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Buying/Selling forward

  • 29-09-2010 10:00pm
    #1
    nilhg
    Registered Users, Registered Users 2 Posts: 5,185 ✭✭✭


    I'm going to be loading out some wheat over the next few days that I sold forward this time last year. Since the wheat price jumped since June selling forward wasn't the best decision I ever made but I was half (quarter:rolleyes:) consoled by the thought that at least some Irish farmer would be getting reasonable value, however talking to the broker the other day he tells me he couldn't find a taker for it last autumn and so hedged the trade on to the LIFFE futures market, some hedge fund has just made €50 a tonne on my wheat:(


    Do any of you buy or sell forward, would you like to be able to?

    On a side note, even though the way it worked out I would have been better off holding the crop to sell closer to harvest, it was a worthwhile exercise, knowing even before the seed goes in the ground the price you are going to get really does concentrate the mind on controlling costs.


Comments

  • #2
    aristo
    Registered Users, Registered Users 2 Posts: 124 ✭✭aristo


    nilhg wrote: »
    I'm going to be loading out some wheat over the next few days that I sold forward this time last year. Since the wheat price jumped since June selling forward wasn't the best decision I ever made but I was half (quarter:rolleyes:) consoled by the thought that at least some Irish farmer would be getting reasonable value, however talking to the broker the other day he tells me he couldn't find a taker for it last autumn and so hedged the trade on to the LIFFE futures market, some hedge fund has just made €50 a tonne on my wheat:(


    Do any of you buy or sell forward, would you like to be able to?

    On a side note, even though the way it worked out I would have been better off holding the crop to sell closer to harvest, it was a worthwhile exercise, knowing even before the seed goes in the ground the price you are going to get really does concentrate the mind on controlling costs.
    I dont do any forward sales, just store the grain over the winter and usually offload it late spring, but just curious about grading, if you agree to supply milling wheat and your wheat doesnt make the grade are you liable to make up the cost difference or do you have to find the agreed quantity of milling wheat regardless of any price differences?


  • #3
    nilhg
    Registered Users, Registered Users 2 Posts: 5,185 ✭✭✭nilhg


    aristo wrote: »
    I dont do any forward sales, just store the grain over the winter and usually offload it late spring, but just curious about grading, if you agree to supply milling wheat and your wheat doesnt make the grade are you liable to make up the cost difference or do you have to find the agreed quantity of milling wheat regardless of any price differences?

    If you sell product that it turns out you can't supply that my understanding is you have two choices, buy it somewhere else and supply from there or buy out your contract, depending on how prices have moved since you did the deal one or the other might work out best.

    In my experience trying to get wheat to go for milling is a big enough lottery, trying to sell it forward before I had it safely in store would be a step too far.


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