Trading commodities

[farming101]

The risk of grain going out of condition is a consideration but most farmers know how to store grain

[farmaholic]

The risk of grain going out of condition is a consideration but most farmers know how to store grain

......that's why I mentioned "price" risk. But you are right, there is also storage risk.

[samhill]

Trading commodities

Let me throw out this scenario to show how little I know:
I sell Dec 18 MGE at 6.37 b/c I think it's going down
To protect myself from a gain I buy a call for 6.52.
If Dec 18 goes to 6,72, I sell another Dec 18 am satisfied with that price.
I only have to worry about $Cdn and basis.

[Nudge]

I buy a call for 6.52.....please explain that? A dec 18 call will cost a lot if they are even active. In my opinion trading accounts are best saved for when commodities are at extremes either way. Playing for a few pennies in the middle is mainly just for the brokers. In your example you have capped your upside and lowered your average price in one trade vs doing nothing. Only if the market sees a significant decline would you make money. Don't feel like there is a lot of reason to price 2018 production at this juncture.

And one correction if you do buy the call upside is not capped. My mistake there.

[mbratrud]

RJO. Pretty much the only thing I use for hedges is put options. The least risky. Challenge is if they are trading for a reasonable premium.

[TechAnalyst]

I'm in southern Manitoba looking to do some trading/hedging. Looking for a broker, would anyone make a comment or recommendation? any advice other than "don't do it"?

I realize this is late but I had to set up an account, I apologize.

Congratulations on expanding the tools you are comfortable using. Regarding ‘don’t do it’, price risk management gets a bad rap. A farm spends between $10-15/ac on crop and hail insurance, more on home and life insurance, all the while hoping to never get a return on any of it. Yet, if $5/ac is spent on price risk management without a positive return, it’s considered a waste of money.

Regarding a broker, it is better to comment on the type of broker to look for than a firm. Every firm has brokers that are better suited dealing with farmers than others. Given what you say, a full service broker would likely be well worth it. You can likely rebuild your diesel engine cheaper than your local dealer but should you?

If your objective is minimize risk and enhance income, you do not likely want to trade often, just wisely. You need a broker that understands that and realizes it’s better for everyone if you are doing what works for you, not just generating commissions trading frequently.

With that in mind, you must also realize you can’t take up too much of his/her time wanting to be spoon fed generic market information readily available on the web. You want strategies and specific recommendations, not news you can find on your own.

So contact different firms and if they don’t know who would be best suited for you to talk to, maybe you should move on. And good luck.