AN ABSTRACT OF THE THESIS OF
ROBERT LOUIS LEVY
(Name)
for the
MASTER OF SCIENCE
(Degree)
in AGRICULTURAL ECONOMICS presented on)
(Major)
'("
(Date)
Title: AN ANALYSIS OF HEDGING SOFT WHITE WHEAT USING
THE CHICAGO WHEAT FUTURESMARK
Abstract approved
Redacted for Privacy
Dr. ClintonB. Reeder
In 1970, the Pacific Northwest (PNW) produced approximately
145, 332, 000 bushels of wheat (all types) with an average harvest value
of over $220, 000, 000. White wheat comprised about 126, 234, 000
bushels of that total, about 87 percent.
In recent years the financial circumstances, for several reasons, have deteriorated for many farmers and grain handlers in the
PNW. The reduced incomes have stimulated renewed exploration for
some means of increasing revenues and br stabilizing net prices
r e c e iv e d.
The effective marketing of wheat in other areas of the U. S.
involves the use of wheat futures markets. PNW producers and
handlers of White wheat have not generally had this opportunity
because the White wheat is not deliverable on existing futures con-
tracts.
Consequently, it is desirable to evaluate the feasibility of utilizing existing wheat futures contracts in spite of nondelivery. If the
White wheat price patterns move in favorable relation to the price of
deliverable wheats, then nondelivery may not preclude effective
hedging. A one cent per bushel gain by successful hedging would add
about 1.3 million dollars annually to producer income for White wheat
in the PNW.
Results for a ten year period indicate there are certain hedging
strategies which appear to be profitable to PNW White wheat traders.
The December wheat futures cortract prcvids long term gross benefits (not considering transaction costs or holding costs) of 5 to 7
cents per bushel on short hedges opened between the first week in
March and the third week in March, and closed in the second or third
week of May. Short hedge benefits for March futures averaged about
7 to 9 cents per bushel with opening dates between the first and third
week of September and closing dates between the third week of Jan-
uary and the first week of March. Corresponding results for short
hedges with May futures are 12.5 to 14.5 cents per bushel with opening dates between the last week of July and the last week of September
and closing dates between the last week of April and the second week
of May; and for the July and September futures, 8.5 to 10.5 cents per
bushel with opening dates from the second week of October to the
second week of November and closing dates between the second and
third weeks of May.
The optimum short hedges, all of which fall within the above
indicated dates, were profitable nine out of ten years for May futures;
eight out of ten years for December, July and September contracts,
and seven out of ten years for March contracts.
Long hedging strategies were not found to be as frequently
profitable--eight out of ten years for July contracts; seven out of ten
years for May contracts; six out of ten years for December and March
contracts and five out of ten years for September contracts.
Optimum long hedges using December futures provided 8.7 to
10. 7 cents per bushel with opening dates between the second and third
weeks of May and closing dates between the first week of July and the
third week of September; for March futures, 10 to 12 cents per bushel
with opening dates between the second and third weeks of May and
closing dates between the first and third weeks of September; for May
futures, 2.5 to 3.5 cents per bushel with opening dates between the
second and fourth weeks of June and closing dates between the second
week of August and the third week of September; for July futures, 7.5
to 9.5 cents per bushel with opening dates between the second and
third weeks of May and closing dates between the first and second
weeks of July; and for September contracts, 9. 3 to 11. 3 cents per
bushel with opening dates in the second and third weeks of May and
closing dates in the second week of September.
In several instances, profits or losses were generated in both
the cash and futures transactions, indicating that while several of the
optimum strategies did generate overall profitable results, the hedge
would really need to be considered a "speculative hedge" rather than
a "traditional hedge" wherein cash and futures losses and gains are
generally offsetting to at least some extent.
I
An Analysis of Hedging Soft White Wheat Using
the Chicago Wheat Futures Market
by
Robert Louis Levy
A THESIS
submitted to
Oregon State University
in partial fulfillment of
the requirements for the
degree of
Master of Science
June 1973
APPROVED:
Redacted for Privacy
Assistant Professor of Agricultural Economics
in charge of major
Redacted for Privacy
Acting Head of
Economics
partment of Agricultural
Redacted for Privacy
Dean of Graduate School
Date thesis is presentedL
Typed by Clover Redfern for
I
Robert Louis Levy
AC KNOWLEDGEMENTS
The author wishes to express extreme gratitude to Dr. Clinton
Reeder, his major professor, for his patience, constructive criticism
and guidance while this thesis was being written.
Appreciation is extended to the Department of Agriculture
Economics and the Oregon State University Computer Center for their
financial aid which made it possible to analyze the data.
A special thanks is extended to Terry Elton, who helped develop
and write the computer programs and to Richard Emlaw, Account
Executive with Merill, Lynch, Pierce, Fenner and Smith, Inc., who
provided technical assitance concerning hedging and futures trading.
TABLE OF CONTENTS
Chapter
I.
Page
INTRODUCTION
1
Review of Recent Literature
Objectives of Study
II.
3
5
METHODOLOGY
7
7
Data Sources
Modifications of DataCalculation of Basis
Computation of Average Basis
Selection of Optimum Strategies from the Average
Basis
Evaluation of Hedging Transactions
Cautions Concerning Results
16
21
Costs Used in Evaluation Procedures
Assumptions
The Value of an Optimum Strategy from Past Data
Recommendations
24
27
28
28
III. DECEMBER CONTRACT RESULTS
Optimum Short Strategy
Gross Income Results
Net Income Results
Decision Rules
Flexibility of Start-Stop Dates
Opportunities for Short Strategies Using
December Contract
Optimum Long Strategy
Gross Income Results
Net Income Results
Decision Rules
Flexibility of Start-Stop Dates
Opportunities for Long Strategies Using
December Contract
IV. MARCH CONTRACT RESULTS
Optimum Short Strategy
Gross Income Results
Net Income Results
Decision Rules
Flexibility of Start-Stop Dates
Opportunities for Short Strategies Using
March Contract
7
9
10
12
30
30
30
34
35
35
41
42
42
44
45
45
46
47
47
47
50
51
51
51
Chapter
Page
Optimum Long Strategy
Gross Income Results
Net Income Results
Decision Rules
Flexibility of Start-Stop Dates
Opportunities for Long Strategies Using
March Contract
V. MAY CONTRACT RESULTS
Optimum Short Strategy
Gross Income Results
Net Income Results
Decision Rules
Flexibility of Start-Stop Dates
Opportunities for Short Strategies Using
May Contract
Optimum Long Stra.tegy
Gross Income Results
Net Income Results
Decision Rules.
Flexibility of Start-Stop Dates
Opportunities for Long Strategies Using
May Contract
VI. JULY CONTRACT RESULTS
Optimum Short Strategy
Gross Income Results
Net Income Results
Decision Rules
Flexibility of Start-Stop Dates
Opportunities for Short Strategies Using
July Contract
Optimum Long Strategy
Gross Income Results
Net Income Results
Decision Rules
Flexibility of Start-Stop Dates
Opportunities for Long Strategies Using
July Contract
VII. SEPTEMBER CONTRACT RESULTS
Optimum Short Strategy
Gross Income Results
57
57
59
60
60
61
62
62
62
65
66
71
71
72
72
74
75
75
76
77
77
77
80
81
81
88
89
89
91
92
92
92
94
94
94
Chapter
Page
Net Income Results
Decision Rules
Flexibility of Start-Stop Dates
Opportunities for Short Strategies Using
September Contract
Optimum Long Strategy
Gross Income Results
Net Income Results
Decision Rules
Flexibility of Start-Stop Dates
Opportunities for Long Strategies Using
September Contracts
VIII. SUMMARY AND CONCLUSIONS
97
98
98
104
104
104
107
107
108
108
109
BIBLIOGRAPHY
116
APPENDICES
Appendix I: The PNW Wheat Industry
Appendix II: Futures Market Trading
Appendix III: Pacific Northwest White Wheat
119
119
130
Prices, Chicago Futures Market
Prices and Basis from July 1960
Through May 1971
LIST OF TABLES
Table
Page
September futures contract: average basis, high and
low basis, and standard deviation of basis, 1960-1970.
15
2.
Profit-loss summary, May futures, short hedge strategy.
17
3.
Strategy summary, optimum May short strategy.
20
4.
December futures contract: average basis, high and low
basis, and standard deviation of basis, 1961-1970.
31
Profit-loss summary, December futures, optimum
short strategy.
32
6.
Strategy summary, optimum December short strategy.
33
7.
Profit-loss summary, December futures, optimum long
strategy.
43
8.
Strategy summary1 optimum December long strategy.
44
9.
March futures contract: average basis, high and low
basis, and standard deviation of basis, 1961-1971.
48
Profit-loss summary, March futures, optimum short
strategy.
49
Strategy summary, optimum March short strategy.
50
1. Profit-loss summary, March futures, optimum long
strategy.
58
1.
5.
10.
11.
13.
Strategy summary, optimum March long strategy.
59
14.
May futures contract: average basis, high and low
basis, and standard deviation of basis, 1961-1971.
63
Profit-loss summary, May futures, optimum short
strategy.
64
Strategy summary, optimum May short strategy.
65
15.
16.
Page
Table
Profit-loss summary, May futures, optimum long
strategy.
73
18.
Strategy summary, optimum May long strategy.
74
19.
July futures contract: average basis, high and low basis,
and standard deviation of basis, 1960-1970.
78
Profit-loss summary, July futures, optimum short
strategy.
79
21.
Strategy summary, optimum July short strategy.
80
22.
Profit-loss summary, July futures, optimum long
strategy.
90
17.
20.
23. Strategy summary, optimum July long strategy.
91
September futures contract: average basis, high and
low basis, and standard deviation of basis, 1960-1970.
95
Profit-loss summary, September futures, optimum
short strategy.
96
26.
Strategy summary, optimum September short strategy.
97
27.
Profit-loss summary, Setpember futures, optimum
long strategy.
24.
25.
28. Strategy summary, optimum September long strategy
106
106
29. Summary, optimum short hedge strategies, by contract
month.
110
30. Summary, range of start-stop dates and range of average
gross returns per bushel over the analysis period, by
contract months.
111
31. Summary, optimum long hedge strategies, by contract
month.
113
32. Summary, range of start-stop dates and range of average
returns per bushel over the analysis period, by contract
month.
114
Table
Page
33. Supply and distribution of Pacific Northwest wheat.
125
34. Cash and concessional White wheat exports from
Pacific ports, by program, 1962-1969.
127
LIST OF FIGURES
Figure
Page
1,
Marketing pattern PNW wheat.
1 20
2.
Wheat futures contract regulations: summarized.
139
LIST OF CHARTS
Chart
ge
1.
Basis charts, December futures contracts, 1961-1970.
36
2.
Basis charts, March futures contracts, 1961-197 1.
52
charts, May futures contracts, 1961-1971.
67
4.
Basis charts, July futures contracts, 1960-1970.
82
5.
Basis charts, September futures contracts, 1960-1970.
3. Basis
AN ANALYSIS OF HEDGING SOFT WHITE WHEAT USING
THE CHICAGO WHEAT FUTURES MARKET
I.
INTRODUCTION
In 1970 the Pacific Northwest (PNW) produced approximately
145, 332, 000 bushels (bu. ) of wheat (all types) with an average harvest value of over $220, 000, 000. White wheat production in 1970 was
about 126, 234, 000 bu. and represented 87 percent of the total wheat
produced in the PNW for that year (15, p. 3).
The PNW consistently produces from 9 to 11 percent of the
U.S. total wheat crop and approximately 70 percent of the total U.S.
White wheat production. Most of the PNW wheat is produced in the
Columbia Basin, an area extending through northeastern Oregon,
southeastern Washington and northern Idaho.
White wheat and eastern soft wheats are primarily used in the
production of pastries, cookies, crackers and cakes. At the present
time the wheat used domestically for these purposes is primarily produced east of the Mississippi River where one-fourth of the total U.S.
wheat crop is produced. About 10 million bu. of White wheat are
milled annually in the PNW (20, p. 6; 15, p. 2).
In recent years the financial picture of many segments of the
PNW wheat economy has been rather depressed and in need of some
form of relief. The depressed incomes of many producers and
2
handlers could likely be improved by using improved marketing
techniques, such as hedging and more timely selling and buying (24,
p. 59; 20, p.
6).
Country elevator firms in the PNW are experiencing decreased
storage occupancy due to acreage reductions under government programs and adverse weather which has reduced production on planted
acres. In addition country elevator &to rage volume has dropped due
to early selling of the crop and increased farm storage. As a result,
the several elevator firms experience decreased storage returns and
income. Country elevator firms need to profitably hold wheat in
storage for longer periods of time, or to profitably hold more wheat
for shorter periods, to increase their storage returns (23, p. 1; 4,
p. 1).
Holding grain from harvest to a more favorable sale date,
coupled with the effective use of a futures market, may provide an
additional degree of reliability in dollar returns both for elevator
firms and producers.
The effective marketing of wheat in other areas of the U.S.
involves the use of wheat futures markets. PNW wheat producers
and handlers have not generally had this opportunity in the past since
there has been no active futures market specifically for Soft White
wheat. Previous to 1960, however, large amounts of wheat were
placed under the government loan program, removing a considerable
degree of the risk of price change. Consequently, the need for
3
hedging was less intense.
As was expressed at the Oregon Wheat League meeting in The
Dalles, Oregon, on May 25, 1971, many people connected with the
industry--bankers, stockbrokers, producers, and marketing firms- are currently questioning the feasibility of hedging Soft White wheat.
Increased understanding of future markets by bankers and loan
agencies will apparently be needed as they are called upon to make
loans for increasing numbers of storage facilities, hedged inventories,
and margin requirements. The reliability and degree of risk involved
in hedging will certainly be of interest to these agencies (2, p.
1).
Any study which might improve the marketing of wheat and
return even one cent per bushel could have a marked affect on the
wheat economy of the PNW. One cent increase in return would
gen-
erate an additional 1. 3 million dollars at the producer level.
Review of Recent Literature
Recent literature pertaining to PNW White wheat industry and
futures trading is not as prevalent as for other areas of the U.S.
The basic reason for this lack of literature stems from the lack of a
futures market for PNW White wheats and the apparent (or assumed)
lack of feasibility of using existing futures markets for hedging.
Recent important literature on this subject has been mostly concerned
with the feasibility and need for a Western futures market (25).
Bruce Brooks in 1959 completed a PhD thesis dealing with an
analysis of the adaptability of White wheat to futures trading. Brooks
concluded at that time a White wheat futures market was not feasible
because sufficient interest did not exist in the industry and from
speculators.
Brooks further evaluated the marketing alternative of using the
existing Chicago wheat future market as a hedging alternative for
PNW wheat handlers. By showing hedging transactions on the cash
White wheat market and the Chicago futures market from 1925-1959 he
concluded the results were unfavorable (3).
Narin and Brooks in 1961 edited a Washington State University
Extension Bulletin, "The Pacific Northwest Wheat Market and Futures
Trading" in which they established further evidence against futures
trading using the existing Chicago market and concluded in addition
it was not feasible to establish a Western wheat futures market (14).
More recent evidence by Brooks, however, has indicated that
short hedging using the Chicago May wheat future contract offered
potential hedging opportunities for PNW White wheat handlers from
1958 to 1965 (4).
A subsequent study by Owen Wirak (Wahsington State University)
examined specific aspects of the Ma basis pattern movement. He
demonstrated how to record basis patterns and indicated favorable
short hedging might be performed by an after harvest sale of futures
5
when the basis is negative and holding the hedge till mid April or May
(23).
Research since 1958 has not shown conclusive evidence regarding the use of the Chicago futures market to hedge PNW White wheat
using different contract months and under different hedging needs.
Objectives of Study
The general purpose of this study is to determine the feasibility
of hedging PNW Soft White wheat using the existing Chicago wheat
futures market, identifying and evaluating the nature and extent of
benefits to various market participants, considering each of the cur-
rently available wheat contracts. More specifically, the objectives
of this study are to:
1. Evaluate the relationship between Portland, Oregon Soft
White wheat cash prices and the Chicago futures market
prices to determine if the two price patterns will permit
hedging to be performed throughout the year, only at certain
times of the year, or not at allt if hedging appears possible,
2. Identify trading strategies that will provide effective hedging
(strategy considerations: which contract month, should the
hedge be long or short futures, and when should it be placed
and lifted);
3. Determine and evaluate the net additional dollar return to
the hedger under different strategies, and the pattern of
returns over time;
4. Determine the most profitable long-term short and long
hedging strategy for each futures contract month; and
5. Identify cash-futures price relationships that might signal
when not to use the best long term strategies in a current
year.
7
II. METHODOLOGY
Data Sources
Primary data for this research was gathered from Steven C.
Marks, Extension Marketing Spe cialist-Agricultural Information,
Oregon State University, and The Wall Street Journal. Marks supplied the Portland cash Soft White wheat prices, track basis, for the
period July 1960 through May 1971. He also supplied the Chicago
wheat futures prices from January 1969 through May 1971. Marks and
staff have recorded these prices over the years from daily teletype
reports from the Grain Market News Bureau, Portland, Oregon.
The Chicago futu.res prices from July 1960 through December 1968
were gathered from The Wall Street Journal.
Many secondary sources of data and information were also used,
both government publications and reports as well as many books and
periodicals. Where significant contributions were made, the source
has been documented and appears in the Bibliography.
Modifications of Data
In order to limit the total number of prices handled and to better identify long term results by 'Tsmoothing' out the price charts,
one price observation per week was used. The Thursday prices were
selected as the most unbiased estimate of the prices prevailing during
F:]
the week. All prices were recorded on a closing bid basis with no
adjustments made for volume of trading.
In cases where no Thursday price was quoted the Friday price
was used; if the Friday price was also unavailable, then the Wednesday price was used. In all cases the observation dates for prices
were matched; for example, if the Friday Portland cash price was
used then the Fridayfutures price was also used.
The Portland prices are normally quoted to within one -quarter
cent per bushel while the Chicago prices are quoted to one-eighth of a
cent per bushel. The prices were rounded and simplified into decimal
form as follows:
$
.001/8
.001/4
.003/8
.001/2
.005/8
.003/4
.007/8
$
=
=
=
=
=
=
.001
.003
.004
.005
.006
.008
.009
The actual daily dates of the prices were deleted and in their
place numbers from one to four were inserted to indicate the week of
the month from which the prices were taken. In some cases where
there were five observations per month the fifth observation was also
deleted so as to generate 48 observations for every year of the study,
thereby simplifying certain comparisons. The last two weeks when a
contract becomes due have been recorded as zero or no price, as
seen in Appendix III.
The futures price data was double checked by comparison to a
second source- -The Chicago Board of Trade Yearbooks. The cash
prices were checked by having a second person compare them with
the original source. Whenfuturespricediscrepancies (Board of Trade
Yearbook v.s. Wall Street Journal) were judged to be significant (one
cent or more per bushel), the prices were changed to reflect the
yearbook price.
The months in some cases have been coded from 1-1Z to mdicate months running from January to December consecutively.
Calculation of Basis
The basis for each futures contract month for the period under
study constituted the primary consideration in this study. The basis
herein is defined as the Portland cash price minus the Chicago futures
contract price for the appropriate contract month, for any specific
observation date. As an example, consider the prices quoted on
1-1-61 (January, first Thursday, 1961). The Portland price was
$2. 100 per bu. while the December futures contract price was $1. 970
per bu. The basis then is 13. 0 cents which appears in Appendix III
to the right of the corresponding date, 1-1-61, under the section
labeled "BASIS' and the column 'DEC".--" This process was
The first three letters of the months are used throughout this
text to indicate the appropriate month.
10
routinely carried out for each contract month over the entire period
covered by the analysis.
In order to facilitate a visual examination of the basis, to cornpare basis for different years and to later evaluate hedging and
income results, the basis figures have been plotted. The plots
appear in Chapters III, IV, V, VI and VII with the results for specific
contract months.2/ Continuing with the previous example, the DEC
.
.
.
I!
.
TI
basis for 1-1-61 is 13 over (positive basis) which is the first plotted
point on the basis chart labeled "December Basis 1961'62" in Chap-
ter III. (Chart 1, p. 36).
It should be kept in mind that basis charts for different futures
contracts start and end in different months. Consequently, the ten
year period of analysis corresponds with the start date of the contract
in 1960 or 1961, and the termination date when each contract closed
most currently in 1970 or 1971. Hence, all results throughout the
text will be given in terms of the appropriate ten year period each
contract is under study, as follows:
Contract Month
December
March
May
July
September
Start Date
1-1-61
4-1-61
6-1-61
8-1-60
10-1-60
Stop Date
12-4-70
3-4-71
5-4-71
7-4-70
9-4-70
2/ The basis plots were labeled at the left-hand position on the
horizontal axis with the first letter of the month in which the contract
opens.
11
Computation of Average Basis
The ten year average basis figures were calculated as the
primary means of identifying the long term (ten year) most profitable
strategies. The actual computation of the average basis consisted of
adding the basis for a specific trading week and contract month for
each year of the ten year analysis period and dividing by
N
N where
equaled the number of basis figures added. This process was car-
ned out for each of the 48 weekly observation dates over the ten year
study period for each
contract.' The result is five separate aver-
ages, one for each contract month.
In certain cases some futures prices were missing from the data,
usually when a contract month did not reopen at its usual time. When
this occurs the average basis for that observation cannot be directly
compared with averages computed with a different
N.
Where N
was less than 10 for a particular average basis calculation a
TT*U
has been placed beside the date on the average basis table to signify
that, although it is a true average, it is not directly comparable with
averages computed from a different
N.
The price tables and basis
calculations are included in Appendix III and indicate the dates for
The 48 observations per year: the last two observations in
the delivery month are reported as 0 in this text because there is no
trading; the other 2 observations per year are lost due to dropping
any fifth observation per month.
'a
which price data is missing.
Selection of Optimum Strategies from the Average Basis
The determination of the dates for the best long term hedging
strategies for each contract month are derived from the average
basis for the particular contract month. (Long term strategy refers
to buying and/or selling on the same date every year throughout the
specified time period, and should not be confused with a "long" trading position. ) The proof that the average basis will give the average
income result, and thereby the total income for the hedging strategy,
is illustrated as follows; using a short hedging example:
Short Hedging
Opening Date
Buy Cash
Cash
Market
Futures
X1
Sell Futures
Closing Date
Sell Cash
X2
Buy Futures
Y2
X's and Y's in dollars per bushel
Profit (P) for one complete hedge transaction,
P = (XX,) + (Y1-Y2)
P = X2-X1 + Y-Y
P = (X2-Y2) + (Y,-X,)
P = (X2-Y2) - (X,-Y,)
P
(basis on closing date) - (basis on opening date)
13
Summing both sides of the equation for
-
=
N
years
B1.
whe r e
B2 = basis on closing date
B1 = basis on
opening
date
i= l,2,3,...,N
N = number of years of trading using the specified strategy
Dividing both sides of the equation by
N
that is, the average
annual
N
B2.
