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10-12-2018 08:25 AM
You're wrong about the contracts being paper transactions. They would not have delivery dates and notices if it was an index. There is a way that physical grain is delivered to depot points to settle the futures contract, I never looked into it because I never had to do it, but I know its done for a lot of size. If you don't know the costs involved I will find out elsewhere.
Thanks. My guess is that is why the basis is so wide, because there are specialized dealers set up to make those deliveries and they charge you producers for the cost of their work. They are the guys who are selling the futures contracts and capturing that $2000 per 5000 bushels, which is a very nice business.
10-12-2018 08:28 AM
Well, I was trying to be patient and teach you a few things, as you have a lot to learn
However, this is like instructing teen age sons who think they know it all, and they think dad doesn't know anything.
At least the teen age sons made it to there 20's and realized there is more to know.
10-12-2018 08:52 AM
The delivery system is structured for the big boys , Bunge, Cargill, ADM etc.
10-12-2018 08:59 AM
That's what I figured. In just the last 15 minutes I was able to find out how it all works. You have to deliver to a warehouse approved by CBOT, of which there are 13 pages worth of Iowa warehouses listed here :
You pay them 8 cents a bushel per day of storage, and they arrange to cart your corn to the Illinois River terminals and deliver it to the buyer of the futures contracts you sold. As I previously wrote, I figured there was a cost involved in transport, but I still would like to know what that cost is. What does the warehouse charge you for every 5000 bushels to ship to an Illinois River terminal for delivery into a futures contract ? Is it more or less than $2000 per 5000 bushels ?
Simple question, my guess is I don't have an answer because no one on this site has ever done it. Like you wrote, only the really big dealers get involved in delivery, and their charge for doing it is what comprises the basis.
And you guys make it sound like this stuff is hard...puhleeze...
10-12-2018 09:01 AM - edited 10-12-2018 09:08 AM
You were trying to teach me a few things ? I haven't gotten one answer from you to my questions about the cost of transport, just knuckleheaded comments.
If that's the way they teach on the farm, now I know why farmers' daughters are so easy...
10-12-2018 09:06 AM
You're about the most intelligent person here.
Actually the trick to making money trading is to follow trends rather than getting in and out.
I do most of my analytics overnight, place my orders, and see how the market trades. Not a hard life, but takes a lot of time to program and run computer models.
That's why I have a lot of time to waste here. The guy who owns this website should write me a check for building up the visits to this site.
10-12-2018 09:37 AM - edited 10-12-2018 09:53 AM
You know, "not fer nuthin' " like we say in New York, but if I ever bought into a farm interest, the first thing I would do is go to one of those approved warehouse places and ask them what they charge to ship lots of 5000 bushels into an Illinois River terminal for delivery into a CBOT futures contract. Not buy 5000 bushels, just ship it for me. I wonder how many of the farmers on this site have ever actually gone to a warehouse and asked that very question ? Being that no one has been able to give me an answer as to what the transport costs are to deliver corn into a futures contract, my guess is that no one around here ever has.
Perhaps you grew up in the business being told that its not worth it, better just to sell to the cash dealer and lose the $2,000 per 5000 bushels that paying the basis comes out to, because the shipping costs are too high. And maybe that may be true. But why not find out for sure ?
My guess is that the companies who do that shipping are making a 15-30% margin for their work. So I will guess that the cost per 5000 bushels to ship it is about $1400 to $1700. To gain $300 to $600 profit ($2000 for basis less the shipping costs of delivering to the Illinois River terminals) for the work involved in arranging the shipping might not be worth it, even if it amounts to an extra $9000 to $18,000 per season for a thousand acre corn farm producing 150 bushels per acre. To me, that sure would be worth the work, it pays part of the salary of a hired hand each season, or a couple of nice vacays in the Caribbean every winter when the snow is falling.