Is It Time to Make a Few Cash Sales?
Sep 04, 2012
Producers continue to call in and e-mail asking my thoughts regarding making cash sales at these levels. My answer emphatically is YES, YES, YES!!! Even though I am conservatively bullish "PRICE" that does not necessarily mean store the bushels. Let’s think this through for a moment:
- Brazilian corn is being imported into the US right during the heat of our own domestic harvest for some $0.30 to $0.50 cents cheaper than it can be originated for here at home.
- Producers to the south have had a good corn crop with limited storage. Bottom-line, the bushels (for the most part) are being harvested and sold...not stored.
- Demand for corn is not only being "rationed," but many analyst actually believe it is being "destroyed" as traditional global importers find new sources, livestock producers look for and find some new alternatives and the ethanol industry is being restructured and shaken down right in front of our eyes.
I could go on and on, but why??? The market is jumping up and down screaming to make cash sales and re-own with paper, but still many producers want to store the bushels. Remember just because you are bullish "PRICE" does not dictate storing the bushels. There are only three reasons to store corn: 1.) Low Prices 2.) Weak Basis or 3.) Good carry in the market. Think about it, "prices" are sky high, not weak. The "basis" is as strong as it can be for harvest time. And the markets are trading at a huge "inverse," not a huge "carry." As I have been saying for weeks, why store the bushels??? If you want to "speculate" on price then simply buy a call or enter into some type of limited risk bull strategy on the board. Just remember, as CEO of your farm you are a "risk-manager," NOT a "speculator." I know its tough but you have to keep the two positions separated.
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