Two Things To Watch If You’re Using Cash Contracts

AgriBusiness 06-08
“If you’ve got hedges in the deferred contract and you’re in a futures application, you’d want to be thinking about selling the September contract and looking for carry to decrease,” he told AgDay host Clinton Griffiths. ( Farm Journal )

If you’re a farmer managing the grain in your bins with cash contracts, there are two things Bob Utterback of Utterback marketing wants you to watch: basis and carry.

Carry: While the carry has shrunk a little lately, Utterback recommends looking toward the fall to make sales.

“If you’ve got hedges in the deferred contract and you’re in a futures application, you’d want to be thinking about selling the September contract and looking for carry to decrease,” he told AgDay host Clinton Griffiths.

Basis: “If you’ve got old crop corn in the bin that you still have to price, I would be moving expeditiously,” he said. “I would not get basis exposure into August or September.”

According to Utterback there will be a fast recovery of basis in September or October because he thinks farmers will be reluctant sellers during that time.

“Elevators will have to bid up cash basis into November and December,” he said.

 

Listen to Utterback’s full explanation and tips for using cash contracts in the video above.

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