MARKET DATA, INC. – SUMMARY OF MARKETING ADVICE FOR 2004

 

FROM GREG’S GOSSIP – WEEKLY ADVICE – ON K.C. WHEAT:

 

JANUARY 15, 2004: Move cash sales to at least 80% on OC 2003 wheat crop at $4.00 MAR K.C. futures. Move to 100% price protected or cash sales with $4.30 MAR K.C. futures. NC wheat pricing should start at $4.00 on SEP 04 futures for NC hedging or make cash sales at $3.50 a bushel on 10% to 20% of the bushels you feel you will harvest - or on the non CCP covered bushels up to 30% of your expected production. The lower planted acres and dry weather could cause the futures to move back over the $4.20 level on SEP futures. IF SEP futures move above $4.20, look to move to at least 50% price protected with the use of PUT options and/or cash sales.

 

RESULTS:  K.C. SEP futures had a high closing price on April 2, 2004 of $4.315 a bushel, which hit our target where producers should have been at least 50% price protected.  This compares to a July 1, futures price of around $3.60.  This means that those that sold 50% of their crop gained $.70 in value or $28.00 per acre with 40 bushel wheat over the price available on July 1.

 

The above advice was further supported on the following dates:

 

March 18, 2004 GOSSIP: NC wheat pricing should start at $3.95 on SEP 04 futures for NC hedging or make cash sales at $3.50 a bushel on 20% of the bushels you feel you will harvest. Use the $4.20 level on SEP futures to be at least 50% price protected with the use of PUT options and/or cash sales. Look to buy $4.00 to $4.20 K.C. SEP or JUL puts for a cost of $.18 or less to move to at least 50% price protected on your expected 2004 NC production.

 

March 25, 2004 GOSSIP: NC wheat pricing should move to 40% with $4.15 SEP 04 futures for NC hedging or make cash sales at $3.70 a bushel on 40% of the bushels you feel you will harvest. Use the $4.30 level on SEP futures to be at least 60% price protected with the use of PUT options and/or cash sales and/or the MIN/MAX plan mentioned under the Futures and Options section of this letter. Look to buy $4.00 to $4.20 K.C. SEP or JUL puts for a cost of $.18 or less to move to at least 60% price protected on your expected 2004 NC production if you do not want to do the MIN/MAX plan.  OR do the MIN/MAX plan where you "BUY a $4.30 SEP K.C. PUT and SELL a $4.80 SEP K.C. CALL for a net cost of $.10 to the buy side". Be sure to have 60% price protection in place with SEP 04 K.C. futures at $4.30. SEP futures traded above $4.72 just 1% of the time in our similar years.

 

If a producer followed our advice on 50% of their crop, they should have netted at least a $20.00 per acre higher return than the price available July 1, 2004 (or any date since).  Assuming their cost for our service is $.50 an acre (800 acres with our  $400 base cost) then they had a 20 to 1 overall return on the cost of their service.  $.50 an acre cost times 2 due to only 50% priced vs. a return of $20.00 per acre = a 20 to 1 return.