|
| "The basis and the price of freight move in the same direction. "
Not to nitpick here, but I think you got this one backwards. As Freight Goes up, basis goes down. The only time that would be true is at the export house with a demand pull situation that would raise bids to make up for freight increases to their facility. As a rule of thumb for producers/local elevators, they move in opposite directions.
I think the big key is that regardless of whether its a local coop or independent or its a major grain company elevator, they serve a purpose or they wouldn't be able to make any money doing what they do. Most elevator guys and cash commodity traders are trading basis. that's where they make all the money, not so much on a flat or CBOT price bullish/ bearish trend, although those market trends do factor into basis plays.
to go back to the original question, why let the elevator make money on the farmer. My answer is the grain industry is a huge complicated puzzle and every piece has its place. | |
|
who buys the wheat?