B1.
N
N
profit from a short hedging strategy over
any period of concern equals the average closing basis less the average opening basis for any two given start-stop trading dates throughout the analysis period. Thus, to obtain the average longer term
profit figure per bushel for a short futures hedge (as illustrated above)
one need determine only the difference between the average basis on
the closing date and the average basis on the opening date. By
selecting the two dates with the largest difference between average
basis, the strategy with the largest total profit may be selected from
among various alternative short hedging strategies over the N years.
14
As an example, consider Table 1 which provides the ten year
average basis for the September contract. The maximum income
from a long term short hedge strategy is where the largest difference
in basis occurs, closing date minus opening date, which is from Oct.
2 (7. 39 cents per bushel) to May 3 (17. 88 cents per bushel). The
average return per bushel that would have occurred over the analysis
period is 17. 88g less 7. 39, or 10. 49q. (Notice OCT 1 has an
to its left indicating it cannot be directly compared to the other aver-
ages because price data is missing for one or more years.)
Following the same proof procedure for along futures hedge will
lead to a similar conclusion, but the opening and closing dates are in
reverse of those for a short hedge. In a long hedge the average profit
per year is equal to the average basis on opening date minus the average basis on the closing date.
Selecting the best long term strategies for each contract month
involves finding the two average basis figures with the largest differ-
ence, first for a short hedge then for a long hedge. It must be pointed
out again that this holds true precisely only for averages computed
with the same
"N".
If the
N's
are different, the average profit
may or may not be as good an estimate of the true return.
CAUTION: The opening and closing dates must be selected in
the correct order- -the opening date must occur before the closing date
within the same trading year for the particular contract month.
Table 1. September futures contract: average basis, high and low basis, and standard deviation
of basis, 1960-1970.
Date
*OCT 1
OCT 2
OCT 3
OCT 4
NOV 1
NOV 2
NOV 3
NOV 4
DEC 1
DEC 2
DEC 3
DEC 4
JAN 1
JAN 2
JAN 3
JAN 4
FEB 1
FEB 2
FEB 3
FEB 4
MARl
MAR
MAR
2
3
MAR4
Basis!!
Ave.
High
Low
10.99
45.00
39.20
42.70
38.50
41.50
40.50
48.50
46.90
40.90
-2.50
7.39
8.01
8.25
7.60
8.21
10.13
9.02
8.70
9.01
8.70
41. 10
10.20
12.66
13.02
13.01
13.76
13.71
12.92
12.17
11.20
38.20
38.70
41.20
46.40
49.90
48.00
54.50
54.90
59.90
56.70
50.40
10. 86
42. 10
10.94
12.21
43.00
47.00
9.48
-4. 30
-4. 80
-5.00
-3.30
-6.10
-4.60
-7.50
-13.80
-11.50
-12.80
-9.30
-9. 10
-9.60
-5.80
-4.90
-6.90
-8.90
-9.50
-9.80
-6.80
SD2.'
13.422
12. 597
13. 397
12. 718
13.463
13.376
15.212
15. 646
15.444
Ave.
13.12
16.97
16.62
17.28
16.33
17.35
17.88
Date
APR 1
APR 2
APR 3
APR 4
MAY
1
MAY2
MAY 3
MAY 4
14. 89
15. 104
15. 590
14. 878
JUN 1
JUN 2
JUN 3
JUN 4
10.64
9.52
14.436
15.227
15.613
14.698
JUL 1
JUL 2
JUL 3
JUL 4
8. 13
16. 827
AUG 1
AUG 2
AUG 3
AUG 4
17.887
19.619
18. 804
17.152
-8. 10
-15. 80
15. 944
16. 829
-6.60
16.334
SEP
SEP
SEP
9.36
9.88
8.53
8.30
7.94
8.79
7.94
7.95
8.71
8.08
6.58
1
2
3
Low
49.50
68.00
-7.50
-6. 00
20. 670
68110
-9.60
-7.90
-8.20
-10.20
-12.80
-13.30
-15.60
-17.00
20.937
-24. 80
-6. 80
13. 187
12. 388
7. 886
24. 60
.50
-0.50
-5.50
-1.00
-5.80
-7.50
-4.40
-6.40
-10.30
5.451
5.446
8.612
7.261
7.821
8.777
9.857
10.471
9.960
0
0
0
0
0
0
68.10
69.60
72.70
7050
44.50
26.70
29.50
26.00
23.40
19.60
16.90
18.00
18.40
22.70
20.40
23.70
27.90
27.60
0
0
*SEP 4
-Cents per bushel.
The standard deviation was computed with the formula
Basis!!
High
SD
= [
N (X-X)2
N-i
i=1
SD
-23.50
16.956
20. 182
21.449
22.049
21.621
15.223
11.071
11.463
16
Evaluation of Hedging Transactions
The summary of results from the 'best' long-term hedging
strategies (most profitable, considering only basis difference) were
generated through the use of a computer program. The actual operation involved the simultaneous purchase and sale of two contracts
(10, 000 bu. of wheat) on both the cashand futures markets for each of
the years under study, following the selected strategy in the same
manner, year after year. Two contracts (10, 000 bu. ) were used to
simplify calculation of per bushel returns. The output consists of
yearly income results for both the cash and futures transactions, and
the net income results for the two transactions combined. An explanation of the results of a short-hedge strategy from AUG 2 to FEB 2
using the MAY contract follows (Table 2):
Yearly Income Results, Short Hedge Strategy.
1. TRADING YEAR--Signifies the trading year the transaction
took place.
2. CASH--Cash wheat transaction (10, 000 bu.).
3. MAY- -May wheat futures transaction (2 contracts;
10, 000 bu. ).
4. AUG 2--Indicates the opening transaction date.
5. FEB 2--Indicates the closing transaction date.
6. BUY, SELL- -Indicates whether the trader is buying or
N
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selling. The total dollar valuation of the transaction
(price/bu. times 10, 000 bu.) appears in the row to the right
of the 'BUY- -SELL' designations.
7. PROFIT OR LOSS--The total dollar value of the sell transac-
tion less the total dollar value of the buy transaction.
8. GROSS PROFIT--The summation of the dollar profit and/or
loss from both the cash and futures transactions together
for that year.
9. RETURN/BU. --Calculated as dollar GROSS PROFIT!
10, 000 bu.
The Summary Table is a summary of how the strategy actually
performed over the total time period.
1. CASH- -Signifies the cash transactions summary.
2. MAY--Signifies the May futures transactions summary.
3. TOTAL--Summarizes the net returns from both cash and
futures market transactions combined.
4. PROFIT--The sum of all the profit figures in the PROFIT or
LOSS row of the main table.
5. LOSS--The sum of all the loss figures in the PROFIT or
LOSS row in the main table.
6. NET PROFIT--Profit less losses.
7. NO. OF TIMES PROFITABLE--The number of times (or
years) the particular market was profitable over the number
19
of times trading took p1ace.
8. AVERAGE RETIJRN/BU. - -The total net profit over the
analysis period divided by the number of bushels traded each
year (10, 000 bu.); i.e. , average return per bushel per year.
The procedures for evaluating results of each optimum hedging
strategy are as follows
1. Evaluate the overall gross income results from the hedge
strategy, and compare the results of trading in the cash and
futures markets individually.
2. Evaluate the gross income results of the strategy, year by
year.
3. Evaluate the likely net income results from the strategy,
considering the various costs of making the transactions.
4. Evaluate price patterns for years generating poor results to
determine if decisions rules can be identified from price or
basis charts so a trader may predict therefrom when the best
strategies are likely to come up in the next (current) period.
5. Evaluate the "safety margins" on the opening and closing
dates of the transaction, i. e. , how many weeks prior to and
The "No. of times profitable" for the "total" row may differ
from "No. of times profitable" for "Cash" or "May" (or other month)
because cash and futures profits or losses may have been offsetting,
thus generating different "times profitable" for net hedge results
than for the two separate transactions individually.
20
following the optimum dates the transactions might have been
made without significantly affecting the income results.
6. Evaluate the futures contracts for other strategies which may
provide favorable results for various traders.
To help the reader evaluate the significance of various strategies, the individual yearly outcomes will be summarized into various
classifications according to the profit-loss income results in a frequency table as follows:
Table 3. Strategy summary, May short strategy.a
Cash
Possible Outcomes
Futures
Net
Frequency
+
-
+
+
+
-
+
-
0
+
-
-
1
-
* -
+
+
-
3
2
3
1
10
a From Table 2.
The symbols
and
U_Il
indicate respectively profit or loss
made in the cashorfutures transaction. In some cases neither a
profit or loss was made, so a '0' was inserted in the proper column
and row. The '" indicates those results which are most unlike true
hedging results. The profits and losses in the two markets are not at
all offsetting. All results except the last two are considered poten-
tially favorable, contributing to income and/or protecting against
21
price change. The table is also arranged in decreasing order of
desirability of income (hedging) results, according to the author's
preference that any strategy add to income or reduce losses--and
preferably not reducing gains even though offsetting risks.
Cautions Concerning Results
Several cautions should be interjected at this point to avoid
later confusion either concerning the author's interpretation of the
study results, or when readers make their own interpretation of the
results.
It is misleading to look at the long or short strategy outcomes
of several futures contracts and assume that since they all generated
a profit this is some indication of safety or success of hedging in
general. One would expect the results from using the various con-
tract months to be highly correlated, expecially as to strategy startstop dates and income results since the prices of different futures
contracts generally move together quite closely. For example, the
start-stop dates and income results for three optimum short strategies are as follows:
Contract month
May
July
September
Start date
Sep. 2
Oct. 2
Oct. 2
Stop date
Av. Return/bu.
May 2
May 2
May 3
$. 1415
.
.
1056
1049
22
Another confusing point arises when examining the number of
times a particular strategy is profitable. Consider the two short
strategies using the May contract--from August 2 to May 2 and from
September 2 to May 2. The average return per bushel and the num-
ber of times (or years) profitable for the two strategies were 13. 90
and 10/10, and 14.5lq and 9/10 respectively. The income results of
the strategies and the differences between the two as to number of
times profitable is likely not significant (the author's judgment).
There is a fine line between what can be considered significant
differences in individual strategies, the significance being more of a
practical nature than statistical. Each potential user of any strategy
must carefully consider his own financial situation, current and
potential market conditions, and other factors unique to individual
situations and realize that because the strategy is wise for some, it
may not be for others--and that profitability in the past is only a suggestion, not a guarantee, that the strategy will be profitable in the
future.
The final point of possible confusion rests with the individual's
interpretation of hedging and what hedging should provide him. In
Appendix II which explains futures trading, the traditional definition
of hedging is given assuming an equal and opposite position in the
futures market and the cash market. The only reason hedging is
potentially successful (or even possible) is because the cash and
23
futures prices generally parallel each other in major price movements. Consequently, the profit and loss from the cash and futures
aspects of the overall hedging transaction should be at least partially
offsetting, with the trader gaining in one market and losing in the
other, with total gains or losses being less than would have been
experienced by trading in only the cash market.
When examining the strategies presented later it becomes
obvious that in many cases profit is made in both the futures and cash
markets, which is contrary to "perfect" hedge results. Such results
are generated when the cash prices and futures prices both move in
favorable opposite directions (Appendix II).
Making abnormal profit in both markets as occurs in several
strategies discussed later herein is not consistent with the theory of
how prices of cash and futures should behave. It becomes, therefore,
necessary to decide which of two ways one wants to look at the results
of such strategies by considering an additional criteria. First, one
can consider the most important part of hedging as the traditional
characteristic of "locking-in" prices and protecting oneself from
adverse price movements. Second, one can consider the important
traditional criteria of hedging as protection from adverse price change
plus a second criteria of contributing directly to net income through
profits in both markets, which is in effect speculating with some
relatively "safe" probability that cash and futures prices will move in
24
favorable directions and possibly opposite from one another. There
is evidence the latter criteria may be the more relevant in many
cases, given the current hedging alternatives for PNW White wheat.
If a hedge is to 'lock in" the prices at the time the hedge is
placed, then the gain in one market must offset the loss in the other
market. For this to happen, the cash commodity must be such that
its price moves closely with the futures price. This type of hedging
is the traditional uperfect! hedge (see Appendix II), and generally
occurs only when the commodity traded in cash markets is identical
to that specified in the futures contract and the cash commodity is
realistically deliverable against the futures contract--which is not the
case for PNW White wheat.
Choosing the second criteria indicated
above, direct contribution to net income, plus some likely price protection puts the results of this study in a different context from standard hedging. Interpreting the results of this study using this first
criteria alone
will
result in a different conclusion than from using the
second criteria. Conclusions concerning the feasibility of hedging
PNW White wheat will likely differ considerably depending on whether
traders wish a "clean traditional hedge" or a "speculative hedge".
Costs Used in Evaluation Procedures
In evaluating the net profit results from different hedging strategies it becomes necessary to assume some transaction and holding
25
costs. The following costs will be used in evaluating the strategies
presented herein.
Costs of holding cash wheat"
Storage, $.01/bu. per month
$.01
Interest, @ 8% (av. value of
bu. --$1.50)
.01
Cost of holding one
bushel one month
$. 02
Costs of holding futures contract
Commission @ $30/contract (5, 000 bu.)
cost of two round turns per bu.
$. 006
Margin deposit ($1, 000/contract) @ 8%
cost of holding futures contract,
per bu. /month
.0013
Assuming these costs, one may calculate a net profit figure per
bushel for each strategy. To arrive at the net profit for the cash
portion of the hedge transaction, subtract from the gross profit in the
Profit-Loss Summary tables the number of months the grain was held
times two cents per bushel.
The net income for the futures part of the transaction is calculated in two steps. First, subtract the brokerage fee per bushel.
Then, subtract the length of the hold in months times the per month
cost of holding the futures contract. For example, a four month hold
will cost $. 006 commission, plus 4 times $. 0013, for a total cost of
$. 0112 for the futures part of a 4 month hedge.
costs are included for handling cash grain, because most
cash traders will incur this cost whether or not the strategy is
undertaken.
26
Conditions such as farm owned storage, tax bracket, government storage programs or government storage construction programs
will cause most individuals to have different costs than those previously presented. To obtain a more accurate analysis of the strategies
each reader must adjust the gross r net income results to fit his own
circumstances. For example, a farmer may have on-farm storage
making it necessary that he only cover his own out of pocket storage
costs and not those charged at the country elevator, possibly making
a longer hold more profitable for him than for a neighbor who uses
commercial storage.
The tax bracket will change the effective rate of interest that the
individual is paying since interest is a tax deductible item. For
example, a corporation or individual in a 50% tax bracket will have an
effective rate of interest of 4% instead of the 8% previously assumed.
At certain times the government programs have been structured
so as to encourage the storage of wheat or the construction of on-farm
storage facilities. When the government is making these types of
programs available, the individual generally may borrow money at a
lower rate from the government, he may be getting the storage paid
for by the government, or he may be getting a faster depreciation
write-off than is normal, causing his costs to be less, and thus affecting which potential strategy is best under his particular circumstances.
27
As sumptions
The basic assumption being made is that 'wheat is wheat to a
considerable degree thus, a consistent relationship should exist
between the PNW cash wheat market and the Chicago cash wheat
market--and consequently, the Chicago wheat futures market.
Whether there is an actual relationship between the markets may not
be important as long as the two markets have yearly repetitive price
movements.
Several other assumptions have been made and/or implied
throughout this study:
1. The weekly single price observation (Thursday) is repre-
sentative of prices on that market during the particular week.
2. Volume of trading on both cash and futures market is ade-
quate to provide a broad and liquid market; i. e., volume of
trading does not significantly influence price trends.
3. Portland cash prices are representative of prices in the PNW,
or are at least functionally interrelated.
4. The past is at least a partial predictor of the future, and
therefore the analysis herein will have relevance for practical decision making for some years to follow.
The Value of an Optimum Strategy from Past Data
Researchers are known for the use of past data and historical
events to predict the future. The author is supporting the idea that
analysis of the past is extremely helpful in predicting likely future
events and conditions, particularly ii coupled with reliable outlook
information. The basis patterns from past years are at least the
most logical place to start in developing and evaluating hedging strate-
gies for the future.
Recommendations
This paper is not advocating that any one strategy be followed,
even though selected "most profitable" strategies are presented. It
is suggested for reasons indicated earlier that each futures contract
month and each market year be examined on its own merit and then a
strategy be developed by the individual trader to "fit" his own particu-
lar set of circumstances. In short, this type of seasonal analysis is
only one tool to be combined with many other factors considered by
the trader according to his individual discretion and beliefs.
Those individuals looking for firm recommendations concerning
"most profitable trading strategies" will not find any in this paper.
The material herein is believed to be accurate and analyzed in a
scientific way, but no specific recommendations are made about
29
something as volatile as supply-demand conditions as influenced by
investor and farmer psychology, and influenced so significantly by
individual circumstances. However, to the extent the past is a somewhat reliable predictor of the future, to the extent that seasonal wheat
and futures price patterns repeat themselves, this study will likely
have special interest to current and potential hedgers and/or specula-
tors. If evaluated consistent with individual circumstances, the
results herein may well provide insight into profitable marketing!
commodity trading alternatives for various persons interested in the
PNW wheat market.
30
III. DECEMBER CONTRACT RESULTS
Optimum Short Strategy
Gross Income Results
The most profitable short strategy over the ten year analysis
period using the December futures contract involved an opening transaction date of March 2 and a closing date of May 3 (Table 4). The
strategy generated a gross profit eight out of ten years with an average per bushel return of
6.95
cents per bu. (Table
5).
The cash transactions generated loss figures in two years,
and
1968,
1961
for a total loss of $1600 over thetenyears. The profit for
all the cash transactions was $5, 320. The cash strategy had a good
probability of success, generating a profit seven out of the ten years.
The futures transactions resulted in profit and loss figures of
$4, 530 and $1, 300 respectively and was also profitable seven out of
ten years.
Examining the individual yearly outcomes more closely reveals
there were no trading years which resulted in a loss in both the cash
and futures markets; however, in 1966 there was a loss in the futures
transaction and no gain in the cash transaction.
The strategy provided offsetting gain-loss results similar to
what would be expected under normal hedging conditions in four out of
Table 4. December futures contract: average basis, high and low basis, and standard deviation
of basis, 1961-1970.
1/
Basis 1/
Date
Ave.
*JAN 1
JAN 2
JAN 3
JAN 4
FEB 1
FEB 2
FEB 3
FEB 4
5. 06
7. 82
8.33
8.21
8.92
8. 78
2
3
8.12
7.11
6.24
5.75
5.92
7.20
7.54
11.51
11.32
11.88
11.18
12.26
12.70
MAY4
9.96
MAR
MAR
MAR
1
2
3
MAR4
APR 1
APR 2
APR 3
APR 4
MAY
MAY
MAY
1
JUN 1
JUN 2
JUN 3
JUN 4
5. 58
4.04
3.09
4.06
Cents per bushel.
Basis -
High
Low
36.70
-14.60
15. 354
42. 10
-14. 80
45.60
43.50
49.50
50.00
56.80
52.00
45.20
37.50
38.40
42.20
44.50
63.70
63.70
63.50
64.60
67.90
65.70
39.50
20.60
23.40
19.90
16.90
-10.80
-10.10
-11.80
15.450
15.675
14.820
-13. 90
-14.50
-14.60
-11.80
-14.00
-20.90
-11.60
-13.10
-11.30
-14.60
-13.00
-13.10
-15.50
-17. 80
-18.30
-18. 60
-22. 10
-29. 50
-28.00
SD
16. 761
17. 904
20.038
19. 010
17. 215
15. 979
16. 923
16.479
17.151
21.082
21.296
20.621
21.521
22. 205
21. 751
15.252
10.525
11.262
13. 102
11. 895
Date
Ave.
High
Low
JUL 1
JUL 2
JUL 3
JUL 4
2. 39
14.50
10.90
11.60
12.20
1 6.50
14.00
17.50
21.50
-12. 80
7. 864
-5.50
-6.50
-11.60
-7.40
5.599
5.306
8.364
7.158
7.427
8.681
9.589
AUG 1
AUG 2
AUG 3
AUG 4
SEP 1
SEP 2
SEP 3
SEP 4
OCT 1
OCT 2
OCT 3
OCT 4
NOV 1
NOV 2
NOV 3
NOV 4
DEC 1
DEC 2
*DEC 3
*DEC 4
2.76
2.32
1.99
2.93
2. 02
2.15
2.74
2.25
2.30
2.40
5.21
5.23
3.03
3.66
4.04
2.64
3.95
5.97
5.91
5. 11
5.40
0
0
2L70
19.40
23.50
2340
SD
-10. 80
-14.50
-11.80
-13.90
-13.60
-11.90
-11.30
-12.00
-12.00
-8.40
-8.40
-10.40
-7.80
-8.60
-7.50
10. 370
9.936
10. 270
9.998
9.374
8.786
7.695
8.549
8.208
7.025
7.960
7.755
23.90
21.50
18.70
21.70
16.00
17.10
22.10
20.60
21.50
21.90
-9. 10
-10. 10
9.117
0
0
0
0
0
0
8. 545
Table 5. Profit-loss summary, December futures, optimum short strategy.
.44.e.,.8,8###*.,#m##44.m,.4m,4,4.444444. *844*444*44448*4484444
DATE
4444444*4444444444444*44444C**4443#**444344*44
TRADING YEAR
AND
ACTIVITY
63-63
:
CASH
DEC
CASH
DEC
CASH
6.-61.
