You are thinking about storing 10,000 bushels of your 2018 soybean crop. You would like to store soybeans this fall from harvest time (October 29, 2018) to about May 29, 2019, but you are unwilling to speculate on the futures price of soybeans from October 29, 2018 to May 29, 2019.

Assume that the cash #1 yellow soybean plies at harvest (October 29, 2018) is $7.80/bu. at your local elevator near Delphi, IN and that July CBOT soybean futures on that date are trading at $8.95/bu. Based on your analysis of historical basis you expect the basis will improve to -$0.30/bu. by May 29.

You estimate that it costs $0.01/bu /month to store soybeans in your (on-farm) bins. If you sell the soybeans at harvest, you will use the cash to pay down an operating loan at your local bank. The operating loan interest rate is 6% per year.

How can you store the soybeans until May 29, 2019 and take advantage of the soybean basis becoming more positive without speculating on the futures price of soybeans?

Answer rating: 100% (QA)

The period between October 29 2018 to May 29 2019 the crop of the price may increase or ... View the full answer