It’s too soon to say exactly how market volatility in 2017 is going to play out, but Errol Anderson has some tips to manage whatever the markets throw at you in the coming year.
Strong Futures-Strong Basis
What should you do? “Price it. It’s tough to do because, at that point, everybody is bullish. But when you see the narrow basis levels and the futures going up, sell your cash if you can. It’s easier said than done.”
Strong Futures-Weak Basis
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What should you do? “Hedge. Lock the futures with your cash buyer, lock the futures with your broker, or — my favourite — buy put options. Just get puts, because there’s no delivery obligation.”
Weak Futures-Strong Basis
What should you do? “Basis contract. You want to lock that basis. You think the futures are going to go up, but you want to lock that delivery basis. Or if you need money, sell the cash and then replace it with call options or long futures. Go cash grain to paper.”
Weak Futures-Weak Basis
What should you do? “Put your grain bins to work. I realize there’s a cash-flow component here, but keep that in the back of your mind.”
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