DEC
CASH
65-65
DEC
CASH
66-66
DEC
CASH
67-67
DEC
CASH
68-68
DEC
CASH
69-69
CASH
DEC
70-70
DEC
CASH
DEC
4
PIAR2
BUY
' 21200
CASH
4
20
SELL DEC
8
2f500
22330
21690
20100
15000
19530
16350
15206
15650
17000
15240
16700
18400
15250
11.650
16550
14400
1.3890
4
HAY 3
4
SELL CASH
20052
21600
22550
22300
4
BUY
1970
DEC
PROFIT
OR LOSS
-1200
?5
4
GROSS PROFIT'
2221C
t1)o
19130
-521
220
4
15730
220J
620
17900
15206
14530
608
520
16980
6
-740
16300
17300
900
11.00
14700
15030
-400
1520
15700
13930
-40
50
14380
1.50
20
-DQ
530
620
2820
920
-740
2000
1120
10
'.70
-3.8Su
.S8u
.0620
.21320
.0920
-0.0740
.2000
.11.20
.0010
.0470
4
RETURN/DU.
1.00
15400
SU'1'IA'IY TABLE
*4444*44*44444*4*4444 #44**4*44*4*4*444444 4*444444444* #4*444*4*484*
*
* NET
4
NO. DF TIMES
AVERAGE
' RETURN/BU '
PO4tT 4 LOSS
P1OFIT
FRDFITABLE
44*44*44*4 44*#4.####,#fl#*s***4*4#****#*#**8c44#*444*4###4#,*#*#44
CASH
-IbuC *
*
3720 '
532i
7/16
.0372
ACTIVITY
'
8
*
*
4
4
4
V4#4*444##4444-# #4 ##44##4444#c*4#4*#*e*#*44##84#4#4#***44*#4*4444
DEC
8
3235 *
4530
-0300
7/10
.0323
4
4
4
4
4
4444444444
ToTAL
4
4
-'2C
4
5550
4
*
4
4
.069
5/11
4
*
*44 444444444444444444 * 4##*4###*4 *4*4*444*4*
a
'4)
33
the ten years (Table 5). However, the losses and gains were not
exactly offsetting. As a strategy to lock in price the overall results
are not favorable.
Of particular interest in evaluating feasibility of hedging Soft
White wheat on current wheat futures markets, is the fact that five
out of the ten years this strategy was profitable in both the cash and
futures transactions (Table 6). Such a high occurrence of "non-
standard" hedge results implies the hedge is to a high degree a
speculative hedge", with a trader being subject to futures and cash
prices moving inversely rather than together- -but, in this case, the
immense price movements were generally favorable to the trader.
Table 6. Strategy summary, optimum December
short strategy.
Possible Outcomes
Cash
Futures
Net
+
Frequency
+
+
+
+
5
+
-
+
z
-
+
-
-
-
1
1
1
0
10
aThe profit result of the 1966 cash transaction was
zero.
The December optimum short strategy generated acceptable
results nine out of ten years, either generating gains in both markets
34
or offsetting gains and losses in the two markets. It is important to
note the profitability of the strategy was not due to windfall gains in
any one or two years.
Net Income Results
The yearly costs per bushel (see Chapter II) for this hold of two
months and one week would be approximately 4. 5 cents per bu. for the
cash transaction and 0.9 cents per bu. for the futures transaction.
Subtracting out these costs from the average yearly returns leaves
these net return figures:
Total net income
(6. 95 - 5.4) = 1.55 cents per bushel
Cash net income
(3. 72 - 4.5) = -.78 cents per bushel
Futures net income (3.23
.9) = 2.33 cents per bushel
The profit figure was not large enough in 1961, 1966, 1969, and
1970 to pay the costs associated with the transactions. It can be seen,
however, that the overall strategyfor ten years returned a positive
net income. The portion contributed by the futures transaction was
quite significant and substantially offset the loss in the cash market.
The futures transaction made it a profitable strategy, rather than the
loss one would have experienced by only trading in the cash market
between these dates.
35
Decision Rules
The basis chart for the December contract (Chart 1) shows th
per bushel basis during an individual year as a result of the combined
price movement of the cash and futures market. There does not
appear to be any specific basis pattern for the two months prior to
the start date of the optimum strategy which would distinguish the
individual years from each other and provide decision rules to be
used which could increase trading efficiency by signaling in advance
when not to follow the strategy. Examining the price patterns in
Appendix III for the two months previous to the start date of the
optimum strategy reveal no specific price patterns which would mdi-
cate when specific yearly strategy outcomes were about to arise in
the up-coming periods.
Flexibility of Start-Stop Dates
The flexibility of getting in and out of the optimum December
short strategy can be seen in Table 4. The optimum in-date was
March 2 with an average basis of 5.75 cents. The average basis was
within a 2 cent range of the lowest figure over an extended period,
from February 4 to April 1, indicating the in-date is not critical, that
a trader might expect quite similar results from a wide range of indates.
36
20
10
I-
I
I
A
S
I
-I--'- -J--1--+4---I- I
0
-10
20
10
-10
-20
Chart 1. Basis charts, December futures contracts, 1961-1970.
N
-I-
D
37
30
20
n
10
I
I
A
-10
I
M
December Basis 63-64
Chart 1. Continued.
60
50
40
30
20
10
-10
10
-10
Chart 1.
Continued.
10
December Ba
M
J
-10
-20
'k
/
-30
10 f-
0
December Basis 67-68
-20
Chart 1. Continued.
40
20
10
-10
I
M
I
I
I
I +-4 .-e--.--f -s--4-t --f--
J
J
A
December Basis 69-70
-10
10
-10
Chart 1. Continued.
- f-f--i-S
0
-f-3 -+
N
I
D
41
The out-date (closing transaction date) appears much more
critical in terms of average basis. The average basis takes a large
drop after May 3. Closing the strategy beyond this point could turn a
profitable strategy into a loss. The dates from April 2 to May 3
offered opportunities to close the transaction with a profit similar to
the optimum strategy, with average basis varying within about 1.5
cents from the optimum.
Opportunities for Short Strategies Using December Contract
Examination of the average basis (Table 4) for the December
contract reveals two basic time periods when successful short strategies could be used to protect the trader from price movements and/or
increase income through a speculative strategy generating profits in
both the cash and futures transactions. The first time period was
identified and discussed when consideration was given to the optimum
short strategy, that is, a start date between January and March, and
a stop-date in April or May. The gross return on these transaction
strategies would range from approximately 4 to 7 cents per bushel.
The second time period involves start dates between July and
the middle of September, and a stop date in November or December
with returns ranging from 2 to 4 cents/bu.
42
Optimum Long Strategy
Gross Income Results
The most profitable long strategy for the December contract
involved an in-date of May 3 and an out-date of July 4 (Table 4). It
returned an average gross profit per bushel of 10.71 cents and was
profitable six out of ten times (Table 7). This strategy may have
limited use to White wheat handlers since it encompasses two sepa-
rate market years which begin on July 1. These are two main rea-
sons to limit the use of this strategy: (1) the thin cash market at or
near the end of the market year and (2) there is some instability in
the cash market as anticipation builds for the new crop and export
markets are developed.
The cash transaction generated $16, 400 of profit in seven pro-
fitable years and $4, 330 total loss in three of the ten years. The
futures transactions returned $4, 320 in profit and $1, 360 in loss.
The futures transactions were profitable only four of the ten years.
In seven years there were partially offsetting losses and gains,
but only 1968 and 1969 could be classified as 'good' hedges in the
classical sense, with gains and losses almost exactly offsetting. The
overall strategy gave good positive results in eight of the transaction
years, the 1962 and 1968 years giving unfavorable results. A breakdown of the result patterns follow in Table
8.
Table 7. Profit-loss summary, December futures, optimum long strategy.
44*44444444444444444
44
44*44444 #4
44444444
4*4*4
DATE
TRADING YEAR
AND
ACTIVITY
Et-61
CAS4
JEC
.44*4*44
b'-62
JFC
CASH
63-63
DEC
65-65
6L.-61+
CASH
CASH
DEC
DEC
66-66
CASH
DEC
CASH
67-67
DEC
68-68
CASH
DEC
69-69
CASH
DEC
70-70
CASH
DEC
CASH
#44#4#4#84*4#4*#444##*44##4***#44*444 44444#*4444444#4444#44S44#4##44*4*44444*S#444444
4
MAY 3
4
BUY
DEC
1q7
22iU
19133
4
SELL CASH
2160u
15730
22550
S
14533
22300
16980
15400
17300
15200
15030
17900
13930
16300
14380
14700
15700
JUL 4
4
SELL DEC
2198'
18283
S
BUY
CASH
2llOC
2183C
S
14690
19503
15113
15250
14400
Ic? -1133
-?3
-232
-850
4
GROSS PDFIT4
.
3060 -1040
7150
580
14500
15290
14200
14600
-770
500
910
1100
810
100
-270
2010
-6.J"L
-u..63
.2200
.6010
.1580
-0.0620
.0810
.0100
0.0270
.2010
-5f
'.?3
-1360
4
4
CASH
-I'3?
4
4/10
5
12371
*
8
-3.0136
4
4
7/if
4
.1207
*
'
4
4##.*.#* 48444*44*44444*4 4*#,#.#**#4#4.**#4*.#####
'
1800
-620
###4##448#4-4444484#44#444#8#*4444###4#44S4*4*#4#*#4V44
4
1900 -1700
1580
4
TOTAL
2380 -3000 -1090
5010
SU1'1AY TARLE
4
ICOO
2200
4#*44*#4***##4S#**s****4*#4*454#*4s44*4#4S##44*44444444#4#4*#4#44
4
NET
NO. OF TIMES # 4VEAGE
ACTIVITY
'OFIT
LOSS
OFtT
PROFITABLE
ETURNIBU
4
16000
13160
-46j
#444.4*444544.
*
18200
13330
-SEC
S
RETURN/RU.
t)FC
16210
4
PROFIT
OR LOSS
4
19360
7'
-1
4
1u711
1?
8
6/10
4
4
4
.1371
4
44
Table 8. Strategy summary, optimum December
long strategy.
Possible Outcomes
Cash
Futures
Net
Frequency
+
+
+
-
±
+
2
0
+
-
+
4
-
+
-
2
+
-
-
1
-
-
-
1
10
The optimum December long strategy returned a larger positive
gross income figure than the short strategy but the probability of a
successful trade was not as good. Three of the highly profitable
years, with returns well above average, occurred in the first five
years. The 1964 trading year generated windfall (exceptional) gains
and tends to distort the overall results of the strategy.
Net Income Results
Considering the assumed per bu. costs (.9i futures costs) for
this holding period gives the following average annual resu1ts.-'
Total net income (10.71
Cash net income (12.07
Futures netincome (-1.36
.9)
.0)
.9)
=
=
9.81 cents per bushel
12.07 cents per bushel
-2.26 cents per bushel
'In a long hedge, there are no cash grain holding costs; at
start of hedge, trader buys futures and sells cash.
45
The overall strategy returned a positive net income figure with the
futures transactions contributing an average loss of 2.26 cents per bu.
and the cash an average profit of 12. 07 cents per bu.
In six of the ten years the hedge strategy returned a net income
greater than the total costs of . 9 cents /bu. those six years being
,
1963, 1964, 1965, 1967, 1968 and 1970. There was one year, 1962,
with a loss in both the cash and futures transactions and two years,
1965 and 1970, with a profit in both the cash and futures markets.
Decisions Rules
Referring back to the basis charts for the December contract
(Chart 1) provides no consistent patterns which would signal whether
or not to follow this strategy. The same applies for price patterns
of the cash and futures markets (Appendix III) for the two months
previous to the start date of this strategy. One might notice, how-
ever, that the three years generating large returns, 1963, 1964, and
1970, occurred when large drops in the basis occurred after May 3
and when there was an extremely large positive basis before May 3.
Flexibility of Start-Stop Dates
May 3 has the greatest average basis and hence was the best
average start date (Table 4). The average basis before this date mdi-
cates a fairly reasonable time period, about 6 weeks, to enter the
46
transaction with an average basis range of approximately 1. 5 cents
per bushel. However, going beyond May 3 to start the hedge involves
a substantially lower average basis and consequently much less
chance for as profitable a long strategy.
The stop date appears less critical; the average basis is within
a range of 1 cent per bushel of the lowest value from July 1 through
September 3.
Opportunities for Long Strategies Using December Contract
Evaluation of the month for the December contract reveals two
time periods with opportunities for profitable long strategies. One
was pointed out with the optimum strategy, May 3 to July 4.
The other opportunity arises from February 1 to March 2 when
the average basis takes a 3 cent drop. The range of in-out dates
appear critical on the average but are actually not if one examines
the yearly basis plots individually (Chart 1). The strategy actually
generated better results in the last five years than the optimum long
strategy which considers the overall ten year period.
47
IV. MARCH CONTRACT RESULTS
Optimum Short Strategy
Gross Income Results
The optimum short strategy selected from the March contract
month involved opening the transaction on September 2 and terminat-
ing it on February 1, with an average per bushel return of 9.03 cents
per bushel (Table 9). The strategy generated $15,990 of profit and
$6. 960 of loss in seven profitable years and three loss years (Table
10).
Both the cash and futures transactions individually returned
positive returns over the ten years of 7.01 and 2.20 cents respectively. The cash transactions were profitable eight years out of ten
and generated $9, 660 in gross profit. The futures transaction
returned $6, 330 of profit and $4, 310 of loss in five profitable and five
loss years.
The outcomes of the individual years show there were no years
with a loss in both markets; however, there were three years with
negative gross returns per bushel. Seven years generated results
similar to what could be expected in actual hedging transactions
(Table 11)and the three remaining years gave good speculative
returns.
Table 9. March futures contract: average basis, high and low basis, and standard deviation of
basis, 1961-1971.
Basis-1!
.
Date
Ave.
High
Low
SD
*APR 1
*APR 2
*APR 3
*APR 4
1.24
3.47
9.54
9.90
8.11
9.27
9.64
7.16
2.02
.94
.41
.64
-1.40
27.90
32.40
60.20
59.40
60.50
63.70
61.50
35.00
15.70
18.90
15.40
12.10
11.00
7.00
5.90
9.60
10.50
8.40
11.60
15.50
15.70
13.50
17.60
17.40
-17. 10
14. 089
14. 016
22. 531
MAY
MAY
MAY
1
2
3
MAY4
JUN 1
JUN 2
JUN 3
JUN 4
JUL 1
JUL 2
JUL 3
JUL 4
AUG 1
AUG 2
AUG 3
AUG 4
SEP 1
SEP 2
SEP 3
SEP 4
-1.32
-1.54
-2.09
-0.85
-1.88
-2.08
-1.36
-2.04
-2.43
-2.00
.91
Cents per bushel.
-14.00
-17.30
-15.40
-15.70
21.393
al.453
-18. 10
22. 094
-20.80
-21.20
-24.00
-25.10
-33.30
-31.00
-16.30
-10.00
-10.80
-15.90
-11.90
-14.80
21.708
15.333
-19. 10
-16.00
-19.80
-17.00
-19.30
-13.80
Ba&Ls-1/
Low
High
11. 120
10.963
12. 603
11.723
7.685
5.712
5.157
7.969
6.900
6.840
8.331
9.012
10. 069
9.507
10. 239
9.398
Date
Ave.
OCT 1
OCT 3
OCT 3
OCT 4
1.46
-1.05
-0.39
.04
NOV 1
NOV 2
NOV 3
NOV 4
-0.96
.18
2.08
DEC 1
DEC 2
DEC 3
DEC 4
JAN 1
JAN 2
JAN 3
JAN 4
FEB 1
FEB 2
FEB 3
FEB 4
MAR
MAR
*MAR
1
2
3
*MAR4
1.84
1.89
2.37
1.33
2.30
3.59
5.29
5.74
6.42
6.60
18.00
15.50
12.70
15.90
10.70
1L90
16.90
15.60
18.00
17.90
13.00
15.00
14.20
18.60
18.20
1870
5.65
6.02
6.30
5.26
18.90
21.50
21.60
22.00
16.40
15.60
0
0
0
0
6. 17
SD
-12.00
-14.60
8. 193
8. 161
-11. 10
6.808
7.587
7.251
6.269
7.644
7.598
9.014
9.149
8.389
8.378
7.594
7.601
6.511
7.371
-11.80
-13.00
-11.00
-11.30
-10.30
-13. 10
-13.00
-12.50
-12.00
-10.30
-9.40
-8.40
-6.90
-6.30
-7.40
-13.90
-14.50
-8.00
7. 125
8.833
10. 246
10. 732
8.505
-8. 80
7.938
0
0
0
0
Table 10. Profit-loss summary, March futures, optimum short
strategy.
DATE
TRADING YEAR
AND
ACTIVITY
4
61-52
CASH
62-63
IAP.
CAS1
63-6+
CASH
MAR
MAR
F+-65
CASH
65-66
MAR
CASH
MAR
66-67
CASH
MAR
67-66
CASH
68-69
MAR
CASH
MAR
69-70
CASH
70-71
MAR
CASH
MAR
4
SEP2
BUY
' 21l0
CASH
71250
'
C
SELL MAR
21051
e
1961
20130
21491
19310
1'.800
15110
18651
16150
16030
20350
14400
15880
14000
13050
15650
13850
17230
FEB 1
C
SELL CASH
20601
27533
4
BUY
20331
MAR
PROFIT
OR LOSS
:
-71k.
GROSS FOOFIT:
'
RETURN/BU.
4
670
22603
15103
21030
22050
1+60
2570 -2740
1252
16100
15140
-30
140
1300
MAR
4
TOTAL
3910
750
1023
15200
13460
11+860
161+1+0
-580 -1951
14800
400
-410
17700
16960
141+00
1200
-550
2050
1710
-170
110
720
1960
1770
-10
-).j011
650
2320
.1710
-0.0173
.0110
.0720
.1960
.1770
-0.0010
.0650
.2320
'
'
44#4*44##44*#44*44#484444#444#44*44+4344*40*#S*#*4***444#4*44*4
3SJ
2020 *
-1+110
5/10
.0202 '
4
16750
-IC
SUM'IORY TOOLE
4444*4444444 4-1' 444444 #444 44-44*44444444444444**4444* +44*444344444444
4
NET
* NO. OF TIMES
AVERAGE
' ACTIVITY
'OEIT
' PRoFIT
LOSS
PROFITAFLE
RETURN/BU *
4 444444 4 4 +444 #4 44 44 #4 #4 44 4444 44 *444+4 4444444 * 4*44 * 4*4*fl*fl4***44
C4S
16700
16730
966
4
-060
7110
4
4
3/10
'
4
.0701
4
4
4
4
4
4
4
4
-6952
4
9031
4
4
4
7/11
'
4
4
.0903
4
4
44444444444444 4..#,.*44#.44**4*.,.****##4#.4*
270
50
Table 11. Strategy summary, optimum March
short strategy.
Cash
Possible Outcomes
Futures
Net
+
+
Frequency
+
+
3
+
+
-
+
-
+
3
2
+
-
-
-
-
-
1
1
0
10
Net Income Results
Considering the assumed costs associated with this five month
hold gives the following net income results.
Total net income (9.03- 11.25) -2.22 cents per bushel
Cash net income (7.01 - 10. 00) = -2. 99 cents per bushel
Futures net income (2.02 - 1.25) = .77 cents per bushel
The overall strategy returned a net loss of 2.22 cents. The cash
transaction costs, 10 cents, contributed significantly to the net loss
results of the overall strategy. The futures transactions were net
contributors to the strategy returning .77 cents above assumed costs.
Although the futures contributed a positive net income to the strategy
it was not sufficient to make the overall strategy profitable. In the
seven profitable years there were six years (1962, 1966, 1967, 1968,
1969, 1970) with returns above the assumed costs and one year with
returns below those costs (1964).
51
Decision Rules
There does not appear to be any price or basis pattern movements prior to the trading period which would signal when not to use
the strategy (Chart 2). The trader may however be able to identify
patterns while using the strategy in current years which might
improve results. He may then limit loss years and improve profit
years by closely following the basis pattern for the current year and
then terminating or prolonging his position as the basis changes.
Flexibility of Start-Stop Dates
The start date of the optimum strategy was September 2 with an
average basis of -2.43 cents (Table 9). The start date appears very
flexible. The average basis ranges within 1 cent of optimum from
July 1 to September 3. The stop date February 1 also appears
flexible; the average basis is within a 1 cent range from January 3 to
February 3. Over the analysis period, strategies started and stopped
within these date ranges would provide average results similar to the
optimum strategy but the yearly results may vary considerably.
Opportunities for Short Strategies Using March Contract
The March contract reveals a wide range of short strategy
opportunities none of which are significantly distinguishable from one
5Z
10
-10
F
Chart 2. Basis charts, March futures contract, 1961-1971.
M
53
30
10
March Basis 63-64
Chart 2. Continued.
60
50
:: E
10
0
i
I
A
-10
March Basis 64-65
10
i-+--
o
J
A
-±--t
S
I
0
March Basis 65-66
-10
Chart 2. Continued.
N
D
I-
10
-10
-20
-30
56
20
10
[I]
10
[I]
-10
10
I
I
-1
4
-10
-{
March Basis 70-71
-20
1
Chart 2.
Continued.
57
another, using average basis figures in Table 9. The average basis
declines after the contract is opened to September 2 at which time the
average basis trends upward to the expiration of the contract.
Strategies started between June 1 and January 1, and closed before
the contract expiration would give positive average per bu. returns
over the analysis period. The results although similar as to average
return, may differ substantially as to the returns from the yearly
cash and futures transactions.
Optimum Long Strategy
Gross Income Results
The long futures trading strategy selected from the March con-
tract returned an average gross return of 12.07 cents/bu. for an
approximate four month hold. The opening date for the transaction
was May 3 and the closing date was September 3 (Tables 9, 12). The
strategy produced $23, 410 of profit and $11, 340 of loss over the study
period with six of the ten years generating a profit.
The futures transactions returned an average gross return of
1.46 cents/bu. --a total profit of $8, 050 and a loss of $6, 590. The
futures transactions were profitable five years while the cash transactions were profitable eight years during the study period. The cash
transactions generated $15, 360 in profit and $4, 750 of loss.
Table 12. Profit-loss summary, March futures, optimum long strategy.
4444444444 44*44*4*4*4444
DATE
TRADING YEAR
AND
ACTIVITY
Et'
62-63
CISH
'IAP
34*444*44*444*44
63-64
CASH
MAP.
