A.M. Bickley Comment
Good luck and if you have any questions feel free to call us at the office.
For a good hedge play in corn we would consider growers' look at some of the following options: 1) Set target contracts for $5.80 cash corn. With a breakeven price we peg at $5.62 per bushel, this would provide a 3.2% return. $5.61 is the rough estimate of the cash price right now delivered into Marshallville. 2) Buy the 570 Sep put option for 42 cents and write the 600 Sep call option to collect a premium of 16 cents. This strategy gives a net debit of 26 cents, along with a basis of even September, will provide a floor price of $5.44 and a ceiling price of $5.74 which we peg at 0 to 2.0% return. 3) Forward contract at the market price of around 570 September future and sell the 600 September call option to collect a premium of 29 cents. Along with an even basis into Marshallville, this strategy will have you booked for cash prices of $5.85 and $6.15 (Assuming a market rally) which gives an average returns of 8.5%. This option is for producers who have plenty of grain to hedge and feel a bull market rally is in play. As of today the S&P 500 index has returned roughly 10.5% YTD.
Best of luck in the fields this spring and call us at the office at any time.
(Editor's note, future and option prices are estimates.
Future and option prices change during marketing hours.)