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SC Iowa | Don, you are spot on....basis levels are stronger than expected, thus I doubt the grain dealer would (or should) let the farmer out for the simple difference between the hedge price on the contract and whatever futures are trading at now....
If the farmer expects higher futures prices---from today's levels--then buying a futures contract or option would be the most appropriate method.
BUT, I have seen the fixation on a "low priced sale" absolutely ruin a person's ability to focus on the task at hand......had a guy who booked 15K of December 07 corn at 2.60 almost 2 years ago, and vividly remember the conversation and him saying "yeah, and if that's the cheapest I sell, it'll be good" yada, yada, yada.....well, this is a guy who is going to grow 300,000 bushels of corn in '07 and he can't seem to get past this 15K sale....flat out told him that if he didn't quit worrying about that, he was going to miss out on the best year of his farming career....I'm still working on him because he has less than 20% of his 2007 production sold right now...
PS----bringing my mother to Muskogee day after Thanksgiving....you going to be in Bixby??
Ray J | |
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Buy back $ 2.71 contract
