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Daniels Trading | Hightower Report - The Bearish Outlook for Corn and Soybeans - December 2013
To Hedge or Not to Hedge is NOT the question.
Furthermore, questioning whether to start hedging now or starting hedging later is not the answer. The answer is to hedge NOW with some safety values to protect against an unlikely change in conditions.
Corn is obviously already factoring its negative forward fundamentals. Therefore, hedgers might
need the exactitude of short corn futures hedges.
However if you are hesitant about the timing or level of hedging at current prices, use long call coverage or bull call spreads to benefit from a shift in market direction.
Soybeans appear to have greater downside and upside potential than corn. Therefore, we suggest
using puts as a hedge to start 2014 rather than futures. With many producers storing significant
amounts of corn on farms and the potential buildup of stocks for both corn and soybeans, producers might not only face significant declines in profit margins, there might also be significant pressure on rents and even farm land values if the bears’ worst case scenario unfolds.