As a reader of TWIG, I hope you have come to understand my major objective to inspire ideas so you can hedge or trade these grains markets on your terms. Lately, I have been asked by producers why it would make sense to re-own. Today, I am going to step out of my bear costume and put on my bulls jersey. Maybe I can inspire an idea or two to get you involved.
Let’s talk about a phrase we like to call Seller’s Remorse. You may be asking, “What is it and how does it happen?” We will answer that question in greater depth later on, but it is more important to know how it can be avoided! Seller’s Remorse is the feeling you get after making a… Read More.
Through our experience from working with more than a few grain farmers, we are always dealing with the producer dilemma of choosing whether they should hedge or make a cash sale. As similar as the two choices appear to be, they are NOT one in the same. Each action will eliminate downside price risk, but… Read More.
As commodities prices rally, producers of goods should be taking a hard look at marketing plans that will hedge downside price risk. When the U.S. initiated credit swap lines with Europe back in mid-December, commodities rallied across the board. Producers have had the bull in their corner; but with uncertainty in these markets being far… Read More.
Part 1: Hedging Stock Exposure For those of us who are involved in the buying and selling of assets, the feeling of buyers/sellers remorse is one that can remain with us for a while. As anyone who has participated in these markets can attest, it is almost impossible to sell at the very top and… Read More.
Hedging agricultural crops using options can be a very useful risk management tool if used correctly. The number one focus of any grain producer’s marketing year is to make “cash sales” at the best possible price. However, this is much easier said than done. Why? Because we can’t predict the future. Therefore, savvy producers use… Read More.
Many believe that we are in a golden age of farming in this country. Since the summer of 2006, we have seen grain prices move in a big range, both up and down. These price fluctuations combined with below trend yields, new markets (such as China) becoming more willing buyers, and other policy factors have… Read More.
A few months back, the CME Group launched weekly grain options for corn, wheat, and soybeans. On Sunday, September 25th, the CME Group will introduce Live Cattle and Soybean Oil/Meal weekly options. These options, short term in nature, will trade just like the monthly options that we all know. Each weekly option will have a… Read More.
Talk with any hedger and they’re sure to tell you about an experience with trading on margin. Margin is a good faith deposit that a hedger must have in their account in order to initiate a long or short futures position. For example, the margin on a corn contract is currently $2,362.00. This means that… Read More.
Part Two: A User’s Perspective The goal of hedging is to transfer price risk from one party to another. You may remember this from the initial article I wrote on hedging. This article will focus on how users of a product can roughly lock in a price to transfer risk to another party. If you… Read More.