Let's Get Technical
Montana MarketManager® is a marketing education program for grain producers. Producers are strongly encouraged to visit with their grain merchandiser or elevator manager in regards to the specific grain contract(s) which currently exist or will exist in the future, and to fully understand the obligations and implications of any contract before authorizing with your signature. Please read our disclaimer.
Realizing that each elevator has its own policies, your options may be somewhat limited. If you find yourself in this position, your best bet is to call your elevator manager and let him know right away. The relationship with your elevator manager may come into play, depending on the situation. Here are some options you may have:
Response from HTA Week Contributor:
Some elevators will allow a HTA contract to be rolled from one month to another, delaying the delivery and the reference futures contract month into the future, i.e. Sep KC to Dec KC. If there is a carry in the market from one futures month to the next, i.e. Dec KC is a higher price than Sep KC, then your HTA contract price will be increased by the amount of the carry. When contemplating this action, remember that there is a hidden cost to you of storing your grain for the additional time period. For example, if you figure your storage costs at .04 cents per month, then it will only be advantageous to you to roll a Sep KC HTA to a Dec KC HTA if the carry is greater than .12 cents. Check with your elevator for more details.
Ed Usset's article on How Does a Rolled Contract Work? describes the mechanics clearly, if you can see past the corn. Iowa State University focuses on the different types of rolling contracts in Understanding Risk in Hedge-to-Arrive Contracts, © 1999.
You might consider rolling a HTA contract if one of the following is true:
1. The basis for your contract month is at a low level and you have expectations of a higher basis later in
2. The carry from one futures month to the next exceeds your costs to store the grain for that period of time.
Every elevator has their own guidelines by which they operate. Consult your local elevator manager with any questions you may have.
Disclaimer: Montana MarketManager® is a marketing education program for grain producers. It is not a marketing advisory or brokerage service. The content herein is intended solely for informative purposes and is not to be construed, under any circumstances by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is obtained from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.