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North Central Illinois | I understand your interest completely. I was in your shoes a few years ago. Basically if you know your cost of production there is nothing wrong with straight forward pricing to get started on the first half of your crop if it is a good price and it cash flows for you. Hard to go wrong selling at a profit. What I have done at times is go to a 50% cash position by March and then protect the other half with put options. Your only risk at that point is the premium you paid for the option. There are no margin calls but the options still need to be managed as it may be to your advantage to roll them up or down at some point. What a put option will do for you is put a floor under any unsold bushels you might have. If after you purchase the puts the market goes down for an extended period of time your put options will be worth more than you paid for them and continue to rise in value as the market drops. If the market goes considerably higher than when you bought the puts more than likely your puts will expire worthless and you will be out the cost of the puts. However you still have the bushels to sell in the cash market at the much higher price. I have had pretty good luck this way. It hasn't always worked out but more often than not. It is a pretty conservative approach which allows you to sleep at night during the summer when the markets are volatile. To each his own. | |
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Looking at 2011 prices
