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Ray J., dumb question but

isn't the effect of the May/July inverse to basically drive everything in commecial ownership that was hedged in the May through the pipeline?

 

What is your estimate of how nuch of corn and beans carried in country elevators was hedged in May?

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5 Replies
Veteran Advisor

Re: Ray J., dumb question but

most of the hedges were in the May.......I know some who rolled when the K/N was 14.....

 

the hedger wants to be paid a cash carry and the buyer is trying to say "sell it now or take your chances"

 

given the strength in the cash markets (CR bidding +47K today), I don't think the end user has done a very good job of convincing the hedger they won't get paid, even if they have to gut it out and roll to the N.....

 

very interesting!!

 

PS---this will be a great example of comparing "what the book says" and how it all turns out!

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Veteran Advisor

Re: Ray J., dumb question but

Ray,

I can't remember if it was you who told me to watch the prompt spreads or someone else, but, ?????? --kinda squeezin' already.

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Re: Ray J., dumb question but

I could look this up but am being laszy- anyway- for harvest purchased corn there was a pretty decent carry into May at the time, am I right?

 

Plus some decent basis appreciation even if what they had to pay to get it bought at the time seemed pretty rich.

 

Pretty good returns there although I suppose some may have considerably reduced volume that they're wanting to compensate for.

 

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Veteran Advisor

Re: Ray J., dumb question but

I went back to 10/25 and looked at the spreads....Z/K was inverted a couple of cents and Z/N was inverted 8 cents...

 

nobody had good coverage on for Nov through March, so it was a mad scramble to fill those slots instead of buying farther out on the curve...

 

it was taking +45-50Z to buy that winter coverage, and would have taken +70N and higher to buy anything for May...

 

it's been a fistfight all the way to keep adding coverage out 30-60 days at a time...

 

summer will be interesting....

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Re: Ray J., dumb question but

Thanks.

 

I had forgotten the degree to which the carry was gone at that point- makes it all make a little mroe sense to me.

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