What To Do If You Have Soybean Sales Booked Against The "NOV12" Contract
Sep 06, 2012
I recently received a question from a couple of readers about rolling their HTA type soybean sales from NOV12 to the JAN13 on the setback.
Q. Kevin, what do you think of soy basis appreciation vs the SF3 (i.e. roll HTAs in soybeans from NOV12 to JAN13 at a penny inverse), looking for a significant pop in basis after harvest, but before the South American harvest? Also curious on your risk vs reward thoughts of owning KWH3 vs CH3 at 1.10?
A. Rolling the soybeans sales out into JAN is obviously a must, the question is timing. There are some who believe we could actually trade the JAN contract out to a carry into harvest pressure as many producers will elect to simply sell their beans right out of the field rather than storing into the steep $4 inverse. The flip side is that money-flow tends to love the front month. First notice day in the NOV futures is still a long ways out (Oct 31st), so we can not rule out more length being added. From my perspective you are toying with fire. Yes, the JAN may eventually work to a slight carry, but I am not sure waiting around for the $0.05 is ultimately worth risk that could come "IF" China decides to ramp up buying or the USDA leans on production. Bottom-line, you might wait a couple of days to see if we actually trade out to a "carry" but I wouldn't try and get too cute.
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