POST HARVEST MARKETING PLAN
Is your grain currently held on farm in silos?
If so, consider the following:
A straightforward strategy is to simply sell out-of-the-money call options. This technique alone will help your grain bins pay for themselves and make your farm more cost effective.
One can wait until the basis becomes favorable throughout winter, and into spring, before you decide to deliver.
Choose an option strike price above the current futures price, and select a price point at which you will be comfortable in releasing the grain and delivering to the elevator of your choice.
Current Example: Sell a March 2019 $4.40 Corn Call for 10 cents or $500.
If the futures price is below the strike price of $4.40 upon option expiration, then you would simply keep the 10 cent premium, or $500 from originally selling the call. This premium can then be applied against your basis.
If the futures price is above $4.40, you can then deliver to the elevator. It’s a win/win by either collecting the premium if prices stay below $4.40, or move your grain off farm at higher than current prices. One would also keep the ten cent premium of the option sold to the buyer.
Continue to execute this plan month to month as you await a possible grain market rally. This allows you to obtain your preferred delivery price. If a subsequent rally does not develop, continue to collect premium selling each month forward as the options expire worthless. This premium can then be applied to your operation.
BYRNE AGRICULTURAL MARKETING
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This material has been prepared by a sales or trading employee or agent of Byrne Investment Services, Inc. and is, or is in the nature of, a solicitation. There is a significant risk of loss when trading futures and options contracts. Please read our full disclaimer.
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