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I hate free price later....

Our coop has started to take "price later" corn on a limited basis. (they are tabbing the total to ssave room for any previously contracted jan. corn). It is somewhat unusual that they are already allowing jan. delivery this early in dec.  We have had good movement OUT of our little country locations.   So far they told me they are just getting jan. corn and no takers on the price later. I would love to feed your corn ,too, if I could use it unpriced and pay you at a later date. I've also heard a rumor that one local ethanol plant is taking up to march contracted corn, but don't know the details of that one. Heck, we will be getting australian feed wheat next and argentinian soys to the interior of the corn belt. this will be interesting to see play out. I have enough contracted for cash flow, but low 6's will pry some more out of my greedy little hands.

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10 Replies
jrsiajdranch
Veteran Advisor

Re: I hate free price later....

NOw John I would like a free price later option also I would like to price it later when it is about 3 dollars.  I think we can arange something here if you will go along with me.  

 

I will agree to feed it right up so that it will not wiegh down the corn market with unneeded supply thereby someday raising your price in the future.


I see this as a win win for us both. 

 

ALso if you are worried I will make sure that we hedge thru MF global so that we have the very best in political consulting for any future problems that we may not foresee which will arise.

 

I think you can see that this deal is on the UP and UP!

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Nebrfarmr
Veteran Advisor

Re: I hate free price later....

I like the price later. This year I didnt contract until march, so I can pull a load or two out of my bins, and not pay storage until the end of March. If they really need corn they even let me use that corn towards my contracted bushels.
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Re: I hate free price later....

I'm with Nebraska...I like it, merely from the standpoint of being able to move grain when conditions for hauling are good..and the grain is in good condition. If it's in their bin..then I don't have to manage it. The downside is..if it's in their bin...you might want to have some kind of agreement on basis..because they make the rules and you're not going to get it out of their bin if their basis goes to hell.

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Palouser
Senior Advisor

Re: I hate free price later....

I'd have to check around but I don't think co-ops around here have done a delayed price contract before (on wheat). The privates do, and it is usually to capture the volume and make it easier toplay their pricing games (in exchange for 'free storage'). For believers it's a 'premium'. What is the 'premium' from a co-op that is letting you deliver earlier? Delayed pricing is a risk, whatever it is. What's the premium? It is always a reflection of demand in some way. What is the user offering the co-op? Does the member benefit? I've never had an elevator turn down an early delivery unless it was one of those situations when there was a wait for barges or rail.

 

Perhaps there are differing conditions elsewhere than my area.

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Nebrfarmr
Veteran Advisor

Re: I hate free price later....

The premium is this.  Let's say I had some corn in my bin with a July hedge in it.  If the elevator gave me free price later until July, I'd deliver it there at my leisure, pay no storage, have no risk of the corn going bad, and sell it when my hedge expires.  Sometimes, they will give the option to lock in the basis at delivery, so if you deliver at a time of strong basis, you can gain that, as well.

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Palouser
Senior Advisor

Re: I hate free price later....

This IS a passed title situation, correct?

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Nebrfarmr
Veteran Advisor

Re: I hate free price later....

Yes, you agree to sell by a certain date. However, sometimes, you can get an option on that matures before then at a good price, then it turns into a minimum price thing. If the price goes down, the option pays and if the price goes up, you sell cash, and buy back the option. Note that this is not always ( or even usually) the best way to go, but some years, it is a good way to get some corn out of your bin, and not have to worry about it.
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Palouser
Senior Advisor

Re: I hate free price later....

Life is so simple here 😉

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Re: I hate free price later....

JR I'm amazed that these guys still think it is a good opportunity. they (and you by your example) get the grain and the use of it and don't have to pay for it. It would appear that the reason it is offered is to save the coops from tightening basis to entice sellers. Let 'em bid for it! 

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