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Re: futures now
ray ole buddy...his point is pretty clear...you just wrote a "textbook" answer to a real world question....
ih, and a number of us here, have lived it real time for a few decades at this point, it is not so easy
as your textbook claims....exit the hedge at a profit during a LOCAL AREA crop issue. See, that
is problem, my crop size is not 100% correlated to CBOT pricing or local basis....the slippage can
be quite extreme actually (40% in 1991 for example).
Plus, many of us have generated very positive rates of return over the years managing our
farms (well north of 20% ROI fwiw with extremely low risk by financial mgmt standards)
....so your stereotyping is pretty immature, ill-informed, and just frankly stupid.
Off to the big green box to do what I love, shell corn on a crisp clear sunny 50 degree fall day.
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Re: futures now
The general rule in any financial investment is when in doubt, get out. So if you have crop damage when you have a hedge position in place, and you're not sure if its a local problem or a systemic one, close the hedge. You're never going to make delivery on the hedge to begin with, you will either close it or roll it forward before the first delivery date, so if you're worried that you may be caught in a promise to deliver a crop that never materialized, you won't have that problem.
Next about slippage, if you're growing any ag product that trades on the CBOT, then you are correlated in those products. What you will be paid for those crops is based off where the exchange trades. So to think that a hedge in those products would not work well for your crops really defies reality. Have you ever done a mock hedge transaction to see how your crops have fared against the exchange traded crops ? Please provide those details and enlighten us.
Regarding what you have achieved in the past, congratulations. I doubt you will be able to repeat that performance not because you are not a good farmer, but because the profit compressions occurring as agricultural prices recede lower is inevitably going to squeeze you into both operational and capital losses. Its a huge error to try driving the car forward while looking in the rear view mirror, history is littered with the remnants of companies who failed to adapt to the changing business practices and environments they suddenly found themselves in. And if you're going to do the same practices when the markets go against you as they have for the last five years as you employed when markets were in your favor, you will not survive.
One other point...if you can't converse with me in a respectful way, please don't bother writing to me. You know just as I do that the financial practices in your industry leave much to be desired. If they didn't, 40% of your colleagues wouldn't be sucking at the government tit, taking $20 billion of American taxpayer money every year. I guarantee you that if I looked at your books for just a few days, I could prove to you that you stone age financial practices are costing you a lot of money now, and maybe your farm later. So when you call me names as you did in your post when most of the people who analyze and invest in the agriculture industry know that I am correct, you not only offend and insult me but you show your own ignorance to anyone reading here.
If you think I am wrong about the need to hedge your production inb a bear market, fine, don't do it. Maybe you'll be lucky and live long enough to see prices return to a bullish trend. But if they don't, then you will live to regret that you didn't listen to the sound advice that you were given for free and discarded because you think it didn't pertain to you.
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Re: futures now
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Re: futures now
Don't you understand, silly?
See, Ray is different than the other guys.
He is a skilled analyst, so therefore he knows which way the market will go.
Everyone else is just guessing.
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Re: futures now
Yes, I am pretty good at knowing where the market goes, but I do not sell my advice, There are good advisers who are very good at figuring out where the market is going, and they can prove that they have a successful track record. Those are the guys you want to partner with, because they can make you money.
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Re: futures now
Take your own advice.
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