Positive sign for wheat ..

[farmaholic]

Don't drink too many double whiskey's , you will start swearing and saying things you may regret later .... been there lol .

Honestly, I swear, I'm not liquored up all the time!!! I just swear alot and I am opinionated and outspoken! Maybe not the most virtuous qualities but its who I am!

[furrowtickler]

Lol , I hear ya farma lol

[Oliver88]

If you look at a historical 20 year futures chart you can see that "normally" is the case.

Or if you want to try something else.

Do a fixed basis and roll the futures too May or July

Do a call for May or July 2018 futures.

Do an averaging contract for a few months off May/July futures.

Lots of other options than locking the bins. Some even let you haul now and stay in the market.

So Kinger, If you were going to do a call for a July 2018 contract would you do this off Minneapolis wheat?
Would it be a futures contract or an option?

[sumdumguy]

Honestly, I swear, I'm not liquored up all the time!!! I just swear alot and I am opinionated and outspoken! Maybe not the most virtuous qualities but its who I am!

You must be , "Joe Blow" from Idaho? 😹

[Kinger]

So Kinger, If you were going to do a call for a July 2018 contract would you do this off Minneapolis wheat?
Would it be a futures contract or an option?

Yeah Minneapolis wheat for Spring Wheat.

You can do a contract now but attach a call for father out futures onto it. Or you can just to a straight call with a broker and sell your wheat to someone who doesn't offer options.

Technically both, but you are using an option to hopefully make more money on the overall contract.

Hope that answers our question.

[farmaholic]

Yeah Minneapolis wheat for Spring Wheat.

You can do a contract now but attach a call for father out futures onto it. Or you can just to a straight call with a broker and sell your wheat to someone who doesn't offer options.

Technically both, but you are using an option to hopefully make more money on the overall contract.

Hope that answers our question.

Kinger, Please do a cost scenario of reasonable price expectations and what price the futures would have to move to to be at least a break-even once the costs of the option is known.

I don't trade paper, and people say alot of times options expire worthless. I am not a fan of futures or basis first contracts.....commits you!

If cashflow is needed, why not maintain control of the grain and take a cash advance? Use a line of credit or operating loan? Unless you think there is storage risk, lack of storage, or credit is maxed out.

[farmaholic]

You must be , "Joe Blow" from Idaho? 😹

My name isn't Joe, I don't blow and I'm certainly not from Idaho.

I'm the Sandbox farmer from the Slum of the Ghetto.

[Kinger]

Kinger, Please do a cost scenario of reasonable price expectations and what price the futures would have to move to to be at least a break-even once the costs of the option is known.

I don't trade paper, and people say alot of times options expire worthless. I am not a fan of futures or basis first contracts.....commits you!

If cashflow is needed, why not maintain control of the grain and take a cash advance? Use a line of credit or operating loan? Unless you think there is storage risk, lack of storage, or credit is maxed out.

I believe 1% of options actually are held till they expire. Now what are options worth when they are sold is another story.

If I do a put and the market rallies $0.50/bu the option is only going to worth time value(how long it has still to expire, there is a value to this because there is still opportunity for it gain value it won't be a huge value but it isn't worthless)

I would seriously stress if you don't know much about options at least try and learn about them. Lots of Grain cos do marketing meetings where they discuss them or you could find a broker who could give you a much better description than I.

As for your comment regarding keeping the grain and sell later you listed the main reasons why. I'm sure if we polled every farmer in Canada 99.9% would say they have had to make a grain sale at some point when they didn't want too. Options are a way to make a grain sale but stay in market.

As for you dislike of futures/basis contracts i'd rather have them as an option then not too. Say a grainco comes out with a really good bid. Say it works out to a 0 basis. If you think basis isn't gonna get better but futures will a basis contract is a good strategy to consider.

Very basic cost break-even
Canola
Call $500/mt futures (at the money)
Cost is $15/mt
If futures rise $30/mt you will be over your breakeven. The delta(rate your option gains money) will get better as futures rise. But if you just assume a 0.5 it makes the math easier.

Not sure if i answered your questions or just come off like a raving lunatic. 50/50 either way

[farmaholic]

Thanks Kinger....

You came across fine but may have described me most days!

[Oliver88]

Yeah Minneapolis wheat for Spring Wheat.

You can do a contract now but attach a call for father out futures onto it. Or you can just to a straight call with a broker and sell your wheat to someone who doesn't offer options.

Technically both, but you are using an option to hopefully make more money on the overall contract.

Hope that answers our question.

Good stuff Kinger.

Can you dial in specifically on using a broker and purchasing a July 2018 call option?
What will your cost be and what rise will be required to break even?


(Every time I talk to a brokerage they mention how using Chicago wheat options would be the way to go due to cost and liquidity.....I'm just not sure about how Minne HRS high protein wheat and Chicago wheat will correlate in this environment???)

[errolanderson]

If replacing cash wheat sales with call options, Minneapolis spring wheat is very thinly traded into May/July. It may be better to replace with Dec, March calls for now as liquidity is better and there isn't so much time value in price of call premium. Time value is much more expensive than broker commission.

Note: There is a nasty little gap on December MWE wheat that fills around $6.10/bu.

[furrowtickler]

Thx for all the insight guys 👍👍