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EC SoDak | In my program, the downside is when you get a late season bull run that goes higher than pre July market prices for the Dec. So, in a year like 2020, you’d be hedged on a decent amount of your crop before the derecho hit IA and IL and China finally went on a buying spree that gave the market an adrenaline shot. One could argue, and I would, if you stick with your plan through the years, you make that up and then plenty more when the market turns bearish again and goes to more seasonal market years. For example, going off memory, I believe May of 22 was the peak of the market and it’s been bearish since, so hedging ahead of time, rolling to capture the carry/spread(I believe fall of 22 the spread was inverted so it actually made sense to forgo the roll and haul in asap from the field or shortly after), and hopefully gaining some basis bumps, you can make up for losing out in 2020 and some of 2021.
An example would be my Dec 23 hedges last year. I believe I averaged around $6 or a little more on grain corn for Dec 23. I rolled from Dec23 to July 24 at +.43 or .45 in late November/early December, then gained somewhere around +.25 in basis gain (I haven’t run the math to figure out my average basis gain yet)
So, a lot of folks I’ve chatted with around here that were selling cash grain that wasn’t priced ahead of time this spring were getting 4.40-4.60 a bushel vs $6+.45+\- basis= roughly $2 more a bushel. As the market has dropped that difference has only grown.
On average, I believe Ed Usset’s research shows this program wins 7 or 8 years out of 10, I believe it’s 8 out of a handful of typical farmer methods of selling grain. It’s been a while since I read his book.
Edited by SoDak Farms 7/5/2024 14:14
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