MAR
64-65
CASh
MAR
65-66
CASH
MAR
66-67
CASH
CASH
MAR
67-68
68-69
CASH
MAR
MAR
69-70
CASH
MAR
70-71
CASH
MAR
CASH
4
MAY 3
4
BUY
' 2O?1
MAR
22430
4
SELL CASN
2000C
19230
21600
4
16100
22550
14180
22300
17280
17680
15200
151+10
15'+60
17900
11+280
16300
14540
14700
15700
4
SEP 2
4
SELL MAR
' 21252
BUY
'
21490
19710
4
CASH
21E3C
2125i
4
15110
20030
16150
14960
20350
14800
15880
18650
13050
16000
13850
14400
17230
14000
15650
4
44434*43444 4-
44*,,,
4
PROFIT
OR LOSS
042 -1320
-010
252
80
4
GROSS PROFIT4
43444444
7340
1370
2690
100
-510
270
2740
-3.2450
-.U56Q
.2600
.6300
.1970
-0.0380
.0100
-0.0510
.0270
.2740
NO. OF TrMES 4 AVERAGE
NET
'
'
4
4
-(SIC
4
1460 '
5/10
4
4
4
4444444 *4 444 4$ 4 #4 4 44 4444 44 4*44 4444 44 *44 #4 4 #4*4 4 4,.. #44
10'0
'
-4750 '
10612 '
4
4
*
8/10
'
4
.0146
*
4
4*4*4*4444
.1161
4
44434*44444! 4$44*$$44#444*$##*4#4444*4*#4*4444*434##*4*3*4#444#344
'
*
TOTAL '
-t1T14
'
1L7u
5/iC
.1207 '
4
700
-1+30
-380
SUMMARY lADLE
4
1900
1970
44$#44$#444$4$4#4444444444444444444444444444444**
CASH
1900 -21+10
63012
2IT ' LOSS ' PROFIT
' RETURN/DU
PROFITAELE
4444#*4*$*44444+*4444#4*44444+44##4*44#4*444*#44*4**V#444
'
3070 -31+50 -1800
2600
ACTIVITY
MA
600
-'60
4
RETURN/9U.
2570 -1040
-.63
4
4
*
4
4
50
59
Examining the individual yearly outcome shows there were no
years with a loss in both the cash a.nd futures market (Tables 12, 13).
Three years gave positive results in both the cash and futures mar kets- -1963, 1965, and 1970. The remaining years gave offsetting
gains and losses. It is important to recognize that 1964 generated
windfall gains (63 cents/bu. ) and that three other years (1963, 1965,
and 1970) gave results substantially above the average per bushel
returns.
Table 13. Strategy summary, optimum March
long strategy.
Cash
Possible Outcomes.
Futures
Net
+
Frequency
+
+
+
3
-
+
+
-
+
-
-
+
+
-
-
-
0
3
2
2
0
-
10
Three years of the strategy generated good speculative results,
generating a profit in both markets. The remaining seven years gave
results similar to what traditional hedging would provide.
Net Income Results
Given the costs associated with this seven month hold the net
results are as follows:
Total net income (12.07 - 1. 12) 10.95 cents per bushel
Cash net income (10.61 - 0
10. 61 cents per bushel
Futures net income ( 1.46 - 1. 12) = .34 cents per bushel
)
The overall strategy returned 10. 95 cents per bushel from the cash
transactions and . 34 cents per bushel from the futures transactions.
The results of the individual years show five years with average
net returns per bushel large enough to cover the 1. 12 per bushel
costs associated with the transactions.
Decision Rules
The basis patterns for the two months previous to the start date
of the optimum long strategy do not signal any pattern which would
improve the results; likewise, the price patterns show no individual
significant movement patterns (Chart 2).
Flexibility of Start-Stop Dates
The flexibility of the start date, May 3 for the March long
optimum strategy, appears moderately flexible (Table 9). However,
the high ,low and standard deviation basis values indicate tremendous
year to year variation in basis patterns. Looking at Chart 2 it can be
seen that for some years the date for opening the transaction is quite
critical. For example the 64-'65 March basis on 5-4-'64 is 35 cents
61
and the following week it has dropped to -4. 5 cents (Appendix III).
The stop date, September 2, gives considerably more flexibility
in providing opportunity to close the transaction, from approximately
July 1 to October 1, with the average results being similar.
Opportunities for Long Strategies Using March Contract
The only significant long strategy opportunity using the March
contract coincides with the optimum long strategy examined previously (Table 9). Judging from the average basis figures, there does
not appear to be any other significant opportunities other than the May
to September hold.
The slight decreases in the average basis that occur, as from
November 3 to November 4, or even until Dec 3, actually do not
represent feasible opportunities for long strategies. These decreases
occur due to the interaction of several factors, mainly very short
term fluctuating price movement, and do not represent true seasonal
or longer term trends. The risk in pursuing these shorter length long
strategies as identified by average basis method is felt to be rather
high. More conventional methods of identifying short term trends are
available using day to day price movement and current market information.
62
V. MAY CONTRACT RESULTS
Optimum Short Strategy
Gross Income Results
The optimum short strategy for the May contract had a start
date of Sept 2 and a stop date of May 2 (Table 14). This strategy
generated average gross profits of 14. 51 cents /bu. The strategy was
profitable nine out of ten years, with zero gross profit in the tenth
year, generating overall a total of $17, 730 of profit and $3, 220 of
loss for the analysis period (Table 15).
The start-stop dates for this strategy coincide closely with the
major portion of the Soft White wheat marketing year and hence may
have wide application by White wheat handlers and producers who are
holding grain from harvest to a later sale date.
The cash transactions in this optimum strategy generated an
average positive return of 8.64 cents/bu. in eight profitable years.
This compares to an average futures transaction return of 5. 87 cents
generated in six profitable years. The cash market generated
$9.490 of profit compared to $850 of loss while the futures market
generated $8, 240 of profit and $2, 370 of loss.
There was no year with a loss in both markets but there were
six years (1961, 1963, 1965, 1966, 1967, and 1969) with offsetting
Table 14. May futures contract: average basis, high and low basis, and standard deviation of
basis, 1961-1971.
Basis-1/
Date
Ave.
High
Low
SD
*JUN 1
JUN 2
JUN 3
JUN 4
2.71
1.56
.95
1.14
-0.96
-0.93
-0.82
-1.37
.28
-1.40
-1.75
-22.90
-23.80
-31.00
-28.00
-13.30
-8.90
-7.60
-13.10
-9.10
-12.90
-18O0
-14.80
-19.00
-16.50
-20.50
-11.00
-9.80
11.431
10.532
11.938
JUL 1
JUL 2
JUL 3
JUL 4
14.10
16.20
12.90
11.10
11.00
11.40
10.50
16.10
14.50
10.90
13.80
15.20
13.20
11.30
14.50
14.70
14.70
AUG 1
AUG 2
AUG 3
AUG 4
-1. 11
SEP 1
SEP 2
SEP 3
SEP 4
-1.47
-2.01
-1.98
.87
OCT 1
OCT 2
OCT 3
OCT 4
1. 11
NOV 1
NOV 2
NOV 3
NOV 4
-1.30
-0.78
-0.21
-1.21
-0. 10
1.55
1.45
-1/Cents per bushel.
11. 118
7.315
6.287
5.418
8.261
6.560
6.433
8.208
8.543
9. 162
8.748
9.905
8.675
7.075
Basi.s
Date
Ave.
High
Low
SD
DEC 1
DEC 2
DEC 3
DEC 4
JAN 1
JAN 2
JAN 3
JAN 4
1.57
2.21
1.32
2.79
3.29
4.89
5.38
5.94
6.32
6.30
5.67
5.98
5.56
5.04
6.53
7.25
7.57
15.60
14.90
10.00
17.20
12.50
15.20
14.70
15.90
15.20
18.70
18.50
18.40
16.40
17.20
19.20
20.10
21.00
25.90
23.50
22 20
25.50
25.20
-15.30
8.838
8.711
8.739
9.358
7.794
7.724
6.745
7.455
7.401
8.979
10.476
10.926
9.410
9.024
11.560
9.640
9.212
9.790
9.610
7.965
FEB 1
FEB 2
FEB 3
FEB 4
MAR 1
MAR 2
MAR 3
MAR4
APR 1
APR 2
APR 3
APR 4
12. 20
-1240
9.20
12.70
7.70
9.00
-9.30
-10.40
-11.80
-0.60
6.222
6.555
6.267
5.523
13.70
12.70
-9. 60
7. 154
MAY
MAY
*MAY
-10.60
7.005
*MAY4
7. 356
1/
1
2
3
10. 14
9. 88
11.27
11.73
12.50
0
0
0
0
-13. 10
-14.90
-12.10
-11.30
-11.00
-0.50
-7.30
-6.60
-7. 80
-14.40
-15.00
-11.00
-10.60
-14. 00
-8.50
-6.50
-8.40
-11. 30
-7.00
-7.70
-9.20
10. 030
10. 099
0
0
0
0
Table 15.
Profit-loss summary May futures, optimum short strategy.
DATE
'
AND
ACTIVITY
4
'l-E
' CASI
'lAY
TRADING YEAR
o?-&3
CASI
63-64
MAY
CASH
MAY
6566
6+-6E
CASH
MAY
CASH
MAY
6667
CASH
MAY
67-68
CASH
68-69
MAY
CASH
69-70
MAY
CASH
MAY
70-71
CASH
MAY
*
SEP2
a
BUY
CASH
4
13J
2125J
'
SELL HAY
2l26
4
21033
211Au
14960
15900
14800
15150
18650
15890
16000
20300
14400
16150
14000
15650
13650
1335L1
16980
4
MAY 2
6
6
SELL CASH
2275
4
BUY
22300
146i
MAY
4
15310
23951
20233
240
2270 -1331
1513U
14681
17900
16050
15900
16410
14700
13630
15700
13260
18500
14530
15980
4
PROFIT
OR LOSS
4
-2U
Gj
a
j539
GROSS PUFtT4
1741
'
RETURN/lU.
a
340
500
330
300
90
1700
-680
2650
1000
390
1020
3650
.0940
.3540
.0170
.3140
.2420
.0390
.1020
.3850
6
6
*
4
'
*
2520
2420
4 44*436 44 94 4 4 463 9 44 #44* #4 33 #644 444*4 444444 6 * #66 644 * #46 * 4 664 * 4 * 4 #6
*
MAY
B?L..
-2371
6
5871
6/10
.0587 6
6
-100
3140
'
4
3890
170
SU'IMARY TABLE
4
-750
540
S6#4444*#444$64#4444!*c#4444#4*44#444*446#6*66446*64*#4464*4646V4
6
' NET
*
OF TIMES ' AVERAGE
ACTIVITY '
BFtT ' LOSS ' F9IFIT ' NO.
' RETURPI/BU #
FROFITABLE
*4*4464*64*4434 4$#44$#4##44###44-*46,.4.*6**.
,**.**..**....,*e
CASH
-151
164C
8/it
.0864
S
4
4
4
'
-160
940
'
*6*6*#6#3**##9#c4#44449*##3*4#9444###64#664#*6S44#466#*34#66***4#6
*
TOTAL
-.E21 ' 14510 '
17733
*
9/10
.1451 *
4
4
4
4
6
4
4
44*6*#45#4#444#34'##4444946#4439#44464$4##4*##4446#S#S4##*6S**##6#6
65
gains and losses. In 1961 the gains and losses were exactly offsetting.
The remaining four years, (1962, 1964, 1968, and 1970) provided
positive returns in both the cash and futures markets.
The following table (Table 16) presents the yearly results in
frequency of different possible outcomes.Table 16. Strategy summary, optimum May short
strategy.
Cash
Possible Outcomes
Futures
Net
+
+
+
-
Frequency
+
+
4
0
+
-
+or0
-
+
+
-
-
-
2
3
0
0
10
Net Income Results
The May short strategy involved an eight month hold. Consid-
ering the costs associated with this hold gives the following net
income results.
Total net income
Cash net income
Futuresnetincome
(14.51
-
17. 64)
(
8. 64
-
16.
(
4.87
-
)
1.64}
=
-3. 13 cents per bushel
-7. 36 cents per bushel
4.23 cents per bushel
The overall strategy returned a negative net income of 3. 13
cents per bushel, the cash side of the hedge returned a negative
7. 36 cents per bushel and the futures transactions generated a net
profit of 4. 23 cents per bushel. The addition of the futures transac-
tion in this strategy helped to decrease the loss generated by the cash
costs assumed in this analysis.
There were three years, 1966, 1967 and 1970 which generated
results large enough to cover the associated cash and futures costs.
The 1962 trading year was only . 24 cents from covering the total
costs.
Decision Rules
Examining the yearly basis patterns previous to the start date
of the strategy (Chart 3) shows no significant pattern which would
"flag" or separate the five highly profitable years, (1962, 1966, 1967,
1969 and 1970) from the other years and indicate years to use or
avoid this strategy. Likewise, examination of the price patterns of
the cash and futures markets show no distinguishable patterns which
would be useful in deciding whether or not to pursue this strategy in a
current year. A negative basis, however, in August and September
seems to indicate the strategy may have a higher probability of turning out profitable than in years with a positive basis during those
time periods.
67
10
[]
-10
20
10
M
-10
2f
10
0
-I--t---±
J
J
A
S
0
N
D
J
F
M
May Basis 63-64
Chart 3. Basis charts, May futures contract, 1961-1971.
A
M
10
-10
10
-10
10
0 H
i
I
-
F- 4-
A
-20H
-30
Chart 3.
Continued.
10
-10
[èl
J
J
A
S
0
N
D
J
May Basis 69-70
Chart 3.
Continued.
F
M
A
M
70
20
10
-10
Chart 3.
Continued.
71
Flexibility of Start-Stop Dates
The lowest average basis occurred on September 2 which is the
start date for the optimum short strategy using the May contract
(Table 14). The in-date in terms of average basis does not appear
critical. The average basis is within a 1. 5 cent range from July 1
to November 1; any start date during thLs time period would provide
similar results on the average. The individual basis charts, however, show that on some years the optimum in-date may be critical
(Chart 3). Changing an in-date a week or two may significantly
change the yearly outcome, and suggests that watching market news
and current basis pattern may be rather critical at times in selecting
the optimum in-date.
The out-date appears generally much more critical both in
terms of average basis and from the year to year basis charts. The
high basis was on May 2--only two other dates, April 4 and May 1,
were within a 1. 5 cent range. Closing the transaction before April 4
would have changed the average return approximately 3 cents.
Opportunities for Short Strategies Using May Contract
By examining the average basis figures in Table 14 the
7/
It is strongly recommended that the strategy, or hedge, be
closed out before the first trading day of the delivery month (see
Appendix II).
72
opportunities for short strategies using the May futures contract
month becomes obvious. The more significant opportunities involve
an in-date from July to November and an out-date in late April or
early May. The range of approximate average returns per/bu. in
that time period are from 9 to 14 cents per bushel. This range of
start-stop dates includes the optimum short strategy which was dis-
cussed earlier.
Optimum Long Strategy
Gross Income Results
The optimum long strategy selected using the May contract
involved a three month holding period from June 2 to September 2
with a per bushel average return of 3. 57 cents (Tables 14, 17). The
strategy was profitable seven out of ten years with a total gross
profit of $13, 080 and a loss of $9, 510 for a net of $3, 570. The cash
transactions were profitable seven out of ten years with profits of
$6, 610 and losses of $4, 900; the average gross cash return/bu. was
1.71 cents. The futures transactions generated $6,470 in profit and
$4, 610 in losses over the analysis period for an average of 1. 86
cents/bu. gross return.
Returns for individual years reveal no year with a loss in both
the cash and futures markets. There were nine years with offsetting
Table 17. Profit-loss summary, May futures,
optimum long strategy.
DATE
TRADING YEAR
AND
ACTIVITY
61-62
62-63
S
' MAY
CASH
MAY
64-66
63-514
CASH
MAY
CASH
MAY
65-66
CASH
MAY
66-67
CASH
MAY
CASH
67-68
MAY
CASH
68-69
NAY
CASH
69-70
MAY
70-71
CASH
MAY
CASH
S
4
S
,JUN2
BUY
' 20500
MAY
21650
S
SELL CASH
1.9700
18950
21750
15650
20050
4
14900
15900
17880
15250
17940
15500
14730
17600
14310
16350
14680
14950
15500
S
SEP2
S
' 21260
SELL MAY
21190
16900
S
BUY
S
S
CASH
21300
21250
15180
20030
15890
14960
20300
14800
16150
18650
13350
16000
13850
14400
16980
14000
15650
S
PROFIT
OR LOSS
760 -1601!
-460
500
S
GROSS PROFIT4
-50
S
S
-470
940
990
450
2420 -3150 -1790
1800 -1380
1950
-460
960
2300
-150
40
-30
470
1440
-730
10
570
490
2150
-0.0840
.0040
-0.0030
j470
144'O
-0.0730
.0010
.0570
.0490
.2150
4
RETURN/BU.
20
-840
SUMMARY TABLE
,4444544,44555445'444,444,5444544544445'4444444444,44,4444.444444
5
NET
'
5 NO. OF TIMES
AVERAGE
ACTIVITY ' PROFIT
LOSS ' PROFIT
PROFITAPLE
RETURN/BU
'
MAY
'
6470
4
-4610
4
1860
4
4/1.0
4
.0186
4
4
S4.4444444.444,4s44,4544..#S4,444544444
CASH
6610
S
1710 *
-4900
S
S
S
7/10
S
.0171
4
4
54.*S554534.4S*4*.4S44S.*S*44S4',4*.SS44.SSSSS4.S.S
TOTAL
13080
4
3670 4
-9510
4
5
S
7/10
.0367
4
4
4SS44S4444#4*SSSS4444S44,SSS44544444*S
0
(j.)
74
gains and losses and one year, 1965, with profits in both the cash and
futures markets.
The returns seem to be concentrated in two years, 1965 and
1970, with average per bu. returns of 14 and 21.5 cents respectively.
The three loss years were 1961, 1963, and 1966, with losses of 8.4,
.3 and 7.3 cents/bu. respectively. The remaining profit years gen-
erated .4, 4.7, . 1, 5.7, and 4.9 cents per bushel gross returns.
Table 18 presents the yearly income results in frequency of
occurrence of possible outcomes.
Table 18. Strategy summary, optimum May long
strategy.
Cash
Possible Outcomes
Futures
Net
+
Frequency
+
+
+
+
1
-
+
-
+
5
1
-
+
-
1
+
-
-
-
-
-
2
0
10
Net Income Results
The optimum long strategy using the May contract involved a
three month hold and generated 1.53 cents in costs for the futures
transactions. Considering these assumed costs gives the following
results:
75
Total net income (3.57
Cash net income (1.71
Futures net income (1.86
2.04 cents per bushel
0
1.71 cents per bushel
1.53) = .33 cents per bushel
1.53)
)
The overall strategy returned a positive net income figure of 2. 04
cents per bushel, with 1.71 cents contributed by the cash transactions
and . 33 cents by the futures transactions.
Five years (1964, 1965, 1968, 1969 and 1970) generated returns
large enough to cover the associated transaction costs. Two other
years, 1962 and 1967, provided positive gross returns but not sufficient enough to cover the transaction costs. The remaining years
(1961, 1963 and 1966) generated negative gross returns.
Decision Rules
Chart 3 and the cash and future prices (Appendix III) show no
consistent unique pattern previous to the start date which would significantly distinguish the various trading years from one another, and
be useful in identifying when not to use the strategy.
Flexibility of Start-Stop Dates
Table 16 shows June 2 with the highest ten year average basis
of 1.5
cents.
The May contract does not reopen until June so
-June 1 actually has a higher average basis figure, but since it
has a *' to its left it signals that the average basis is biased (see
explanation in Chapter II, p. 11).
76
there is no opportunity to enter this strategy before June 1.
The lowest average basis figure occurs on September 2. This
stop date in terms of average basis does not appear critical. The
average basis was within a 1.5 cent range from July 1 to November 1,
any stop date during this period would provide similar results on the
average.
Yearly transaction outcomes on the cash and futures mar-
kets may, however, change significantly as one moves the stop date
away from the optimum, judging from the annual basis charts and the
average basis table.
Opportunities for Long Strategies Using May Contract
Strategy opportunities using the May contract taking the long
position can be examined in Table 16. The more significant oppor-
tunity was examined when the optimum long strategy was presented
earlier. There does not appear to be any other significant opportun-.
ity for long strategies using the May contract.
77
VI. JULY CONTRACT RESULTS
Optimum Short Strategy
Gross Income Results
The most profitable strategy using the July contract involved
a start date of Oct 2 and a stop date of May 3 with an average per
bushel return of 10. 56 cents (Table 19). The strategy was profitable
eight out of ten years (Table 20).
The strategy generated an overall cash profit of $6, 150 in nine
of the ten years, composed of $6, 250 gains and $100 of loss for an
average per bu. gross cash return of 6. 15 cents per bushel. The
futures transactions generated $6, 430 of profit and $2, 020 of loss.
The futures transactions returned an average gross return of 4.41
cents per bushel.
The transactions in individual years reflect one year, 1960,
with a loss in both the cash and futures markets. There were six
years, (1962, 1963, 1964, 1966, 1967, and 1968) with a profit in both
the cash and futures markets. The remaining years (1961, 1965 and
1969) gave offsetting gains and losses.
Table 21 presents the yearly results in frequency of occurrence
of possible outcomes. This strategy generated good speculative
return in six years but did not hifixti price. The strategy generated
Table 19. July futures contract: average basis, high and low basis, and standard deviation of
basis, 1960-1970.
Basis !/
Date
Ave..
High
*AUG 1
*AUG 2
*AUG 3
*AUG 4
8. 85
6. 16
39.60
39.90
41.40
42.00
40.50
40.30
43.70
51.50
47.00
40.50
44.20
39.50
42.50
42.00
49.90
48.10
41.70
42.30
39.90
40.40
*SEP
*SEP
EP
1
2
3
SEP 4
OCT 1
OCT 2
OCT 3
OCT 4
6.42
7. 19
7.54
7.41
7.12
11.42
11.93
NOV 1
NOV 2
NOV 3
NOV 4
9.83
10.50
10.38
10.00
10.76
12.12
11.42
DEC 1
DEC 2
DEC 3
DEC 4
JAN 1
JAN 2
JAN 3
JAN 4
11.13
11.39
11.04
11.82
12.60
14.95
15.46
15.36
-1/ Cents
per bushel.
43. 10
48. 10
51.60
49.50
Low
SD
-2.30
11.971
-2. 60
12. 324
13. 113
13. 051
-4.60
-2.50
-7.40
-3.90
-8.50
-200
-L80
-2.30
-2. 60
-2.00
-0.30
-3.90
-1.80
-5.00
-11.30
-0.30
-10.60
-6.80
-6.50
12.936
12. 697
14.669
15.337
13.399
12.362
13. 131
12. 175
13. 106
13. 176
Basis!"
