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USA | Tara,
Here is the problem with your logic. If corn goes to $30, most farmers won't be able to cash flow the margin call, no matter how much it makes land prices go up.
Had a banker tell me a couple years ago when corn was $5 plus farmers should be selling new crop corn. That was about the time elevators quite buying new crop corn. Told him the only way to sell corn at the price was to hedge it on the board. Asked him if a farmer came into the bank and wanted to setup a $500,000 line of credit for margin calls what would they do? After some silence and then some stammering and stuttering he said If the guy has some good black dirt to take a lien on, would probably do it.
With the unknowns and price swings, IMO it is best to be very conservative when it comes to selling ahead. IMO a better option with less risk, is to build up to 200% of APH on farm storage.
Edited by coup 1/12/2010 08:28
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How do you price/protect 'unknown' production?
