Hedging Grain Price Risk

 

Grain price risk continues to manifest itself in the marketplace as major grains – corn, soybeans and wheat – exhibit either marked volatility and/or downward trends in pricing.  This presents meaningful hedging opportunities for consumers and producers.  

As corn prices continue a steady decline, consumers might consider locking-in near term prices with HTAs and fixed forward contracts, and locking-in long term prices with futures and swaps.  Wheat producers should consider increasing their hedge ratios with puts and short futures.  For soybeans, price volatility persists – near term call options for consumers may prove too expensive so organizations should consider costless collars, or a mix of collars and swaps for the longer term outlook.  


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