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Central Missouri | Most SRW basis is historically wide for new crop bookings at this time. If you have to move the wheat at harvest it is probably a toss-up. If you have the ability to store into dec or mar find-out what they are paying you to store from harvest until then. Remember if you do a hta you are still speculating on the basis and if you plan to roll the hedge from say july to december you are speculating on the July/Dec spread. With all of that said I do alot of HTA contracts on corn in my area. We are in a corn deficit area. The local mills will ussually pay +10 the Mar or May sometime each spring. So lets take for instance the Sept corn bid at my local mill is -.20 the sep or 4.04. The bid for mar is -.10 the mar or 4.24 so they are willing to pay 20 cents to store for 7 months. Not hardly worth it; but I know in 18/20 years I will get +.10 the mar or 4.44. Now that is .40 cents which is worth it but I have increased my risk because I'm incurring storage risk and I'm speculating on basis gain. Now the sep/mar spread. This is even more risky than the basis. Normally the sep/mar will go out to 15 cents so now The return to storage is now .45 but I am incurring alot more risk. If we get into a major drought the bids will invert or the sep will trade over the dec or march and if I have my hta in mar I begin to lose even more. Bottom line is this: If you have to sell out of the field book cash and be done with it unless you have a strong feeling that the basis will get better. If you have the ability to store into dec thru mar I would hta off the july and look to roll the hta forward if the july/ dec spread widens. Just my opinions. Every move you make beyond booking cash increases your risk and your opportunity for gain or loss. | |
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HTA
