Friend or Foe: Marketing Example
A farmer produced 200,000 bu of corn in 2023.
Then he delivered 100,000 bushels of cash corn in September, he sold it on Sept 29th at $5.07, with a +30¢ basis.
He transferred $35,000 of his new crop corn income to his futures account.
Bought 100,000 bushels of December 2023 corn futures at $4.77 on the open (opening of trading day) on Oct. 2nd.
On October 19th, Dec corn traded above $5.00 for the first time in two months. With $5.00 being major technical resistance, he sold his 100,000 bushels of futures position at $4.99. His futures profit was 21¢ a bushel on 100,000.
The next day, Dec corn traded to $5.09 and he sold 100,000 bushels of Dec corn at $5.08½. The next day he offset (bought back) his short (already sold the previous day) futures position at $4.95, netting him about 13¢ per bushel of profit.