Date
Ave.
High
Low
FEB 1
FEB 2
FEB 3
FEB 4
16. 14
56.50
56.60
6a.40
-3.90
-5.50
-6.30
-7.90
MAR 1
MAR 2
MAR 3
MAR4
APR 1
APR 2
APR 3
APR 4
16.09
15.30
14.59
13.71
13. 17
13.53
14.83
15.54
19.46
18. 89
JUN
JUN
2
19.64
18.59
19.84
20.39
17.77
13.81
12.36
15. 559
SUN
3
12. 19
14.804
JUN 4
12.85
15.317
15.377
15.179
15.003
-6. 80
14. 393
15. 218
-3.00
-2.00
15.405
14.500
MAY 1
MAY 2
MAY 3
MAY4
JUL
JUL
*JUL
1
1
11. 15
2
10.96
3
0
0
*J1JL 4
5840
52 50
44.20
4500
4910
51.40
70.10
6990
6970
69.70
74.60
72.60
47.10
30.60
33..60
30.00
27.70
23.60
19.50
0
0
SD
-4. 10
-5. 50
-12.00
-3.90
-4.30
-4.10
-7.50
-5.50
-6. 10
-8.00
-10.40
-11.00
-12.90
-14.40
-22.00
-20.50
-3.00
2.50
0
0
16. 741
17. 659
19.708
18. 664
16. 900
15. 681
16.446
16. 125
16.649
20.474
20. 742
19. 845
20. 766
21. 804
21.406
15.066
11.395
11.710
13. 383
12.510
8. 107
5. 219
0
0
-J
Table 20. Profit-loss summary, July futures, optimum short strategy.
DATE
TRADING YEAR
AND
ACTIVITY
j-u2
)-51.
:
AS1
JUL
CAS1
62-63
JUL
CASH
54
64-65
63-,'+
JUL
CAS4
JUL
CASH
65-66
JUL
CASH
JUL
66-67
67-66
CASH
CASH
17000
16000
5455 544.4 4444#4545*5555444 545 4.54,...
JUL
555555
68-69
69-70
JUL
CASH JUL
CASH JUL
555444444544444
OCT 2
4
BUY
' '5133
CASH
21400
21150
4
SELL JUL
1a5
21300
21503
19060
4
14700
17450
15150
14930
14830
16660
11.550
15930
11.150
13430
13500
4
MAY3
S
SELL CASH
21600
22550
:
BUY
17i
'
JUL
4
21510
22330
18550
15400
1501.0
15200
17900
13R50
16240
1080
50 -1410
16300
16350
14700
14010
15700
13230
13700
4
544444434444
PROFIT
OR LOSS
'
-1J
-2L1
430
-210
510
11.00
4
GROSS POFIT'
RETURN/OU.
AlO
2410
700
900
310
300
1920
160
200
1550
-200
-1(
190
1910
0210
1780
-1360
1210
2220
350
1.350
-.J!00
.1193
.1913
.3210
.1780
-0.1360
.1210
.2220
.0350
1350
SUMMAY TABLE
*
4'
S ACTIVITY
LOSS
40'
CASI
5
' NEt
OFtT
4
* P0FIT
5
'
AVERAGE
RETURN/AU '
PROFITABLE
615
-1 30
4'
' NO. OF TIS
9/10
4
.0815
4
4
*4S*4 #343 #4c33e* 44444 *44444444*444e44*4544*4444444454455
JUL
4
-0
'
3
4
6/it
4
4
.041.1
4
4
4444443434444*4##*444*4#*4#3#454444*4445434445*44445454*444443444
*
TOTAL
'
3
4'
3
1J5G '
2121
4
4
A/IC
.1056
4
4
S5S4SS434#444'44'*4*4####4443#4443*444#44344S4544444#4Y*4*4444#444#5
1
acceptable results eight out of ten years, either generating gains in
both cash and futures transactions or providing offsetting gains and
losses in the two markets.
Table 21. Strategy summary, optimum July short
strategy.
Cash
Possible Outcomes
Futures
Net
Frequency
+
+
+
+
+
-
+
-
+
-
6
0
2
0
+
-
-
1
-
-
-
+
-
1
10
Net Income Results
The July optimum short strategy involved an approximate seven
month hold. Considering the assumed costs with this hold gives the
following net income results.
Total net income (10.56- 15.51)
Cash net income ( 6. 15 - 14. )
Futures net income ( 4.41 - 1. 51)
-4.95 cents per bushel
-7. 85 cents per bushel
2.90 cents per bushel
The overall strategy returned a negative average net income of 4. 95
cents/bu. The cash costs of 15 cents/bu. contributed substantially
to the negative net income for the overall strategy. The futures
transactions were net contributors to the strategy, returning a positive 2.9 cents/bu.
31
The individual yearly transaction outcomes show four years,
(1962, 1963, 1964, and 1967) with returns sufficient enough to cover
the associated transaction and holding costs. Two other years (1966
and 1969) provided returns which were close to covering the assumed
costs. The remaining years generated negative gross return per
bushel.
Decision Rules
Examination of Chart 4 and the price patterns of the cash and
July futures prices for a two month period previous to the start date
reveal no specific basis patterns which would signal the trader when
not to use the optimum strategy.
Flexibility of Start-Stop Dates
The lowest average basis (considering ten full years of data)
occurred on October 2 with an average basis of 9.83 cents (Table 19).
The average basis before September 4 is lower than October 2 but
represents an average using less than ten years data for that date,
suggesting, but not documenting, opportunity to enter the transaction
with an average return/bu. at least as profitable as the optimum prior
to October 2. The average basis after October 2 is within a 1 cent
range until November 3. On the average, then, there is apparently
opportunity to enter the transaction from August 1 to November 3 with
20
10
-10
10
-10
Chart 4. Basis charts, July futures contracts, 1960-1970.
30
20
10
Chart 4.
Continued.
70
60
50
40
30
20
10
Chart 4.
Continued.
20
10
-10
10
-10
-20
10
-10
30
20
10
20
10
Chart 4.
Continued.
10
Chart 4.
Continued.
similar results, on the average, to the optimum.
The stop date, May 3, has an average basis of 20.39 cents.
The average basis figures near that date suggest opportunity to close
out the transaction from April 2 to May 3 with results similar to the
optimum; however, holding the strategy beyond May 3 would decrease
the average return by at least 2. 5 cents per bushel.
Opportunities for Short Strategies Using July Contract
The opportunities for short strategies using the July contract
over the analysis period involved a hold from the early part of the
marketing year to a later sale date. The average basis for the ten
years trends upward throughout the marketing year, indicating many
profitable short strategies are likely possible with this contract.
From the average basis one should note that the first seven
dates, August 1 through September 3, are Hstarredhl dates indicating
less than ten full years of market prices. By trial and error using
those dates as start dates and May 3 as a stop date one finds a
strategy from Aug 2 to May 3 returns 12.06 cents. This is a gross
return larger than the strategy selected from ten full years of data.
Optimum Long Strategy
Gross Income Results
The optimum long strategy selected from the July contract
involved a start date of May 3 and a stop date of July 2 (Table 19).
The strategy generated an average per bushel gross return of 9.43
cents per bushel and was profitable eight out of ten years (Table 22).
The cash transaction generated $14,930 of profit and $4,450
over the ten years, with seven years profitable overall and three
years generating gross cash losses, for an average/bu. gross return
of 10.48 cents. The futures transaction contributed $3, 640 of profit
and $4, 690 of loss in four profitable years for a negative average/bu.
gross return of 1.05 cents.
The results for individual years reflect one year, 1963, with
exceptionally large returns of 62.6 cents/bu. Two other years, 1962
and 1964, provided results of 23.6 cents/bu. and 13 cents/bu.
respectively, both of which were above the average. The remaining
seven years generated results below the average return per bu. for
the ten year period.
Table 23 presents the results in frequency of the possible gross
income results. There was one year, 1961, with a loss in both the
cash and futures markets and two years, 1960 and 1964 with profits in
both the cash and futures markets. The remaining seven years gave
Table 22. Profit-loss summary, July futures, optimum long strategy.
44444
44#44##4#444 s44
DATE
TRADING YEAR
AND
AC'tVI'v
E,3-1
JUL
51-62
CASH
JUL
62-63
CASH
JUL
CAS}
53_5l
JUL
54-65
CASH
JUL
65-66
CASH
JUL
CASH
66-67
JUL
67-68
CASH
JUL
68-69
CASH
JUL
69-70
CASH
JUL
CASH
MAY 3
4
BUY
' 17J
JUL
21510
4
SELL CASH
2000
4
18553
216iJU
15140
22550
13850
22303
16240
15400
16350
15200
14010
17900
13230
16300
13700
14700
15700
S
JUL 2
4
SELL JUL
1895C
2120fJ
17980
4
BUY
CA'H
198E0
a
1901
14309
19520
14200
16300
18860
14450
14830
19250
12850
16000
12840
14800
14200
11.250
15800
4
PROFIT
OR LOSS
20)
17
-319
S
GROSS PROFIT
RETURN/lU.
.9370
-570
2930
-743
7000
350
4
4
4
-100
60
1.00
-9.9610
.2360
.6250
.1300
-0.1430
.0380
.0340
0060
.0400
-4631
4
NET
NO. OF TIMES
PROFIT
PROFITABLE
-1051
4
4
4/IT
4
7/11
4
AVERAGE
RETURN/RU
4
S
4
4
500
340
-0.0105
4
.1648
S
S4#4S4444444444+#4444444#S4444SS*S444#
TOTAL
-9l.G
9430 *
4
450
380
1U48u
4
-390
-1430
14q3
CASH
1500
1300
LOSS
JUL
1900 -1160
5260
SUN41AY TAOLE
OFIT
2620 -4050 -1520
260
S*444S44S44S4#4#444
ACTIVITY
950
o13
379
a
-3U
4
5
4
.0943
5
4*45*554445444 54444*ca*444**S5a5*54**4*5S5S*44S*S*#4553SS45*#44444
91
offsetting gains and losses.
Table 23. Strategy summary, optimum July long
strategy.
Cash
Possible Outcomes
Futures
Net
Frequency
+
+
+
-
+
+
1
+
-
+
5
-
+
-
1
+
-
-
0
-
-
-
1
2
10
Net Income Results
The optimum long July strategy involved an approximate two
month hold generating no cash costs and . 86 cents/bu. costs for the
furtures transactions. Using these assumed costs generated the following net income results.
Total net income
9. 43
Cash net income (10.48
Futuresnet income (-1.05
(
-
.
86)
0
=
) =
.86)
=
8. 57 cents per bushel
10.48 cents per bushel
-1.91 cents per bushel
The overall optimum long strategy returned a positive net income of
8.57 cents/bu., 10.48 cents/bu. contributed from the cash transactions and -1.91 cents/bu. from the futures transactions.
There were seven years with returns sufficient enough to cover
the assumed costs associated with the transactions. The remaining
92
three years (1961, 1965 and 1968) provided returns insufficient to
cover the costs.
Decision Rules
Examination of Chart 4 and the price of cash and futures mar-
kets for two months previous to the start date reveal no clear cut
decision rule which could improve trading efficiency. However, the
individual trader could substantially improve the results by termi-
nating a cash or future position before large losses are actually
incurred within the particular market.
Flexibility of Start-Stop Dates
The start date, May 3, had an average basis of 20. 39 cents
(Table 19). The average basis for April 2 to May 3 offers opportuni-
ties to start the strategy with results similar to the optimum.
Acceptable opportunities to complete the transaction generally
exist from June 1 to July 2. As the stop date approaches July 2, how-
ever, the risk increases because the contract expires. The startstop dates offer about one month entry and exit time, which is likely
of sufficient flexibility for most uses of the strategy.
Opportunities for Long Strategies TisingJuly Contract
Limited opportunities existed using the July contract for long
93
strategies since the most profitable strategy involves two market
years. The most profitable strategy was discussed previously and
involved a strategy with start dates from April 2 through May 3, and
stop dates in June or July.
Another long opportunity exists with a start date from January
3 to February 3 and a stop date before April 1; however, the returns
on the average would be less than 3 cents/bu. Considering transac-
tion costs, this latter strategy is not likely to be very feasible under
most circumstances.
94
VII. SEPTEMBER CONTRACT RESULTS
Optimum Short Strategy
Gross Income Results
The most profitable strategy selected from the September con-
tract involves a start date of October 2 with an average basis of
7. 39 cents. The stop date, May 3, had an average basis of 17. 88
cents (Table 24). The profitable years returned $12, 670 in eight
profitable years while the two loss years decreased the outcome of
the strategy by $2, 180 (Table 25).
The cash transactions resulted in profit nine out of the ten
years with an average per bushel return of 6. 15 cents. This cash
strategy had an excellent probability of success over the analysis
period. The one loss year, 1960, generated only $100 in loss while
the profitable years contributed $6, 250 in profit.
The futures transactions generated an average return of 4. 34
cents /bu. in six profitable years. The futures transactions resulted
in $6, 420 in gross profit and $2, 080 in los-s.
The individual yearly outcomes reveal one trading year, 1960,
with a loss in both the cash and futures market. This strategy also
generated six years with a profit in both the cash and futures markets.
The remaining three years generated offsetting gains and losses.
Table 24. September futures contract: average basis, high and low basis, and standard deviation
of basis, 1960-1970.
1/
Basis 1/
Basis.
Date
*OCT
OCT
OCT
OCT
NOV
NOV
NOV
NOV
DEC
DEC
DEC
DEC
JAN
JAN
JAN
JAN
Ave.
High
Low
45.00
4
10.99
7.39
8.01
8.25
1
7.60
-2.50
-4.30
-4.80
-5.00
-3.30
-6. 10
13. 376
15. 212
1
2
3
2
3
4
1
2
3
4
1
2
3
4
FEB 1
FEB 2
FEB 3
FEB 4
MAR 1
MAR 2
MAR 3
MAR 4
1/
39. 20
11.20
42.70
38.50
41.50
40.50
48.50
46.90
40.90
41.10
38.20
38.70
41.20
46.40
49.90
48.00
54.50
54.90
59.90
56.70
50.40
10. 86
42. 10
10.94
12.21
43.00
47.00
8.21
10. 13
9.02
8.70
9.01
8.70
9.48
10.20
12.66
13.02
13.01
13.76
13.71
12.92
12. 17
Cents per bushel.
-4.60
-7.50
-13.80
-11.50
-12.80
-9.30
-9.10
-9.60
-5.80
-4.90
-6.90
-8.90
-9.50
Date
Ave.
High
Low
SD
13. 422
12. 597
13. 397
12. 718
APR 1
APR 2
APR 3
APR 4
13. 12
49.50
68.00
68.10
16. 956
20. 670
13.463
MAY
MAY
MAY
69.60
72.70
-7.50
-6.00
-9.60
-7.90
-8.20
-10.20
70-. 50
-12. 80
44.50
26.70
19.50
26.00
23,40
19.60
16.90
-13.30
-15.60
-17.00
-24.80
-23.50
-6.80
.50
-0.50
-5.50
-1.00
-5.80
SD
15.646
15.444
15.104
15.590
14. 878
14.436
15.227
15. 613
14.698
16. 827
17.887
-9. 80
19. 619
18. 804
-6.80
17.152
-8. 10
-15. 80
15. 944
16. 829
16. 334
-6.60
1
2
3
MAY4
JUN 1
JUN 2
JUN 3
JUN 4
JUL 1
JUL 2
JUL 3
JUL 4
9.52
9.36
9.88
8.13
8.53
8.30
7.94
68.. 10
1
8.71
8.08
2
6.58
18.00
18.40
22.70
20.40
23.70
27.90
27.60
24.60
0
0
0
0
AUG 1
AUG 2
AUG 3
AUG 4
SEP
SEP
16.97
16.62
17.28
16.33
17.35
17.88
14.89
10.64
*SEP 3
*SEP 4
8.79
7.94
7.95
-7. 50
20.937
20. 182
21.449
22. 049
21. 621
15. 223
11.071
11.463
13.187
12. 388
7.886
5.451
5.446
8.612
7.261
7.821
8.777
-4.40
-6.40
10.471
-10. 30
9.960
0
0
0
9. 857
0
U'
Table 25. Profit-loss summary, September futures, optimum short strategy.
44444####.6#4#####cm######4#m8#.#44844##4 44
DATE
#444
4444444 4#,.4#4344.#.444,4#44#.4#4.#.,#4
44
TRADING YEAR
AND
ACTIVITY
4
6;-61
61-o2
AH
F
CASH
#44444446644446446*46444
62-63
SEP
CASH
61-61+
SEP
SEP
CASH
65-66
61+-65
SEP
CASH
CASH
SEP
66-67
CASH
67-68
SEP
CASH
SEP
68-69
CASH
6970
SEP
CASH
SEP
4
OCT 2
S
BUY
3 2C1fl
CASH
1fl1
C
SELL S''
l803
6
MAY3
21150
2158j
15190
11+700
17580
15130
216Jfl
22550
V
SEP
1P13U
3
PROFIT
OR LOSS
4
3
'+J
-1+'
RETURN/Pu.
U.
6
22330
18680
217.+C
-i0
-1)'J
GROSS PRCI
14090
-I6U
68U
11+00
151.00
15250
800
2330
700
15200
16000
16930
V.550
16230
11+150
13730
13750
16480
1070
50 -1490
3
8
4
-130
1420
.'U1+i
.2080
.3130
.1770
-0.11+1+0
.1120
.2130
.0440
.11+20
3
HUT
NO. OF TINES 6 AVERAGE
PROFIT
PROFITAeLE
,15C
6
0/it
6
IJ1+9C
4
1550
440
1 ],
-1
290
150
2130
4
1?57
1830
1120
RETURN/F3U
6
4
.loiS
+
4
4
44#+S+4#*.V**GCC4*6VCC*44#4*#*4,3#4*4#+#644343.e4#43.434444#443#4
4
300
13880
-11+1+0
46446+.44*46*448*#46*,46V*4,##4*48##6+6#*4#*.,44#36##644##4443##4+4
6
4
SEP
-?13fl
1+31+U
6/10
.01+31+
8
S
TOTAL
220
131+40
1770
Lncs
*
900
11+400
15700
3130
66+43464#,4#64.46+I###86## #444644446666344434*6*463344363364444463
CASH
16710
14700
2080
SU1tAY lADLE
2FTT
16300
4J
6334S#6*4,#4*#6,+##,#84#4,44.36#,#64#3,34#,6#3,#444#,4I,,4344,3444
ACTIVITY
17900
1406)
S4e6#36#e# #+64#6*83444*####SVfl#4433#64344633*4434#3444433446634444#4446446
6
17000
4
SELL CASH
BUY
21500
1936.0
4
8/li
3
104
4
34#*###44$44#-448644*64'#*#8##4444#446#44*3#4##*3453+*#+4*#4634443+3
3646664348#*64#4e4664668666S6466466SS64
97
Table 26 presents a summary of the type of results and their frequency of occurrence.
Table 26. Strategy summary, optimum September
short strategy.
Possible Outcomes
Cash
Futures
Net
Frequency
+
+
+
6
-
+
+
+
-
+
-
+
0
2
0
+
-
-
1
-
-
-
1
10
Net Income Results
The optimum September short strategy involved approximately
a seven month hold; the cash transactions generated 14 cents per
bushel costs while the futures transactions generated costs of 1.51
cents per bushel. Deducting these costs from the gross results pre-
sented earlier leaves one with the following net income results:
Total net income
Cash net income
(10.49 - 15.51)
( 6. 15 - 14.0 )
Futuresnetincome ( 4.34- 1.51)
=
-5.02 cents per bushel
-7. 85 cents per bushel
2.83 cents per bushel
The overall strategy returned a negative average net income of 5. 02
cents/bushel. The cash transactions and the holding costs associated
with the seven month hedge period contributed a negative net return.
The futures contributed a positive net income of 2. 83 cents per bushel
to the overall strategy.
Only four years (1962, 1963, 1964 and 1967) generated returns
sufficient enough to cover the assumed costs associated with both the
futures and cash transactions.
Decision Rules
The basis chart for the September contract (Chart 5) shows the
combined price movement of the cash and futures markets. Examining
Chart 5 and the price patterns (Appendix UI) for decision rules which
would signal when not to use the optimum strategy reveals no clearcut decision rule which could be applied to more clearly identify when
the optimum strategy might be applicable in the next period.
Flexibility of Start-Stop Dates
The flexibility of the start date for the optimum strategy
selected from the September contract can be evaluated in Table 24.
The optimum start date was Oct. 2 with an average basis of 7. 39
cents. The average basis was within a 1 cent range of the Oct 2 date
until Nov. 2 indicating a trader might expect quite similar results on
the average from using several start dates within that one month
time period.
The closing date, May 3, appears more critical. The average
100
30
20
10
Chart 5.
Continued.
101
70
60
40
30
20
10
Chart 5.
Continued.
102
10
-10
103
30
20
10
1,J
10
-10
10
-10
104
basis is within an approximate 1.5 cent range from April 2 to May 3.
Beyond May 3, however, the average basis takes a large drop; consequently, holding until May 3 may involve some considerable degree
of risk.
Opportunities for Short Strategies Using September Contract
Examination of the overall September contract reveals one period when successful short strategies may be initiated to protect the
trader from price movements and/or increase income through an
effective speculative strategy. The time period was identified and
discussed when consideration was given to the optimum short strategy.
The range of start-dates may be broadened, however, to include
start dates between October 2 and December 4. The most effective
range of stopdates is between April 2 and May 3. The gross returns
from using this range of start-stop dates would have generated on the
average from 7 to 10 cents /bu. gross returns.
Optimum Long Strategy
Gross Income Results
The most profitable long strategy for the September contract
involved a start date of May 3 and a stop date of September 2 (Table
24). This strategy returned an average gross return of 11.3 cents /bu.
Table 27. Profit-loss summary, September futures, optimum long strategy.
444444444
DATE
AND
4
4
1-62
CAS'l
SEP
#444
44434444
6i--1
ACTIVITY
SE
62-60
CASH
CAsI
SEP
TRADING YEAR
444444444444
6.-65
63_6L.
