As you’re bringing in New Crop, remember these three marketing alternatives available through our Landus Grain Marketing Advisors.
- Extended Price Contract has a high risk/reward profile. Sell your bushels at the cash price and move into a contract that allows you to participate 100% with a specific futures month on the Board of Trade. For every penny that futures move higher, you participate. Same for every penny lower, you participate 100%. Watch this short video to learn more.
- Minimum Price Contract has a medium risk/reward profile. Sell your bushels at the cash price and establish your “minimum” price by purchasing a call option against a specific futures month. Your participation will be near 50% for any rallies or declines since your downside is limited to your minimum price (or floor). Learn more by watching this video.
- Min/Max Price Contract has a low risk/reward profile. Sell your bushels at the cash price and simultaneously buy a call and sell a call against the same futures month, but at different levels. Your participation will be less than 50% in any rallies/declines since you have both limited downside and limited upside potential, with both a floor and a ceiling.
All of these will use either March 2021, May 2021, or July 2021 futures or options.
Which alternative for this market?
Our main concern right now is the significant rally we have seen, especially for soybeans. If, or perhaps more likely, when this rally ends, have you done anything to put a floor under these values? That is where Minimum Price and Min/Max work very well.
Beyond that, if you are taking bushels home to store, whether corn or beans, we’d encourage you to use a Futures Only contract to protect that price. Presumably, you’d be bullish basis more so than futures, for this to work. If so, lock in one of the deferred futures months, and wait until it’s closer to the time you want to move the bushels, then set the basis.
All of these alternatives work very effectively, depending on what you are trying to do. We just want you to know that you have several alternatives available to you beyond Storage or Price Later. Please contact your local Grain Marketing Advisor for complete details.