Dec12 HTA Contract – Making $7.00.
Sell one contract (5000bu) on the CBOT at 6.67 (04/19/2012), cash price at Co-Ag is 6.66 (Nov12). This
gives me a -.01 beginning basis.
Cash = 6.66
CBOT = 6.67
Basis = -.01
In the past few years, getting back to zero on the basis has been the goal and while anything more
positive has been great, it’s also been unlikely. However, we have been seeing very strong basis
numbers in the past few months and have been positive since mid-January. Today we have a positive 85
cent basis on the nearby, so we may be seeing a change in basis back to a more positive tone.
In order to get $7.00 Portland……
CBOT = 6.67
Basis = +.43
Hedge Fee = -.10
Cash = 7.00
Because I have the 10 cent hedge fee I need an extra 10 cents on my basis gain to achieve $7.00. So
from here on out, I will be watch the November 12 basis on the Co-Ag website, www.co-ag.com.
Yes, basis could always turn the other way and I could end up on the wrong end of this contract.
However, with basis improving with each month we roll into, I’m taking a chance and I’m sick of waiting
for September to rally back to $7.00. Also, my goal is a +43 cent basis. Once I get to this point I will start
putting in offers so that when my basis goal presents itself I can take advantage. More times than not,
the market moves so fast that by the time you realize you have reached your basis goal, it’s already
gone.