SEP
CASH
SEP
44
44444444444443
65-66
CASH
SEP
CASH
66-67
SEP
CASH
4334444443444434444444444444444444
67-68
SEP
CASH
68-69
SEP
69-70
CASH
SEP
CASH
4
MAY 3
4
BUY
l31J
SEP
4
i88o
2171+1
SELL CASH
21630
15253
22550
14C60
22300
16480
15400
167i0
15200
14'00
17900
13440
16300
13880
14700
15700
4
SEP2
4
SELL SEP
10053
201+90
18700
4
BUY
CASH
?1303
4
14360
23030
O1ZSL
15460
14961
18940
14800
14750
18650
11940
16000
13160
14400
16680
14000
15650
4
4..#4#,#
PROFIT
OR LOSS
-1333 -lu
R5
4
GROSS PRCWTT
-0.11+50
4
20
2520
-330
2540
-1.L'OuIj
.251+0
4
RETUR4/9U.
354
-890
7341
11.00
.6450
600
21.60 -3450 -1960
1900 -2460
1900
-280
700
2800
2000
-990
-60
-560
420
2550
.2000
-0.1990
-0.0060
-0.0560
.0420
.2850
50
SU1'lAY TASLE
34.4#,4#,4,#44#4#c#4.##444344*#4,4444444444448#44
4
4
*
8
ACTIVITY
'OFIT
SEP
4
LOSS
7533
4
-5540
4
NOT
NO. OF TIRES
PROFIT
PROFITAILE
690
4
4
444*4444 4#444###44444444#44#444444##4444#
CASH
4
152n
--.750
4
1j611
4
AVERAGE
RETURN/BU
5/11
4
4
.0069
4
44.8,3...,..s 3.4*.
3/IC
4
.1161
4
4
444*3*84444444#44#4#4444e#44#444484444#43#4s344##44*4444444334434
4
'2kfl
TOTAL
4
-11500
4
11330
4
5/11
4
.1130
4
8
4
*4e44.4*,##4444,4.4..#*#.444444#.344444#434+443.4..4
I-
C
01
106
and was profitable five out of ten years (Table 27). As with several
of the other long strategies, this strategy encompasses two market
years and therefore may have limited, if any, use to Soft White wheat
handlers.
Cash transactions generated $15, 360 profit for eight profitable
years; the two other years generated $4, 750 loss. The futures transactions returned $7, 530 profit and $6, 840 loss for an overall gross
return of $690 for the ten year period. The futures transactions were
profitable five out of ten years for this strategy.
Turning to the individual yearly outcomes, it can be seen that
seven years gave partially offsetting gains and losses. The remaining
three years generated a profit in both the cash and futures transactions. The frequency of possible outcomes for the strategy are pre-
sented in Table 28.
Table 28. Strategy summary, optimum September
long strategy.
Cash
+
Possible Outcomes
Futures
Net
Frequency
-
+
+
+
-
+
+
+
-
+
-
0
2
2
+
-
-
3
-
3
0
10
107
This optimum strategy generated a windfall gain of 64. 5
cents/bu. in 1963-64 which tends to distort the results and make the
overall strategy look better than it actually is.
Net Income Results
Consideration of the assumed per bushel costs associated with
this holding period gives the following net income results:
Total net income
Cash net income
(11.30 - 1.12)
(10.61
Futuresnetincome (
.69
10.18 cents per bushel
0
10.61 cents per bushel
1.12) = -.43 cents per bushel
)
The overall strategy returned a positive net income of 10. 18 cents
per bushel, the futures a loss of . 43 cents per bushel, while the cash
transactions contributed a positive 10.61 cents/bu. to the strategy.
In five of the ten years (1962, 1963, 1964, 1968 and 1969) the
strategy returned a gross income large enough to cover the 1. 12
cents/bu. costs associated with the futures transactions.
Decision Rules
Referring to the basis charts for the September contract and
the price patterns for cash and futures markets reveal no consistent
decision rule which would signal whether or not to follow this strategy
(ChartS; Appendix III).
Flexibility of Start-Stop Dates
May 3 had the highest average basis and hence was the best
average start date. Average basis on dates from April 2 to May 3
indicate similar results on the average could be obtained by using this
range of start dates. The dates before April 2 and after May 3 mdicate substantially lower basis and hence lower returns.
The stop date appears much more critical; the average basis is
substantially above the low on September 2 and the contract month is
expiring.
Opportunities for Long Strategies Using September Contracts
Evaluation of the average basis data reveals two time periods
where long hedging strategies may be effectively executed with the
September contract. The first strategy was pointed out when con-
sideration was given to the optimum strategy.
The second opportunity involves a start date of February 1 and
a stop date of March 2. The average basis takes a drop from 13. 76
cents to 10. 86 cents in this time period.
109
VIII. SUMMARY AND CONCLUSIONS
The results of the optimum strategies selected from the various
futures contract months provide a fairly accurate analysis of the
maximum income results which could have been experienced by fol-
lowing one of several strategies year after year throughout the
analysis period. Those optimum results for short strategies are
presented in Table 29 which represents a partial summary of the
information presented in Chapters III through VII on the optimum
short strategy using each contract month.
It is important to recognize the similarities among the results
of the various optimum strategies. The results from the five contract
months can be broken down into different types of results according to
the correlation between the start-stop dates, number of times pro-
fitable, and average returns per bushel. The contract months July
and September present essentially identical results except for the
average returns for the futures transactions where there is a
.
07
cents per bushel difference. This, however, does not indicate the
contracts are identical, or that such a similarity of pattern will
necessarily be repeated.
Short strategies using March and May contracts have the same
optimum start date (September 2) but are significantly different in
stop date, number of times profitable, and returns per bushel.
Table 29. Summary, optimum short hedge strategies, by contract month.
Contract
Start
Month
Date
December
March
May
July
Sep.
Mar. 2
Sep. 2
Sep. 2
Oct. 2
Oct. 2
No. of Years Profitable
Stop
Date
Cash
May 3
Futures
Overall
Cash
7
7
8
8
5
7
May 2
8
6
9
May3
9
6
8
3.72
7.01
8.64
6.15
May 3
9
6
8
6. 15
Feb.
1
Ave. Gross Return
Futures
Overall
(cents /bu.
3.23
2.02
5.87
4.41
4.34
6.95
9.03
14.51
10.56
10.49
0
iii
Strategies using the December contract stand alone, having no char-
acteristics closely related to the other contract months.
Table 30, in conjunction with Table 29, will add some additional
clarity as to the relation among the contract months, the time per
iods of likely use and their possible range of returns for short
strategies from the various contract months.
Table 30. Summary, short strategies, range of start-stop dates and
range of average returns per bushel over the analysis
period, by contract months.
Range of Ave.
Start Range
December
March
Mar.
1
Sep.
1
May
Jul.
4
July
September
Oct.
Oct.
2
2
Mar.
- Sep.
Gross Return
Stop Range
May 2
3
3
Jan.
-
3
May 2
May 2
-
2
3
8. 56 to 10. 56
3
8.49 to 10.49
May
3
Mar.
1
Apr. 4-May
Sep. 4
Nov. 2
Nov. 2
(cents/bu.
4. 95 to 6.95
7. 03 to 9.03
12.41 to 14.51
May
May
If a trader had selected any start date from within the start
range of Table 30 for any given contract month and any stop date from
within the corresponding stop range he would have experienced an
average gross return per bushel (in cents) within the indicated range
of average returns. Considering
the
December contract, for example,
a short strategy started on March 1 and concelled out on May 3 over
the analysis period would have returned an average of 6.46 cents/bu.
(between 4. 95 and 6. 95 cents /bu.
,
as indicated in Table 30).
112
It appears from the material presented in Table 30 that effective
short strategies could generally have been started from July 4
to
November 2 and terminated from January 3 to March 1 and/or April
4 to May 3, assuming the trader could effectively match his anticipated cash transactions with one of the contract months.
The selection of the optimum short strategies for any individual
trader from among the various contract months should encompass
consideration of repeatibility of the profit or loss (probability of
profitable outcome) start-stop dates which coincide with time periods
consistent with the trader's marketing practices, and the consistency
of returns from year to year without windfall gains and losses in one
or more years distorting the "average" returns and increasing the
risk exposure from year to year.
Review of Table 29, Table 30 and the yearly results of the
transactions in Chapter II through Chapter VII shows that good results
were obtainable for each of the five contract months. It is significant
to note that in all contract months a profit was made in both the cash
and futures markets. It would be impossible, however, to rank the
contract months as to which is most preferable since each one had
unique desirable characteristics. The "best" contract month and
strategy depends on the individual circumstances of traders.
Table 31 partially summarizes the results presented in earlier
chapters on the optimum long strategies for each contract month,
Table 31. Summary, optimum long hedge strategies, by contract month.
Contract
Start
No. of Years Profitable
Stop
Ave. Gross Return
Month
Date
Date
Cash Futures
Overall
Cash
Futures
Overall
December
March
May 3
Jul. 4
7
4
6
12. 07
May3
8
5
6
May
Jun. 2
7
4
7
10.61
1.71
July
September
May 3
Sept. 2
Sep. 2
Jul. 2
Sep. 2
7
4
8
10.48
8
5
5
10. 61
May 3
(cents/bu.
-1.36
1.46
1.86
-1.05
.69
10.71
12.07
3.57
9.43
11.30
II-
114
As with the short strategies the long strategies are highly cor-
related as to start-stop dates, number of times profitable and average returns per bushel. The same contract months, however, are
not correlated as they were in the summary of the short strategies.
March and September contract strategies seem to have the most
coincidence of the afore-mentioned items. July and December con-
tract strategies also seem to have similarities, but the May contract
strategy seems to stand alone.
December, March, May and July contracts have the same start
date ranges but with slightly different stop ranges, which would give
average returns within two cents of the optimum strategy for that
contract month. The May contract has a similar stop range but with
a substantially lower range of gross returns.
Table 32. Summary, long strategies, range of start-stop dates and
range of average returns per bushel over the analysis
period, by contract months.
Start Range
Stop Range
Range of Ave.
Ret. /bu.
(cents/bu.
December
March
May 2
May 2
May
Jun. 2
July
September
May 2
May 3
May 3
Jul.
1
Jun. 4
Sep.
Aug.
2
May 3
Jul.
1
Sep.
2
May 2 - May 3
1
-
Sep. 3
Sep. 3
Sep. 3
Jul. 2
Sep. 2
8.71 to 10.71
10.07 to 12.07
2.57 to 3.57
7.43 to 9.43
9.30 to 11.30
115
The selection of the optimum long strategies from the various
contract months did not identify strategies with the generally desir-
able characteristics of repeatibility of the profit or loss on yearly out-.
comes (number of times profitable), start-stop dates which are
realistically usable by many traders in the White wheat industry, and
consistent returns from year to year without windfall gains and losses
in any given year.
In conclusion, the use of the current Chicago wheat futures
market as an alternative to the proposed (or a non-existent White
wheat futures market) appears to be feasible for short strategies conducted during specific marketing periods within a market year, pri-
manly from harvest until sometime between March and May. The
trader, however, would have to accept the non standard Uspeculative
hedge' results of consistently making profit in both the cash and
futures transactions. The long strategies or long futures position
appears less advantageous, with few characteristics of either an
effective "speculative' or 'normal" hedge strategy.
Hedging Soft White western wheat under these circumstances is
most definitely a 'speculative hedge" rather than a traditional price
protection hedge. The results suggest fairly strongly that speculating
on optimum longer term strategies using both cash market and existing wheat futures markets may well be more profitable than just trading cash wheat or wheat futures alone.
116
BIBLIOGRAPHY
1.
2.
Baer, Julius B. and Lon Glenn Saxon. Commodity exchanges and
futures trading. 3rd ed. New York, New York. Harper &
Brothers, 1949. 321 p.
Banking: What every banker should know about commodity futures
markets. Reprinted from Journal of the American Bankers
Association. New York, Merrill Lynch, Pierce & Smith Inc.,
Jan. 1968. np.
3.
Brooks, Bruce Lloyd. An analysis of the Washington wheat market relative to futures trading. Doctoral dissertation. Ann
Arbor, Michigan, University Microfilms, 1959. 226 numb.
leaves. (Microfilm)
4.
Hedging wheat as a marketing alternative for
Washington country elevators. Pullman, August 1966. 14 p.
(Washington. Agricultural Experiment Station. Bulletin no. 673)
5. Gold, Gerald. Modern commodity futures trading. 5th ed. New
York, Commodity Research Bureau, Inc., 1968. 255 p.
6. Hedge Guide to the Feedlot Operator. New York, Merrill Lynch,
Pierce, Fenner & Smith Inc., n. d. 4 p.
7. Hedger's Handbook. New York, Merrill Lynch, Pierce, Fenner
& Smith Inc.
,
1970.
55 p.
8.
Hieronymus, T.A. Hedging for country elevators. Urbana,
University of Illinois, Agriculture Experiment Station, March
1968. (Publication no. AERR-91.)
9.
Making use of basis changes to earn income.
Urbana, University of Illinois College of Agriculture, n.d. 19 p.
(Publication no. AE-3537)
10.
Uses of grain futures markets in the farm
business. Urbana, September 1963. 88 p. (University of
Illinois Agricultural Experiment Station. Bulletin no. 696)
11. Hoffman, Wright G. Future trading upon organized commodity
markets in the U.S. Philadelphia, University of Pennsylvania
Press, 1932. 482 p.
117
12. Hollands, Harold F. Pacific Northwest wheat. Corvallis, May
1956. 48 p. (Oregon State University, Agricultural Experiment
Station. Station Bulletin no. 556)
13. How to buy and sell commodities. New York, Merrill Lynch,
Pierce, Fenner & Smith Inc., January 1970. 60 p.
14.
Nairn, John and Bruce Brooks. The Pacific Northwest wheat
market and futures trading. Pullman, April 1961, 34 p. (Washington State University Agricultural Experiment Stations project
1387, Technical Bulletin 38)
15. Pacific Northwest wheat summary. Portland, Statistical Reporting Service, April 30, 1971.
16. Proceedings of the Hedging Symposium for country grain elevator
operators. Presented by the J3oard of Trade of the City of
Chicago, December 11-12, 1963. 111 p.
17. Proceedings of second annual workshop on wheat marketing in the
northwest. Presented by Institute of Agricultural Sciences,
Washington State University in cooperation with Washington
Association of Wheat Growers, Pullman, Washington, January
2-4, 1963. 72 p.
18.
Quality wheats for the Pacific Northwest. Spokane, The Pacific
Northwest Crop Improvement Association, July 1968. 11 p.
19. Seevers, G.L. Pacific Northwest white wheat exports during the
l960's. Corvallis, November 1970. 9 p. (Oregon. Agricultural
Experiment Station. Special Report no. 314.
20. Task Force. Issues and alternatives in wheat production and
marketing with emphasis on the Columbia Basin, Oregon.
Corvallis, Cooperative Extension Service and the Agricultural
Experiment Station, Oregon State University, January 1970.
22 p.
21. Wals ton & Co. Understanding the commodity futures markets.
New York, Commodity Research Publications Corp., 1966. 40 p.
22. Wheat Futures. Chicago, Chicago Board of Trade, n.d. 3 p.
118
23. Wirak, Owen S. Hedging for Pacific Northwest country elevator
firms, October 1966. 27 numb. leaves. (Washington State
University. Cooperative Extension Service. Contract no. E. M.
2709)
24. Wood, George E. Economic considerations in marketing Oregon
grain: factors affecting Columbia Basin producers. Master's
thesis. Corvallis, Oregon State University, 1966. 91 numb.
leaves.
25. Working, Holdbrook, "Western needs for futures markets,
Proceedings of Western Farm Economics Association, July,
1952.
APPENDICES
119
APPENDIX I
THE PNW WHEAT INDUSTRY
A general understanding of the operation of the PNW wheat
industry and grain movement is important for an understanding of the
implications of various hedging strategies. It would be impossible to
describe in sufficient detail which strategies could be used by the different segments of the White wheat industry, but some general conclus ions will be drawn from the hedging strategies presented earlier
and evaluated herein.
Types of Wheat and Uses
The PNW wheat region includes parts of Oregon, Washington,
and northern Idaho. The quality of the wheat produced in this area is
primarily determined by the genetic characteristics of the variety,
soil, and climatic factors of the specific area. High protein wheat is
generally produced in areas with less than 1Z inches of rainfall,
medium protein in areas of 10 to 14 inches and low protein in areas of
greater than 14 inches of rainfall (18, p.
1).
The wheat is primarily marketed by market classes and sub-
classes. Four main classes of wheat are produced in this area-White, Hard Red Winter, Hard Red Spring and Soft Red Winter (12,
p. 3). White wheat can then be broken down into Hard White, Soft
120
White, White Club, and Western White (18, P. 3). The White wheat
varieties are primarily used in producing cookies, pastries, crackers,
noodles, chapattis, and family flour.
Marketing Channels
The marketing of grain in the area under study generally follows
a pattern as shown below (3, p. 49). Variations in this pattern and
amount of flow to specific segments occur when the operations of the
Commodity Credit Corporation and government programs change, as
well as when PNW and world supply and demand conditions change.
PRODUCER I
Country Elevator
Feed
I MerchandiserF
Exporter
Fore i
Seed
Commodity
1 Terminal Elevatorl
I Flour MillerI
Forein(
Credit
Corporation
Govt. Export
Pro crams
IDomestic
Cons umpt ion
Figure 1. Marketing pattern, PNW wheat.
Foreign
121
The usual movement is westward from the country producing
areas to the coast terminals on a 15-day shipment contract. This
means the seller generally receives the coast price minus the freight
and handling costs from his shipping point to the coast. The 15-day
shipment means the seller has 15 days from the day the contract was
dated to load and ship the wheat. When the wheat is loaded and billed
it then is the property of the buyer who assumes all the risks from
that point (3, p. 34).
The producer in this marketing channel represents the starting
point in the marketing process. During and after harvest, which
starts from approximately the first week in July and extends into the
first week in September, the producers generally deliver their grain
to country elevators which are usually controlled by farm cooperative
associations (cooperative country elevators initially handle about 70%
of all the wheat marketed). There is enough storage in the country
for approximately two average size crops, primarily due to earlier
years when the CCC storage programs were much more liberal (14,
p. 7).
In most cases, this initial delivery to a country elevator does
not represent sale of the producers' wheat (17, p. 52). The producer
usually maintains the title to the wheat until it is sold to a merchan-
diser, feeder, exporter or miller. As was reported by Woods in
"Economic Considerations in Marketing Oregon Grain, " "thirty-four
122
percent of the growers sold the crop all at one time, whether after
harvest or at some other time within the marketing year.
Farm cooperatives in the PNW are in the storage and handling
business and generally only temporarily acquire ownership of wheat.
They buy wheat from producers for resale when they have bids from
exporters or millers. This eliminates price uncertainty since they
are buying against previous (or contingent) sales.
The handling and storage costs of the numerous country eleva-
tors vary with the different companies but typical handling charge (in
and out of the elevator) is 4. 5 cents per bushel and storage charge is
about 1 cent per bushel per month. Because of competition from farm
storage in recent years, and for other competitive reasons, this
charge has in many cases fallen below 1 i/mo.
The terminal elevators in the PNW are closely associated with
the operation of the exporters, frequently being highly integrated by
exporter ownership. They often find it necessary to hold grain in
storage to fulfill the contract commitments of these exporters.
Terminals do not generally have price protection since they have not
made forward sales and they must take the risk of price change.
Some of the terminal elevator operators are not integrated by
exporters and are performing a storage service to all segments of the
industry. In order to do this, the terminals must abosrb the price
risk within the normal business transactions for any net positions
123
they hold.
The miller generally tries to avoid the risks of price change by
maintaining a balanced position between forward flour sales and wheat
purchases. This is not always possible because at certain periods
throughout the marketing season the desirable quality and quantity of
wheat is not available so he must at times store future grain needs in
terminal elevators as unhedged inventory.
The exporter forms the final link in the movement of wheat from
the producer to foreign buyers. Generally, exporters try to maintain
a balanced position but this is not always possible or desirable. If
exporters were always to maintain a balanced position and only trade
on margins, they would experience unfavorable income results.
Exporters indicate in some cases they anticipate the foreign buying
patterns, buy wheat and wait for favorable price changes. The major
factors affecting exporters are government programs of the U.S. and
foreign countries.
In summary, the marketing channels in the PNW are such that
at each point--the producer, the country elevator, the terminal market and the exporter--there are unhedged inventories, inventories
being build or contemplated. The long and short cash positions are
held particularly throughout the first nine months of the marketing
year when the majority of PNW wheat is traded. To protect these
inventories against the risk of price change, effective hedging
1Z4
strategies are needed to protect the net long and short position of
various traders during these time periods.
Economic Factors Affecting Price
The prices and price fluctuations of PNW White wheat are the
result of powerful economic forces. The three basic factors cons id-
ered here that affect price are: (1) the total supply available, domestic and foreign,
(2) demand, foreign and domestic, and (3) the
government programs, domestic and foreign.
Total White wheat production is a function of the acreage har-
vested and yield per acre. The yield per acre is dictated by man's
technology, the soil and the weather. Production, when coupled with
inshipments (primarily from Montana and other points East) and
carryover, equal the total stocks of wheat on hand.
Government programs and past prices of wheat have helped to
limit the number of acres planted to wheat. If prices are high and
the government programs permit, more wheat will generally be
planted. Table 33 represents the statistics for PNW wheat production,
supply and disposition for all wheat and White wheat from 1960 to
1970.
The disposition for wheat in the PNW can be broken down into
three main utilizations: (1) amount used for feed and seed, (2) food
consumption and (3) the export use.
Table 33. Supply and distribution of Pacific Northwest wheat (1,000 bushels).
All Whe
Year
Beginning
July 1
Supply
Total
Carryover
Stocks
Production
1960
79,155
101,587
1961
56,421
1962
Disposition
Rail & Water
Shipments
Distribution
Carryover
of Stocks
Totala
Supply
Seed
Feed
53,643
234,385
3,317
2,403
35,623
143,121
184,464
56,421
85,525
38,356
180,302
3,049
1,887
37,345
109,811
152,092
27,021
27,021
102,722
58,390
188,133
3,130
2,050
35,392
136,756
177,328
16,476
1963
16,476
110,751
78,321
205,548
4,641b
36,865
166,342
207,848
11,853
1964
11,853
124,471
65,430
201,754
3,843
7,701
32,213
143,703
187,460
24,813
1965
24,813
136,429
116,462
377,704
3,389
14,426
31,614
185,307
234,736
33,275
1966
33,275
130,784
87,809
251,868
4,597
4,558
32,844
194,411
236,410
18,869
1967
18,869
168,265
114,759
301,893
4,227
8,039
33,450
235,030
280,746
24,526
1968c
24,526
139,137
122,415
285,978
3,714
12,568
36,587
188,672
241,541
47,548
1969
47,547
140,597
111,824
301,972
3,574
9,524
31,779
213,606
258,483
39,722
1970
39,722
145,332
99,834
284,888
3,825
7,187
34,292
216,237
261,541
24,566
Inshipments
Milled
a
White Wheat Only
1966
18,285
125,683
3,753
147,721
4,418
4,558
5,581
119,853
136,410
9,121
1967
9, 121
162, 627
10, 409
182, 721
3,889
8,039
8, 257
143, 801
163, 986
15, 199
l968'
15,199
128,888
15,950
160,032
3,200
12,568
12,725
90,946
119,439
36,907
1969
36,907
129.279
2,047
168,233
3,005
9,524
12,736
110,422
135,687
18,388
1970
20,368
126,234
2,064
7,187
148,666
3,255
11,910
106,155
125,507
6,139
aThe sum of Total Distribution and Carryover of Stocks does not equal Total Supply. The difference is classified as "Unaccounted For."
bincludes Feed.
