Extension
Date of this Version
2000
Abstract
This NebGuide provides strategies for using the futures market to obtain higher prices for soybeans. Soybean producers who decide to use the futures market to price their crop are immediately faced with a number of decisions. Should a futures contract be used as a hedge to "lock in" a price, or should an options contract be used to establish a floor price? When should the position be established? Which futures contract month is most appropriate? The many decisions facing those using the futures market may be a reason some have decided not to use it at all. The University of Nebraska completed a study analyzing various preharvest marketing strategies from 1988 to 1997. The study used daily futures and options prices and weekly decisions to identify basic strategies that consistently result in higher prices received than simply selling soybeans at harvest. The study calculated prices obtained by using hedges, put options, and "fences", a more complex strategy using put and call options. It compared the November and January contracts and various entry and exit strategies. It concludes that preharvest marketing strategies effectively increase the net soybean price received by producers.
Comments
© 2000, The Board of Regents of the University of Nebraska on behalf of the University of Nebraska–Lincoln Extension. All rights reserved.