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SC Iowa | I want to make it clear----basis contracts do have a place in the grain marketing toolbox....
when basis is unusually narrow, it's a good time to move cash product and generate cash by using the 70-80% advance feature on a basis contract....especially if you were bullish not going to move the corn anyway...
Where I see basis contract "working" is where folks are willing to accept gains of 10-25 cents after initiating the contract....but when I make those kind of calls the standard answer is "I'm going to watch it"......they just don't use the two extra words that are needed to complete that statement, which are "go lower".....
those huge moves we saw in 2007-2008 are both blessing and curse for folks who wrote basis contracts.....some made huge gains, but not willing to accept that what happened was a once in a generation/lifetime event, and they happened to be on the right side of the situation.....but they keep expecting that less than 5% probability event to happen again, and they are eventually going to lose a lot of money over time chasing that rainbow when they already had their hands in the honey pot one time....
Basis contracts are a bit like the 9 month loan program.......they are PART of a good marketing program, but not a substitute for a marketing program.....
Ray J | |
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corn- panic or hold