Coregon and Washington only.
Source: United States Department of Agriculture, Statistical Reporting Service, Portland, Oregon.
LT1
126
There is an inverse relationship between the quantities of wheat
fed to livestock and the price. As the price falls the amount used as
feed goes up (20, p. 7). Wheat is used as cattle, poultry, and hog
feed but to date the use has generally been in relatively small amounts.
In future years wheat as a source of feed is expected to increase,
although such increase will certainly be influenced by availability and
price of other feed grains.
As can be seen from Table 33 the amount of all wheat and White
wheat used for seed and flour has remained relatively constant
throughout the time period 1960-1969. There is apparently little rea-
son to expect this trend to change much in the foreseeable future.
By far the most important single economic factor in the PNW
wheat industry is the export markets. The export markets have for
many years provided the principal outlets for White wheat. In the
1960's over 80% of the White wheat production was exported. India
and Japan have been the principal receivers of this wheat, together
taking nearly 62% of the total exported (19, p. 3). These export sales
have been made possible in large part by FL 480, the Commodity
Credit Corporation, and the export subsidy program.
Table 34, taken from "Pacific Northwest White Wheat Exports
During the 1960's" by Gary Seevers, shows the breakdown of total
exports by cash and concessional sales. The table is arranged so that
concessional aspects of the programs appear in increasing order from
Table 34.
Cash and concessional White wheat exports from Pacific ports, by program, 1962-1969
(in 1000 bu.).
Concess ional
Crop
Year
CCC
Cash
Credit
1964
23,714
45.509
34,064
----------
1965
35, 800
1966
1962
Barter
Long-term
Credit
Local
Currency
Donations
309
Total
Grand
Total
98,658
106,487
667
747
73221
112
1716
59150
74,944
60,978
54
110
59995
60, 159
94, 223
2550
37
1275
55084
94, 755
40,175
6343
14605
1350
56848
39, 193
18969
----
119,321
1967
----
58,955
79,146
75035
104, 004
143, 197
1968
28,676
32,711
4920
14376
91
40540
90,334
8050
----
59159
61,658
76,400
1963
1969
9191
1731
Source: Seevers, Gary L. "Pacific Northwest Exports During the 1960's," (19, p. 5).
,
109, 111
128
left to right, cash sales being generally the least like donations (19).
Several other government programs affect prices, such as the
commodity loan programs and acreage control programs which alter
supply and demand for wheat.
The production of wheat is tailored each year to the potential
demand by the acreage control program. As the anticipated need is
forecasted, the acres allocated to wheat are adjusted in a manner to
prevent over or under supply. Wheat producers are not compelled to
enter the program but if they do not, they cannot participate in loan
programs or receive subsidy payments.
The loan program is available to farmers who cooperate with
the government acreage programs. The loan rate is set each year in
July and then varies throughout the year. The loan rate in specific
years has been as follows:
Year
1961-62
-- $1.79
1962-63 -1963-64 --
1964-65 --
1965-66 -1966-67 -1967-68 -1968-69 -1969-70 --
2.00
1.82
1.30
1.25
1.25
1.25
1.25
1.28
129
If the open market price following harvest and into the fall remains
at or near the loan price, producers usually put part or all of their
crop under the loan program operated by the CCC. This tends to
keep supplies off the market and strengthen cash prices above a sustamed minimum price. The prices in recent years have been close
to, but above the loan level, with only small amounts put under loan.
It appears that the wheat market has varied more closely according
to changes in the free market with less dependence on the floor (loan)
prices set by the government in recent years, as one would expect
with the lower loan rates in recent years.
3O
APPENDIX II
FUTURES MARKET TRADING
The purpose of this chapter is to explain the theory of hedging,
price movements and price relationships. The discussion of the first
two subjects is postponed so that some basic information about futures
markets and futures trading can be presented. This material is not a
complete review of the concepts necessary for futures trading but
represents some brief and basic information on commodity exchanges,
the clearing house, margin requirements, the futures contract, and
the wheat future contract, all of which are essential to the comprehens ion of this paper.
Commodity Exchanges
Commodity exchanges are organized markets, public in nature,
located throughout the United States and the world. There are more
than 50 separate materials traded on the numerous commodity
exchanges (7, 25). The members of these various exchanges consist
of interested businessmen or brokerage firms who carry out the pur-
chase and sale of contracts for customers or for their own account.
The exchanges, being public in nature, are organized as non-
profit corporations operating for the use of their members. The
exchanges only charge participants an amount sufficient to cover
131
necessary expenses.
There are typically two types of members; those called brokers
brokers and those serving the non-member public. The latter of these
two groups is the one that the general public trades through and they
are commonly called commission brokers.
The exchanges are regulated by various rules and laws. The
internal regulation or rules of the exchanges are established and
enforced by a body of officers, a group of committees, and a series
of departments handling operating details (11, p. 160). The rules and
by-laws of the exchange prohibit certain types of trading, unfair
procedure, establish minimum commissions and procedures for
handling disputes or violations.
Above the internal organizations of the exchanges rests a
governing body set up by the Commodity Exchange Act, the Commodity
Exchange Authority (CEA). This body covers all domestically pro-
duced commodities traded on exchanges, except for hides. The CEA
works to prevent any unfair or unlawful practices much the same as
the Security Exchange Commission regulates the trading of stocks and
bonds (5, p. 45).
The whole body of rules, by-laws and laws exist to protect the
people who trade in commodity futures; they help provide a broad and
free market where equal opportunity for all traders is assured.
132
The Futures Contract
Before doing any trading in futures markets, it is important t
understand exactly what a futures contract is. A futures contract can
be described as a legal and binding agreement to deliver or receive a
specified commodity during a specified month at a particular quality
and quantity. The price for that commodity is arrived at through
competitive bidding at the exchange when the contract is made under
the rules and laws set down by the exchange and the CEA.
The contracts are identical for any given commodity and
exchange, and are highly standardized so that trading proceeds at a
maximum rate and each trader knows the terms. Quality provisions
are identical in each commodity futures contract so that "basis grade"
may be delivered or received against any of the outstanding contracts.
On most exchanges, Chicago Board of Trade included, many
grades of a commodity are deliverable at fixed premiums or discounts
to the "basis grade. " Even though the quality of the commodity is well
defined, one cannot be sure when he takes delivery on a futures contract whichgrade (22 grades of wheat) of the deliverable commodity
will be received (5, p. 16). Delivery of a commodity against a con-
tract is possible as set down by the contract, but delivery is seldom
made and is not possible with White wheat because it is not a deliver-
able variety as specified in the contracts.
133
The purpose of futures trading is not generally to make or take
delivery of the commodity. The purpose is to protect against price
risk. Consequently, delivery is made on only a very small number of
futures contracts. The right to deliver assures that the cash and
futures price will be together in the delivery month. If for example,
the cash price was at a discount to the futures price and the prices
did not come together in the month the contract expires it would pay
to buy wheat and deliver against a futures contract sold 'at the last
moment.
To close out a contract, the buyer or seller simply buys or
sells an equivalent amount opposite to his initial transaction and that
clears his account (7, p. 7). For example, if a buyer had purchased
a May contract in December, to close out his transaction he would
merely sell a May contract sometime before the contract becomes
due in May.
The delivery of a contract is at the sellers (initial sale of futures
contract) option after giving notice to the Exchange, seven days prior
to delivery. To avoid the possibility of becoming the owner of an
unwanted commodity and to avoid the difficulties and expenses attached
to making or taking deliver, it is advised that all positions be closed
out before the first notice day of the delivery month (5, p. 40). (The
first notice day is the first trading day in the month the contract
becomes due.) Contracts on the Chicago Board of Trade cannot be
134
traded the last seven trading days in the month the contract matures
(spot month). During these last s-even days all open contracts must
be settled by delivery (22).
Caution: It is important to note that a trader may not be able to
cancel a futures contract. If prices are changing rapidly, other
traders may not want to trade making it impossible to cancel a position in futures contracts except at unfavorable prices. Such occurrence may happen at any time, but tends to be more likely to happen
toward the close of a contract. Consequently, this becomes one major
reason to close out a contract somewhat early- - in order to avoid
being "stuck in a position,
and having to make or take delivery.
The Clearing House
Each commodity exchange has a clearing house which becomes
the third party in all transactions on the exchanges. It is the buyer of
all contracts sold and the seller of all contracts bought. The clearing
house is usually a corporation organized separately from the exchange
with the stock being sold only to exchange members. The require-
ments of an exchange member before he can buy stock and become a
member of the clearing house are quite specific and include the purchase of an adequate amount of stock, deposit of a guarranty fund,
agreement to the procedure of the exchange, and compliance to follow
the rules and by-laws of the clearing house (1, p. 169).
135
In effect, the clearing house guarantees performance of all
cleared contracts by substituting itself as the contracting party to
each contract. On the floor of the exchange, contracts are made
between two individuals, one buyer and one seller. Since contracts
are made on the floor, there is always a balanced number of longs
and shorts. After the contracts are made, the clearing house sub-
stitutes itself as a third party. The contract is actually with the
clearing house and not with another individual trader. Since the clear-
ing house is the third party it is not necessary for a long buyer to wait
until the person he made his short sale with to want to sell. The
trader who is long simply sells when there is any short trader willing
to sell, and the clearing house records the transactions and 'balances
them out."
The functions the clearing house performs are very important:
it expedites deliveries and collections, closes out all offsetting con-
tracts, and guarantees all exchange contracts as to price and
delivery. To the trader this means he can liquidate his contract
whenever he wishes and there will always be the assurance of payment
or delivery even if one party defaults in payment (5, p. 41).
Margin Requirements
In order to more fully understand futures trading it is important
to understand about the margin requirements imposed by the clearing
136
house. This margin requirement is actually good faith deposit and is
adjusted as the market prices change. Each clearing house member
is responsible for the margin for every contract he has at the end of
a trading day. The by-laws of the clearing house establish the minimum amount of margin to be deposited. Individual brokers may, in
addition, require more margin deposit depending on individual
trader's and market circumstances. The initial minimum margin
may run anywhere from 10 to 20% of the total value of the commodity
contract (21, p.
13).
After the original margin deposit is made, the trader's equity
must be maintained as price fluctuations occur. Generally, if there
is unfavorable price movement, considering the type of contract the
trader holds, additional margin will be required, and the trader will
be given a "margin call. " If the price movement is favorable then
some of the margin may be withdrawn by the trader.
The margin requirements for different types of trading vary
according to the degree of risk. In general, margin requirements
increase as one moves from spreads to hedges to speculation.
Choice of Exchange and Contract Month
Wheat is traded on more than one futures exchange market
making it necessary for the trader to select the exchange which he
will trade in (wheat is traded at Kansas City, Minneapolis and
137
Chicago). Several factors become very important when choosing the
market. These factors include (1) which exchange trades in your
basis grade, (2) which exchange provides the best basis pattern, and
(3) the volume of trading on the exchange (5, p. 135). These factors
affect the reliability and degree of protection afforded a hedger by
trading with the particular exchange.
The choice of the future contract month in which to trade
becomes another important decision to the trader. Wheat is traded on
futures contracts for delivery in December, March, May, July and
September. It is important to select a month which will provide pro-
tection for the period the actual grain will be held (7, p. 30). For
instance, a White wheat producer may hedge from harvest, in August,
until an anticipated January sale. He then has the opportunity to use
the March or May contract months. The closer the operations are
synchronized, cash and futures, the more effective the hedge is likely
to be.
On some exchanges there are certain delivery months which are
inactive. It is important to avoid months which are inactive and which
may not provide a broad and liquid market (1, p. 205).
The choice of the exchange and contract month in which to trade
depends on a variety of considerations each of which must be evaluated
by the trader before he selects his market and contract month. The
importance which is placed on each of the factors will likely vary
138
according to the unique circumstances of each trader.
The Chicago Wheat Futures Contract
Wheat is the commodity under consideration herein; some basic
information on the nature of the wheat contract and the related regula-
tions is in order.
Wheat on the Chicago Board of Trade is traded on five delivery
months: December, March, May, July and September. Each contract
month is usually actively traded from the first trading day of the
month following the contract month until the middle of the trading
month in the following year (1, p. 205). Any trading in a given
futures contract must be started and finished before the market for
that contract month is closed.
A summary of the wheat regulations as presented by the Chicago
Board of Trade in "Wheat Futures' follows, Figure 2 (22, p. 2). The
basis grades are #2 Hard Winter,
Z
Red Winter, #2 Yellow Hard
Winter, and #1 Northern Spring. The most common wheat delivered
at Chicago is #2 Soft Red Winter.
Cash and Futures Price Relationships
Both the futures and cash market reflect the same basic complex
economic information. The futuresmarket generally reflects changes
in conditions faster than the cash market. At least part of this can be
139
Wheat Regulations Summarized
Delivery Months
July, September, December, March, May.
Grades Deliverable
At the contract price: No. 2 Soft Red, No. 2 Dark Bard Winter,
No. 2 Yellow Hard Winter, No. 2 Dark Northern Spring, No. 1
Northern Spring, No. 2 Heavy Northern Spring, No. 3 Heavy Soft
Red, No. 3 Heavy Dark Hard Winter, No. 3 Heavy Hard Winter,
No. 3 Heavy Yellow Hard Winter, No. 3 Heavy Dark Northern Spring.
At 14; premium: No. 1 Soft Red, No. 1 Dark Hard Winter, No. 1 Hard
Winter, No. 1 Yellow Hard Winter, No. Dark Northern Spring,
No. 2 Heavy Soft Red, No. 2 Heavy Dark Hard Winter, No. 2 Heavy
Hard Winter, No. 2 Heavy Yellow Hard Winter, No. 2 Heavy Dark
Northern Spring.
No. 1 Heavy grades carry an additional 1/24; premium.
At 1/24; premium: No. 1 Heavy Northern Spring.
At 14; discount: No. 3 Soft Red No. 3 Dark Hard Winter, No. 3 Hard
Winter, No. 3 Yellow Hard Winter, No. 3 Dark Northern Spring,
No. 2 Northern Spring.
All No. 3 grades must be equal to or better than No. 2 in all factors except
foreign material, total defects and total wheats of other classes.
Trading Units
5, 000 bu. round lots.
Price Quotations and
Quoted in cents and eights of a cent per bushel, with 1/84; per bu.
Minimum Fluctuations
($6. 25 per round lot) as the minimum change.
Carrying Charges
$3. 00 per day per 5,000 bushel contract for storage, plus interest and
msurance.
Commissions
(non- members)
$30. 00 per round lot for traders in United States, Canada, Cuba,
Puerto Rico, Mexico and Virgin Islands.
Daily Limits on
Price Movement
104; advance or decline from previous day's close.
Point From Which
Exchange-approved grain elevators in the Chicago Rail Switching District.
Delivery can be Made
Position Limits
1. Daily trading limit: 2, 000, 000 bushels in any one futures, or all futures combined.
2. Position Limit:
2, 000, 000 bushels in any one futures, or all futures combined; positions
of 200,000 bushels require reports.
Margins on Trades
Consult your broker.
Trading Hours
9:30 A. M. to 1:15 P.M. Central Time.
Figure 2. Wheat futures contract regulations, summarized.
140
accounted for by the role of speculators and their increasing drive to
obtain significant information before it hits the general market.
Speculators in many cases pay substantially to get this information.
The cash market does not demand this type of information at such a
rapid speed since much of their business is on a turnover or volume
basis.
It was emphasized when discussing "The Futures Contract" that
the contract was the right to carry out the agreement at the specified
price. As long as the trader can make or take delivery, the futures
market will respond to the same factors as the cash market. Hedging is based upon the assumption that the cash and futures market
prices will parallel each other in movement and the prices will come
together in the delivery month. Whenever the cash and futures mar-
kets get out of line, this privilege of converting the contract to actual
grain will generally force the realignment of the two markets.
Basis
The most important factor in the successful use of a futures
market to hedge grain is the complete understanding of the basis.
The basis is the difference between the cash price at a given location
and the futures market price, on any particular day. Basis behavior
is uncertain, and fluctuates with changes in either cash commodity
price or futures contract price. When one is hedging, he is
141
speculating in basis and not in price. Speculating in basis is easier
than speculating in price because basis patterns are somewhat sea-
sonal and tend to repeat themselves periodically, particularly if the
cash and futures are properly moving together.
Several factors affect the basis, and many of them are discussed at the conclusion of the two aforementioned sections. How-
ever, the cash-futures price relationship, or basis, is influenced
primarily by two factors--time and geographic location of the cash
commodity.
Basis vs. Time
The basis is modified by the time between "now" and the
delivery month. For example, in June the basis may be "2 under"
indicating the cash price is 2q under the Chicago July price, but it
may be "6 under" the September price. Consequently, the appropri-
ate futures month must be specified so the time factor may be con-
sidered accurately.
The basis is modified by time due to carrying charges. Carry-
ing charges are based on three factors (8, p. 5-61; 10, p. 23):
1. Grain is generally harvested at one basic time and must be
carried forward in time for year-round utilization.
2. There are handling and storage costs associated with carrying grain forward.
142
3. There are virtually no costs in holding futures contracts,
relative to costs of holding cash grain.
The carrying charge for grain consists of three main items: storage,
interest and insurance (16, P. 25). Storage costs are influenced by
both facility costs (interest and depreciation) and operating costs
(labor, repairs, taxes, etc.).
Considering the costs associated with storing grains it is logical
to expect prices to be at their lowest during harvest and then to progress each month by the cost of carrying the grain. The prices
actually do follow this general pattern throughout the year but due to
external factors, the pattern is far from precise.
When considering cash and futures prices together in this over-
all yearly framework of price relationships we would expect a pattern
for wheat as below:
Price
143
The harvest price (July-Aug) should be the lowest price with each of
the next four futures contract months priced above that by the cost of
storage from harvest to the appropriate delivery month for each
contract. July does not "fit" into the pattern like the other months
since it is a transition month from one market year to the next, with
its price being a current estimate of market price at harvest time
"next year," rather than an estimate of the cost of "old" wheat carned forward. This is what is called a "normal market. "
This explanatory model assumes no general price level change
or basis change and can therefore be highly misleading if one assumes
the real world behaves like this simple explanatory model. Actually
the price level and the basis between months is changing constantly,
reflecting new or anticipated market conditions. New conditions-environmental, political and economic- -are constantly being inter-
preted by traders, causing variations from the basic price pattern.
Actually, the price difference between any two contract months
is seldom as great as the full carrying charges between months. The
cost of carrying the commodity to distinct months is the maximum
premium that can prevail for any length of time (5, p. 33). The rea-
son the price difference seldom exceeds carrying costs is that corn-
mercial traders are willing to buy and sell the appropriate futures
and then take and make delivery as necessary, reaping an automatic
profit (16, p. 26).
144
There is no limit on the amount of a premium at which the near
months can sell in relation to the far months. This type of relationship is called an inverted market and is opposite from the normal
market. Usually inversions occur between crop years. For example,
in April the May contract may trade at a l5 premium to July,
because the July price anticipates 'new" crop while the May futures
price is based on Holdir crop. These inversions can exist since there
is no point at which the trader can enter the market and be assured
of an automatic profit. Inversions also occur when "squeezes" occur
during the deliver month (persons holding short position are forced
to repurchase their futures contracts due to an inability to obtain
deliverable supplies, thus making price advance rapidly). When
inversions occur, normal market activities are set in motion which
tend to realign prices (5, p. 3 1-33).
Basis vs. Location
The difference in grain prices between different geographic
locations is the second major consideration in cash-futures price
relationships. Prices of futures are for one location, Chicago for
example, while spot (cash) prices are for many different locations
throughout the country. Prices are adjusted in local areas to reflect
the variation in different costs associated with handling and shipping
(11, p. Z60-Z61). In addition, there are local price changes
145
associated with changing supplies and use of grains among local areas
from time to time, which also affects the basis. Imperfections in this
process of establishing equilibrium prices among different locations
as grains move from area to area effect basis, and change from time
to time (8, p. 9). As these locations in the country become farther
from the centralized future market and the shipping points become
more scattered, the basis becomes more unpredictable. This basis
variation, however, offers tremendous opportunities for profit for
many of those willing to spend the time to learn the necessary skills
of hedging (8, p. 10).
Other Factors Affecting Basis
Futures contracts specify one grade as the standard grade for
the contract but they allow many grades to be delivered against the
contract at premiums or discounts. The standard grade on the wheat
contract (basis grades) and the premiums and discounts for various
grades can be seen in the section on "The Wheat Contract. " The cash
price of each one of these grades is influenced by its own supplydemand conditions. These conditions, however, may or may not
affect the price quoted on the exchange.
At any particular time, the grade which is most likely to be
delivered on a futures contract is the grade which is selling at the
most advantageous price to the trader making delivery. The futures
146
price then reflects this grade or class that is most likely to be
delivered. Since the lowest quality is usually delivered, the price
reflects the bottom of that particular grade (17, p. 266). These factors affect the basis between your grade at the price being quoted on
the exchange and, thereby, the effectiveness of a hedge.
Another factor likely affecting the basis and limiting the effec-
tiveness of a hedge is the fact that future contracts are for a specified
quantity, 5,000 bu. for wheat, which may not be exactly the amount a
trader has to trade on the cash market. The trader will always be
speculating to some extent in either the cash or futures market
depending on whether he is long or short cash grain in relation to the
round lots (full contracts) traded on the exchange.
The last major factor which affects the basis and the effective-
ness of a hedge is availability and price of closely related products.
