Hedging a corn contract
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A synthetic put is the process of selling the futures and buying a call to protect your upside exposure. This can be effective if the curve is skewed to the puts, thereby allowing a hedger to lock in a lower cost hedge than buying an outright atm put. This also eliminates the potential for excessive margin calls should the futures price go against you (rise).
A collar/fence in your case would consist of purchasing a put and simultaneously selling a call to finance the purchase of the put. This is typically done at costless, however I advice against costless fences, or fences of any nature from a hedging perspective. By selling the call you are not afforded any upside gains should prices rally. You are also subject to margin calls if prices rally, despite having a cash position - if cash flow is a potential problem, stay well clear of fences.
I have no direct experience with hedge-to-arrive contracts. I think you would have to custom negotiate a swap like that with ADM, Cargill, Bunge, etc.
The best advice I can give is to not look at hedging as a speculation on price. Hedge when you can, not when you have to.
A collar/fence in your case would consist of purchasing a put and simultaneously selling a call to finance the purchase of the put. This is typically done at costless, however I advice against costless fences, or fences of any nature from a hedging perspective. By selling the call you are not afforded any upside gains should prices rally. You are also subject to margin calls if prices rally, despite having a cash position - if cash flow is a potential problem, stay well clear of fences.
I have no direct experience with hedge-to-arrive contracts. I think you would have to custom negotiate a swap like that with ADM, Cargill, Bunge, etc.
The best advice I can give is to not look at hedging as a speculation on price. Hedge when you can, not when you have to.
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Mr heech;
Probably because most farmers already have plenty enough to do ;
and many dont study trends, but they tend to respect risk .
With plenty of crop insurance programs;
they seem to be more common.
DEC Corn is in a nice uptrend, most/many measures;
hi moving average[50 week] is $7.06
low moving average[200] week is $4.80.Those are averages, not predictions.
Remington Arms is selling 40LBS of deer corn @ Walmart, for $8;
thats simply dried corn in a colorful bag.LOL Thay sold out last year, early. Now some are selling ''squirrel corn'';
simply bagged corn on cob ,dried=sky hi price.
Progressive Farmer mag does mention options somewhat regular;
I am not a farmer, but enjoy farming communities, hunting....