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hardnox604008
Advisor

beware a leaky market

For lack of government price supports, an expanding ethanol mandate or a commodity mania to keep markets supported, this thing could just slowly leak away.

 

If that was the case it would present a very difficult psychological challenge to producers and just hypothetically speaking, set up for a real torrent of cash movement come late winter.

 

It's always easier to sell a bit into puny rallies if you've already got a bit on at considerably better prices to be averaging against.

 

In addition , if we seep down a bit further into insurance set price time we're going to be looking at an entirely different environment than recent years.

 

that's my sense of what is most likely to happen but, hey, I've been wrong before.

 

Just musing because I have enough to worry about without feeling responsible for anybody else. But I'm thinking that buying SX/CZ puts and funding them by selling a well out of the money call and put might be a decent strategy. However that is a position that youhave to manage- it could very well be that the call will need to come off before spring. Same for the sold put but if we ultimately go through that strike price at least crop insurance will be close to kicking in.

 

Looks like you can pretty well fund an ATM put with about a $1 window in CZ, $2 in SX.

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2 Replies
425Cat
Advisor

Re: beware a leaky market

I think we begin to build carryouts the next 2-4 years. Corn will be close to cost of production with little margin for new paint or new dirt. The time has come.

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pritchh
Senior Contributor

Re: beware a leaky market

hardnkox,, yes though isn't that what we have been in alrwady?

it is tough for those with not much sold, easier of those 50%+ sold to add some.

but it iss NOV 1, is that wen we should be selling? I guess if we havee none sold.

 

we know it but have to anticipate and play the seasonal.

 

NO one should think, they will noit be short in a bull phase.

 

ie pauloser's theme.

A producer 25% sold into AUG and Wx takes C + 2$, that is the way it is. 

 

I guess I am too old,, old lessons nneed to be re taought, OBJ is do betetr than avg

abd DON"T let yr prior or 2 yr's prior experiences make your decisions.

 

As of OCT 1 we DON"T know, we have a # and because of complexities    harderto define a range or prod --  either

crop size goes up or don by teh time we get to NOV 1,

in this case, here we are, with a likley betetr crop vs concensus 6 wks ago.

 

A bil;lion + in ES   is a BILLION, then next year?

we have to think of teh RANGE of scenarios, and   play within that.

IE have some 2014 crop sold.

 

Look at wheat, SRW, no idea why it raiied as much as it did, but of course that is in teh range of possibilities.

Now back to business.

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