New-Crop Corn Caution

January 20, 2009 06:00 PM

Linda Smith, Top Producer Executive Editor
Use any price rallies this spring on planting delays to sell two years' corn crops, Bill Biedermann of Allendale. He reminded attendees at the Top Producer Young Farmer Seminar that 4 million acres are coming out of the Conservation Reserve Program in fall 2009, in time for 2010 planting, and about the same number each year for the next four years.
He also suggested buying a $4.10 December put option to put a floor under the market (cost: 60¢), selling $3.40 puts for 30¢ and selling a $5.40 call for 31¢. "This means a zero cost to protect your corn on the downside from $4.10 to $3.40.”
Producers need to learn to use futures and options, he declared. "The Court's Dec. 4 ruling in the VeraSun Bankruptcy case changed the world. When it said VeraSun doesn't have to honor contracts, it raised the issue that with cash contracts you may not really have the protection you think you have. Only with exchange-traded contracts do you have that assurance.”

You can e-mail Linda Smith at
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