“Oh Wait, I’m Already There” – 2022 and 2023 brought much higher interest rates, and the carrying cost went with it. As we entered 2023, we got a significantly inverted market structure, which, together with these higher rates, significantly pushed up the incentive to move grain in the present. Being close to large processor markets, our client was used to significant pre-harvest premiums and, in this specific case, had a basis goal in mind that for a small remaining part of the old crop that unto the harvest option, was a good goal and not at all uncommon to past market scenarios. But our client was already well up the curve in our analysis of their full cost to carry. When we looked at the futures inverse and the high cost to get there, even though it was April, we quickly realized their goal was already there. Every year is different, and this heavily inverted year made the typical view of the deferred basis a bit of an illusion when you calculated back to the present. Every year brings new marketing opportunities and market structure, and this was a great example of not adhering to historical assumptions and taking what the market was giving you in the here and now.

“You Sold, But You’re Not Done” – We preach this mantra with clients that you haven’t lost all options just because you have sold a deferred contract. In a case this spring, a client correctly sold right after harvest their best carry value in a Jan/Feb/Mar corn contract. As things played out, other neighboring outlets developed a significant basis premium due to rail market access to the southwest, where drought issues created a hefty premium last year. Canceling and arbitraging a contract can come with consternation, both having to cut the check to the original buyer and negotiating that process. We walked our customer through it and the negotiation’s finer points and laid out the value pocketed by the new sale. Yes, it was a big check to cancel, but they netted over 50 cents per bushel on the recent sale. Our client executed the trade very well and worked through diplomacy with their buyer in the complicated discussion around the cancellation. Well done!