As you get your facilities in top shape for the fall harvest, don’t overlook doing the same for your merchandising. A little bit of pre-harvest preparation can go a long way to positioning yourself for a successful merchandising season. Here are a few big picture things to consider…
Buy Basis
- Your harvest ownership basis sets the tone for the overall profitability of the season
- Raising your basis a nickel hurts you significantly and does not help the farmer significantly
- If you are in the one of the areas expecting a huge crop, there is no upside to a harvest bidding war
- If you are in an area expecting a shorter crop and have to bid up, be ready to sell early
Sell Basis
- If you are in an area with a huge crop, expect basis to be lower overall throughout the season
- If you are in an area with a shorter crop, take advantage of early strong basis before supply from a huge crop area comes in to put out the fire
- If you sell to flat price sensitive end users, create a win/win by getting structured offers to them early at a basis that works for you
Spreads
- Carry spreads can help offset a weaker overall basis
- Don’t put all your eggs in one basket. Be aware of where spreads can go but don’t wait until the very end to see if that happens.
- Target orders help you stay disciplined
- Whenever possible make spread decisions about the basis (I own -40Z, a Dec/Jly spread at 37¢ gives me -77N; how do I feel about that ownership after I account for carrying costs?)
Phil Luce : Jan 5, 2022
