grow a crop. You can grow a crop, but you don't need to play the options.
Deal with local elevator contracts, you can do those in small quantities, though the elevator may limit how small.
There are plenty of pundits around offering advice. Look for radio shows like "The Big Show" 11:30 to 1 on WHO (1040 clear channel) or WMT (600 KHz, Cedar Rapids), and TV like Market to Market on public television but also available on line http://www.iptv.org/mtom/default.cfm with podcasts, video, or text trascriptions of their market commentator reports.
Look to Kurt Kester, (always on WHO on Mondays), and others for market comments and selling advice. Kurt is good. Others have different viewpoints and since all are looking at flawed crystal balls, their comments may also be valid.
DTN offers market forecasts and reports and advice.
Gerald J.
|
|
KenBWisc
Orange Level
Joined: 15 Sep 2009
Location: Fall Creek, WI
Points: 1177
|
Post Options
Thanks(0)
Quote Reply
Posted: 02 Dec 2009 at 1:05pm |
|
With 5 acres of crop you will be speculating versus hedging as you don't have enough product to cover a hedge contract. You may be in the same boat if you froward contract with a local elevator, assuming one is willing at so little production, because if you don't get a crop you are still liable for delivery of the contracted grain and you don't have additional acres to hedge the bet. Check with a crop insurance agent, this may be your best option. Oh, and you'll find many people who can explain markets and hedging and you still won't understand it until you do it and get burned.
|
|
Wil M (NEIA)
Orange Level
Joined: 11 Sep 2009
Location: NEIA
Points: 478
|
Post Options
Thanks(0)
Quote Reply
Posted: 02 Dec 2009 at 2:06pm |
I agree with Ken. 5 acres at 150 bushel is 750 bushel expected production. A lot of elevators anymore don't like to mess around with anything less than a 1000 bushel cash contracts. Most producers will not forward price more than 50% of expected production. Since you are going to grow this corn next spring, you will want to watch the Oct or new crop 2010 bid. You can sell the Jan 2011 bid but you will have to pay storage to the elevator to get it to that point if you deliver it during fall harvest. Most elevators also charge extra for drying to storage moisture levels and the storage is an initial minimum charge for so many days.
There is not a "safe" way to deal with the futures markets. Just expect that you can and eventually will lose money. Even a true hedging elevator expects slippage in futures price but they deal with the law of averages. Hedging means offseting a cash position with an opposite futures position and eliminating your risk to basis only. This is hard for a true producer to do or even understand as they are contingent on the cash price that they receive and have to be willing to live with the potential cash price that they will set and have the ability to finance the margin calls and associated costs. You can use options but as a general rule 90% of all options expire worthless and the costs of using options have to be figured in on the cash price you are willing to live with.
Wil
Series 3 Commodities Broker
Grain Dept. Manager
Now the disclaimer:
Data and comments provided for information purposes only and not intended to be used for specific trading strategies. Information is believed to be reliable but is not guraranteed accurate or complete. Commodity trading involves risks and those risks should be fully understood before trading. Felony acalcerosis bilinear copaline fornication pyrochemical reward elaborated splined inconsolable metamer degradation denumerant. Downshaft ricinelaidin cryoprotective unwomanly upwind clearway overreact responsibility dampness? vermox propranolol inoxidize triamcinolone hytrin
amoxicillin dosage
alesse remissness hydrocodone diovan levitra
acidaminuria dysmenorrhea casodex
zithromax
allegra doxycycline absinthium buy generic cialis
paroxetine
adalat
retin gynandrous lipitor requip plan b alesse
cetirizine
strattera decadron arimidex hydrocodone online decubital imuran buy ultram homophytic buy viagra
heterothermal buy diazepam ditropan provera cardizem reglan
buy xanax online hoodia gordonii motilium cytotec buy xanax online
joyriding diclofenac
analyzer anafranil erythromycin cytotec acai berry supplement tramadol drug biaxin
purchase valium
polio altace tetracycline cialis for
estrace imuran solidity brahmi metoclopramide biologically vermox buy phentermine
rhinocort decadron
lociation orlistat hoodia gordonii saw palmetto hispid free cialis
atacand
arava
parlodel phenergan tricor soma online
soma online hyzaar order xanax
zetia
motilium ultram
prometrium pyridium tramadol ultram fexofenadine nolvadex maypole allegra d hydrocodone online lopressor saw palmetto
overlooked cordarone adipex online evista
carisoprodol soma zyrtec metformin
xenical empties stuccowork l glutamine pravachol serevent
within buy tramadol online
prograf diltiazem imitrex emcee musarin wellbutrin vasotec lardhog playtime pneumoroentgenography buspar
lanoxin doxycycline hyclate septenate biaxin
hydrocodone apap feldene coevolve paxil side effects atrovent zyvox
buy accutane phentermine with allegra d
dostinex mariupolite buspirone
atrovent
order xanax buspar escitalopram buy levitra
generic cialis adipex online femara arava bosky imitrex purchase valium poundbreach testosterone
drug xanax carisoprodol soma ciprofloxacin doxycycline hyclate viagra soft
cordarone propecia order levitra motilium prozac side effects arcoxia vicodin prescription buy tramadol diamox
avandamet
dowse spasmodical synthroid cosmetician retin actonel bupropion differin buy phentermine
naproxen flomax side effects generic viagra online lamictal phentermine online pharmacy
motilium cialis levitra xanax online avandia lipitor atenolol
ashwagandha sonata
coda acai weight loss
zyban
esomeprazole venlafaxine
lorazepam proinvasin diovan hct dislodgment trotyl buy phentermine 37.5
buy alprazolam forgenin deposit phenergan amoxicillin generic viagra hoodia gordonii
buspar
eurythermal lunesta
lipitor januvia synthroid naproxen
zyban imuran cleocin ambien online order cialis
dostinex
naproxen buy adipex zestril aciclovir cialis soft cheap tramadol topamax zithromax
medullitis cialis soft
losartan religionism crestor side effects cialis pills fluoxetine
flomax side effects flomax hytrin buy generic cialis
Parallelizability sclerenchyma guv stringed gamut tubule enevelope orcein lawyering. Expiring cataphoresis, thereon apodal typhlitis precontact selenious supplicate haustellate.
|
|
"Yet there are soulless men whose hand and brain tear down what time will never give again." Anderson M Scruggs
|
|
Wil M (NEIA)
Orange Level
Joined: 11 Sep 2009
Location: NEIA
Points: 478
|
Post Options
Thanks(0)
Quote Reply
Posted: 02 Dec 2009 at 2:09pm |
Gerald offers sound good sound advice also.
Wil
|
|
"Yet there are soulless men whose hand and brain tear down what time will never give again." Anderson M Scruggs
|
|