Usually certain products are closely associated because they can be
substituted at least in part in producing the end product, flour or feed
for example. If there is a short supply of feed grains, wheat may be
fed. Or if there is a bumper crop of hard wheats, these may be sub-
stituted for soft wheats to some extent. This factor takes on special
interest here since the overall premise assumed in this paper is that
a strong positive seasonal relationship exists between midwest wheat
and Soft White wheat- -that is, that they are indeed substitutes to a
considerable degree and hence their prices tend to move together.
147
Generally, the more the cost of a raw product in relation to total
costs of the end product, the more closely the prices of the raw pro.duct and the finished product will flactuate together. This is con-
trasted most dramatically in flour and bread. For flour, the wheat
represents about 80 percent of the total cost, while in a loaf of bread
the wheat represents less than 5 percent of total costs. It is easy to
visualize therefore why the price of flour moves more closely with
the price of wheat than does bread prices.
Another example of the correlation between the prices of two
raw products can be seen from time to time between PNW wheat and
barley. As the price of wheat approaches feed grain value, prices of
wheat and barley fluctuate together very closely--one price seldom
changes in a pattern different from the other unless market conditions
change making it uneconomical to feed wheat, at which time wheat is
again priced according to demand for food use and barley for feed use.
Hedging with Wheat Futures
Farmers and other handlers of grain are subjected to many dif-
ferent forms of risk--fire, rain, wind, theft, price changes, etc. All
take their toll. In most cases these forms of loss can be insured
against. The greatest risk, the risk of price change, is something
insurance companies will not insure against. The marketing system
has developed a hedging system using futures markets to help reduce
the risk of price change.
Hedging may be defined as initiating a futures market position
equal and opposite to an existing cash position (5, p. 123). It actually
involves one of the following types of action (21, p. 19):
1. "Short hedge," The sale of futures contracts to offset the
possible decline in value of an equal amount of the cash
commodity owned.
2. "Long hedge, "
The purchase of future contracts to lessen
the effect of the possible increase in value of the same
amount of a cash commodity not yet owned.
All hedging falls into one of these two categories: either short or
long. As further explanation, one can consider the owner or producer
of grain as being "long" in cash grain because of the grain in his warehouse or field. He gets price insurance for his long cash grain posi-
tion by a short sale of an equivalent amount in the futures market,
or a short hedge. The dealer, exporter, or miller who contracts
ahead for the sale of grain prior to its ownership is short in the
physical grain market. He protects his position by purchase of a
futures contract in equal amount to his short position, or a long hedge
(1, p. 225).
A specific example and some explanation of short and long
hedge will tend to illustrate further the theory of hedging. This will
also point out why hedging can be less or more effective under
149
varying conditions.
Short Hedge
The short hedge can be used in a variety of circumstances and,
as previously pointed out, involves someone who has the grain or will
have after harvest. Other examples of traders who would be interested in short hedges would be (21, p. 21; 10, p. 3):
1. An elevator operator who has currently purchased wheat
from farmers and sells futures against those purchases.
2. A miller who sells futures against his purchase of wheat for
milling.
3. The exporter who wants to protect against owned unsold
wheat for export.
4. For a grower to protect the price of a growing crop.
As an example, suppose the price of Portland White wheat on
August 5 was $1.90 per bushel and on that same day the price of a
December Chicago Futures contract was $2. 00 per bushel. The
country elevator operator buys wheat from producers and is unable
to sell it immediately. He has a choice; he can speculate on the price
of wheat or he can try to lock in that $1. 90 price. Assuming he
chooses to lock in that price, he enters a short hedge as presented in
the following
HTIT
account.
'so
August 5
Buys cash wheat
Sells Dec. futures
Market
Cash
Futures
$1.90
$2. 00
As the season progresses, the price of cash wheat on November 5 has
declined to $1.75 and he sells the wheat. Since the cash and futures
in theory maintain the same spread, the futures also declines by 15
cents to $1. 85. Entering these last transactions on the "T" account,
sale of cash wheat and buy back of futures contract, produces the final
result.
August 5
Buys cash wheat
Sell Dec. futures
November 5
Sells cash wheat
Buys Dec. futures
Profit or loss
Market
Cash
Futures
$1.90
$2.00
1.75
-.15
1.85
+.15
The loss on the cash was offset exactly by the gain on the futures
transaction. This is what is called a "perfect hedge"; it provided
perfect price protection (16, p 37).
A simpler way to calculate the profit on a short hedge is from
the basis and is used extensively in this paper (explained in detail in
Chapter II). The basis is described as the cash price minus the
futures price. Calculating this for each of the above dates gives a
negative 15 cent basis for August 5 and a negative 15 cent basis for
November 5. So in trading terminology the hedge was placed at 15
151
under and canceled out at 15 under for a zero profit
(-15) - (-15) = -l5
+ 15g
0
There are several reasons for calculating profit in terms of
basis rather than price. First, the arithmetic is simpler. Second,
the hedger is generally concerned with basis rather than price, and
lastly, it becomes much easier to interpret the hedgers' standard
tools--basis charts and basis data (ZO, p. 3).
A perfect hedge as illustrated above very seldom occurs due to
the constantly changing relationship between prices. Since the basis
is constantly changing, it is possible to make either more or less on a
hedging operation that was expected. One example of this type of
movement is when the futures price is at "full carrying charge" to the
cash market. The hedger is generally assured of pocketing part of
the carrying charge since the cash and futures price will usually be
together in the delivery month..
Actually, the additional profit or loss from a short hedge is
realized through the basis--if the basis advances (increases), then
additional profit is made. If the basis declines, additional money
beyond the expected amount will be lost. These two previous types of
basis patterns indicate when it is most advantageous to short hedge
and when not to short hedge, unless to limit a large potential loss.
These patterns are best expressed as follows (19, p. 2):
152
Additional Profit
+
+
4-
0
0
1 niie
.t iine
I ILIAC
Additional Loss
+
+
[!]
Time
Time
Time
Careful examination of these basis patterns will suggest numerous
cash-futures price changes which will give these types of patterns
and either substantially improve the outlook on a hedging transaction
or detract from it. For example the first three basis patterns occur
through different price movement. Figure 1 starts with the cash
below the futures and as time progresses the two markets move closer
together. Figure 2 starts with the futures above the cash and as time
progresses they change places, that is the futures moves below the
cash. Figure 3 starts with the cash above the futures and as time
progresses the two markets move apart.
Long Hedge
The long hedge (purchase of futures and advance sale of cash
153
grain) is used to protect against the possibility of an increase in the
price of the grain to be purchased later to cover the advance sale.
Examples of traders who would be interested in this type of hedge are
(11, p. 127; 16,
p. 21; 17, p. 3):
1. The wheat exporter, prior to buying cash wheat, sells a ship
load of wheat to Japan and buys an equal amount of futures
contracts.
Z. The miller who buys futures against the advance sale of
flour, for which at this time, he does not own the wheat.
3. The feeder who wants to protect the cost of feed without
taking immediate delivery buys futures contracts to cover
his later purchase of cash wheat.
4. To speculate in the price of wheat when no storage is available, the owner can sell the wheat and buy futures contracts.
The wheat exporter, for example, who receives an order from a
foreign country at the price of $2. 00/bu. as of December 1, will sell
the wheat on 90 day delivery. The exporter accepts the order and
while not yet holding the wheat, he buys an equal amount of March
futures contract at $2. 10 bu. Entering these prices on the T account:
Dec.
1
Sell cash wheat
Buys Mar. futures
Cash
$2.00
Futures
$2. 10
The exporter acquires the wheat for delivery and closes out the
futures transaction on February 30.
154
Dec.
1
Sell cash wheat
Buy Mar. futures
Feb. 30
Buy cash wheat
Sell Mar. futures
Profit or loss
Cash
$2.00
Futures
$2.. 10
2. 20
2. 15
-.20
+.05
Unlike in the perfect hedge (illustrated in the short hedging example)
the exporter was not protected against the total effect of the price
charges due to the unfavorable changing of the basis.
Again, as with the short hedge and for the same reasons, the
profit can be calculated by using the basis figures except the process
is reversed, subtracting closing basis from strarting basis:
Profit = (basis on starting date) - (basis on closing date),
or from our example
Profit = (-. 10) - (+.05)
= -. 15
The loss, however, is 5 less than it would have been without the
hedge.
As occurred with the previous long hedging example, perfect
price protection is not always the case. Changing basis relationships
can give additional profit or loss depending on the direction of move-
ment- -if the basis pattern is moving to smaller numbers, additional
profit can be made, and if it is moving to larger numbers, additional
loss will be sustained. These patterns can best be expressed as
155
follows for the long hedge (19,
P. 2).
Many cash-future price move-
ments will give these various basic patterns.
Additional Profit
+1
+1
+
0
0
0
lime
jime
1 1111=
Additional Loss
.
+
+
+
0
0
0
White Wheat He4ging Limitations
Throughout this chapter many factors have been indicated which
influence the price difference between White wheat in the PNW and
Chicago wheat futures contracts. The price spread or basis, varies
considerably over time. The primary reasons for that variation
appear to be as mentioned earlier--changing differences in prices
among wheat grades and varieties, supply and demand and hence
prices of closely related commodities, the end use and primary mar-
kets for the varieties or grades speculators and traders interpretation
of market conditions and their price expectations, anticipated crop
156
conditions and government programs, different costs of storing and
transporting the commodity and for white wheat in particular, whether
or not the commodity may actually be delivered against a futures
contract.
White wheat cannot be delivered against a futures contract, and
consequently a White wheat trader should in most situations avoid
having to either make or take delivery. If he makes delivery, he will
have to buy a deliverable variety and grade to fulfill the contract.
And if he takes delivery, he will not receive White wheat.
AWhite wheat trader, however, should not for these reasons
necessarily avoid hedging on existing wheat futures markets. He can
achieve an effective hedge if the PNW White wheat price moves
closely enough together with the existing wheat future prices to (1) be
predictable as to pattern and (2) leave the trader in a better profit
position with such a hedge than without it.
Existing information and observation suggest such hedges are
indeed at times profitable. But at other times, such hedging appears
to be less than wise.
Comments on Hedging PNW White Wheat
It is important to realize White wheat is not deliverable on a
wheat futures contract (see Section 'Wheat Future Contracts"). This
type of hedging falls into an area that the author would prefer to call
157
speculative hedging- -signifying that the commodity, White wheat, is
not deliverable, and consequently a PNW White wheat hedge using
existing wheat futures depends entirely on whether or not the futures
price moves in a consistent predictable relationship with PNW White
wheat prices. Because White wheat is not deliverable, the trader has
no real guarantee that he will have a hedge at all. The trader must
recognize the non-deliverable aspect of this type of futures trading
and be prepared to take the consequences, good or bad.
The author is not trying by the above comments to discourage
hedging of White wheat, but is merely pointing out that there are
some potentially severe limitations when hedging White wheat. It
might be well to mention at this point that many other products and
commodities which are not deliverable on a futures contract are hedged
on the present dayfutures markets- -some quite effectively. Much of
the wheat currently hedged at Chicago, in fact, is also not usually
deliverable, as stated by T.A. Hieronymus in "Hedging for Country
Elevators
1:
A high proportion of the grain that is hedged from locations
other than Chicago is not a tributary to Chicago; that is, it
does not normally move to Chicago. . . . Only a small
proportion of hedged grain can be delivered to Chicago
except at a loss to the hedger. But that does not detract
from Chicago as a hedging medium. It is only necessary
that Chicago prices be representative of the general level
of prices and that price at the many locations be functionally interrelated.
APPENDIX III
PACIFIC NORTHWEST WHITE WHEAT PRICES, CHICAGO FUTURES MARKET
PRICES AND BASIS FROM JULY 1960 THROUGH MAY 1971
61086') F1JT3JS
7\T5
2l'-
77-
'-9
7
7-57
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1-9'
1 .9'.)
0-'
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7- 4-9'
-
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-
1.-cl
°9-
.<+J
101010111111111732-
i?
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1-51
4-91
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7.79)
1.98
8
1-
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'
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7.15)
1.113
2.113
'
?. '1)
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7.113
1-t
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1.87
2-61
1'.72
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3.'73
277
1.8J
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8
7'.13
1.995
MAY
1.971
1 .966
1.9711
1.975
1.973
1.975
1.'9'.
1.983
1.999
2.308
2.019
7.124
2.05)
2.031
2.°25
.359
2.01.9
2.1113
2.001
2.1115
2.076
2.015
2.015
2.021
1.990
2.006
7.229
2.015
2.01.5
ICS
j.EE8
3 .965
1.970
1.975
1.973
1.969
1.978
1.968
1.978
1.998
1.995
2.926
2.031
2.014
1.9P
2.1125
2.01
7.029
2.226
2.041
2.031
2.076
2.105
7.123
2.11.0
2.113
2.111
2.124
2.1335
2.165
7.280
2.054
SEP
1.9'S
1.850
0
1.8,
0
1.891
I.M7
l.87
l.83
1.860
1.363
i.8F5
1.854
1.965
1.158
1.870
1.985
1.910
1.876
1.841
1.869
1.955
1.860
1.858
1.369
1.999
1.985
1.8011
1.923
1.945
1.918
1.931
1.973
1.°5
1.913
1.904
1.301.
1.'75 1.383
1.923
1.°5R
1.0P
1.880
1.365
0
I)
2.014
7.050
2.053
2.065
I3ASIS
JUL
1.929
I.r15
l."51 1.94°
2.159 2.391
1
2.759
3
2.079
1.971 2.116
1.395 2.089
1.965 2.111
2.G',i 2.t'.6
2.33) '.11.5
2.023 2.110
2.121 2.115
2.323 2.17')
2.075 '.099
7.3.8 2.786
1.990
0
1.994
0
1.161
1.978
1.979
1.970
1.965
1.973
1.341
1.963
1.175
2.1211
2.2711
6-93
l.,28
1.9711
7.01.5
-t
'- -)
'
2.195
'-
'-61
'
2.02)
'
6-'I
'
'
2.115
7.111
2.127
7.1119
1.989
2.I3
2.11.5
7- '-61
'_
'
7.155
'
1
-6t
2."l)
,'.11.1
2- 'c-El
1-61
'-
j99'3
'.176
1- -61
1- 4-91
7'-
1.333
2.013
7fl51
4-69
1.3S
l.98u
:'.CL+l
7.351
2.791
2.159
'-911
'-p1
2.1)
2.029
11'- 7-93
1-
1.991
1.771
1.89
1.713
°- 4-61
ii'- 1-11
1.911
1.975
1.923
1.911
1.926
1.924
1.925
1.934
1.933
1.959
1.959
I.95
-1
U01
1.9i1.
1.9911
l-7
DEC
1.91'. i.lc,1
1.915 1.165
1.°9)
4
8
''ICE
1.973
1.976
1.885
1.976
1.87
1.873
DATE
1.81
i.8'.
1.861
1.8
1.853
1.960
1.856
1.961
0
0
1.890
1.883
1.9339
1.115
1.935
1.903
1.965
1.885
1.380
1.8R6
1.881
1.985
1.924
1.915
1.913
1.948
1.971
1.949
1.964
1.963
1.966
1.928
1.931
1.933
1.910
1.903
i.°11
1.50
j499
1.919
1.909
1.908
1.917
1.885
1.896
i.°0
1.913
1.923
1.978
1.379
1.9CQ
DEC
7777-
1-60
2-60
3-60
4-60
8
1-60
8- 2-60
8- 3-61
819991010-
1-60
2-61
3-65
4-60
1-60
2-60
10
3-60
10- 4-60
ii- 1-60
11- 2-60
Ii- 3-60
j12-
1?12121111222237314
446-
5555-
6666-
4
4-SI
8
8
8
8
8
8
8
4-SC
1-60
2-60
3-60
4-60
1-61
2-61
3-61
4-61
1-61
2-61
3-61
6-61
1-61
2-61
3-61
4-61
1-61
2-61
3-61
4-61
1-61
2-61
3-61
4-61
1-61
2-61
3-61
4-61
8
2.2
.1
2.4
3.6
3.9
4.0
4.6
3.9
4.6
6.5
6.6
6.5
2.9
5.1
6.0
6.0
4.7
7.1
6.9
2.2
4.2
3.1
8
8
8
8
8
'
8
8
4
8
8
4
'
8
8
8
8
'
8
8
0
13.0
14.0
16.0
14.0
12.9
15.2
12.0
10.7
10.5
11.2
9.0
9.1
9.9
9.4
5.0
4.1
45
34
2.7
4.6
1.5
-0.9
-6.0
-2.5
MAR
MAY
JUt.
-2.3
-2.6
-2.6
-1.1
-1.1
-0.6
-0.5
-1.0
-0.3
-1.5
-2.0
-2.0
-5.9
-0.8
-0.
-0.5
-1.0
-0.3
10.4
11.0
1.5
1.6
2.0
-1.1
.2
1.1
1.6
1.0
2.9
3.3
.2
2.1
2.9
'7
3.1
-0.6
1.6
1.4
-0.6
1.0
5.0
3.0
1.0
3.1
3.5
0
0
9.5
4.4
.5
-0.6
0
-1.5
-2.1
0
-3.1
-5.6
-4.5
-7.5
2.1
2.2
3.2
1.0
2.2
2.5
1.6
2.9
4.6
6.0
3.5
5.2
6.1
7.9
6.9
1.9
2.9
3.0
1.7
1.5
4.2
3.'.
.6
2.5
3.9
0
.1
9.0
12.2
10.2
12.0
13.5
13.5
0
0
-3.9
-8.0
-8.3
-9.9
SEP
0
0
6.9
8.2
8.6
8.2
11.0
12.7
13.5
14.6
12.3
15.2
14.9
15.5
15.0
18.4
21.8
20.0
21.5
23.0
24.7
24.5
20.1
21.9
23.5
21.7
20.9
24.2
20.6
19.7
19.5
20.7
17.6
18.1
18.2
17.2
14.4
13.5
13.9
12.7
12.2
14.5
11.6
9.2
9.1
8.0
8.0
8.4
8.4
9.7
9.11
10.5
11.2
10.5
11.4
12.9
0
0
9.8
12.7
12.0
13.5
12.5
15.7
19.3
17.5
19.0
20.4
22.4
22.5
17.6
19.0
21.2
19.2
18.4
21.2
18.1
16.7
16.4
19.2
14.9
14.7
15.5
14.2
10.9
10.2
10.7
9.2
8.7
11.0
7.9
6.1
5.7
4.2
Ui
1\TE
rASH 0)122
61110659 FUTURES 'RICES
M49
'6Y
J'JL
SEP
#4 44444444444444444444
2.006 2.056
7.070 1.923
1.91+9
1.998
7.064 2.069 1.895
1.931
2.038 2.095
2.096
0
1.970
2.018 2.37. 2.088
0
1.91+8
2.335 2.089 2.101+ 2.103 1.965
2.354
2.108 2.120
?.111.
1.984
2.061
2.103 2.121 2.123
1.986
2.346 2.100 2.121
?.l5 1.979
2.044 2.095 2.115 2.133
1.981
2.054 2.105
2.126 2.141
1.998
2.061 2.106 2.123
2.173
0
2.045 2.095
2.115 2.125
0
2.023 2.971 2.094
2.11. 2.140
2.044 2.094 2.116
?.170 2.lR
2.036 2.090 2.118
2.1.33
2.163
2.030 2.086
2.110
'.126 2.153
2.026 2.079 2.100 2.116
2.148
2.028 2.086 2.110 2.124
2.153
2.031 2.058 2.118 2.12%
2.156
2.035 2.093 2.113 2.126 2.154
2.064 2.103 2.120
2.125
2.1.55
2.039 2.091 2.116 2.128 2.155
0
2.086
2.113 2.126 2.1.61
0
2.071 2.101
2.120
2.148
2.196 2.066 2.095 2.115
2.141
2.178 2.048
2.075 2.198
2.126
2.158 2.031 2.063 2.080
2.108
2.171 2.028 7.064 2.090 2.119
2.178 2.035 2.076 2.099 2.129
2.179 2.023 2.064
2.005 2.129
2.175 2.025
2.063 2.091
2.125
2.166 7.005 2.043 2.07%
2.111
2.168 2.010 2.053 2.086
2.118
2.169 2.026 2.061 2.089 2.119
2.160
0
2.061 2.085
2.11%
2.171.
0
2.076 2.001
7.121
2.185 2.220
2. 001
2.110 2.13%
2.1.91
2.221 2.106 2.116 2.1.43
2.191 2.213
2.103
2.125
7.148
2.1.90
2.20
2.096 2.124
2.145
2.213 2.728
2.143 2.150 2.170
2.220 2.735 2.146
.153
2.173
2.221
2.740
0
2.151 2.174
2.204 2.228
C
2.135 2.156
2.219 2.239 2.18%
2.146 7.171
2.224 2.273
2.165 2.146
2.174
2.216 2.232 2.171
2.141
2.166
2.191 2.215 2.185 2.113
2.140
DEC
444 4 4 4 44 4 44 4 4 4 4 4 4 44 4 4 4 44 44 #4 #4444
7- 1-61.
'
7- 2-5
7- '-St
'
7- 1+-Si
'
°- 1-61
8- 75j
%
8- '.-St
Q- 1-51
°- '-61
q
3-61
912totO10111111-
4-61
1-61
7-61
3_6t
6-61
1-61
'-6k
'-61
'
11- 4-61.
12- 1-51
12- '-61
12- 'f
17111-
2222-
4-61
1-67
2-6?
'-8"
4-6' 8
1-5'
2-6'
1-6?
.-t?
'- 1-a'?
3'44-
'-6'
7-s'
6-67
j-67
7-67
4- '-p''
61-62
6- 7-f.' '
- 16?
.- 4-2."
6FFF-
1-67
7-62
3-2'
4-6'
1.973
1.993
2.110
2.089
2.085
2.25?
2.111
2.141
7.130
2.113
2.130
2.110
2.120
2.170
2.130
2.129
2.120
2.110
7.110
2.105
2.1.05
2.555
2.070
7.251
2.070
?.fl2
2.070
2.560
2. 31+Q
2.07.1
2.045
2.050
?751]
2.352
2.055
2.095
7.100
2.111
2.16
?.10
2.160
2.150
7.157
2. j76
2.175
2.161
2.112
*
4
4
9AS IS
lATE
DFC
MAR
MAY
JUL
SEP
844444444#444484444484*44444##484444#8444444
7- 1-61
-1.6
-8.6 -10.3
4.?
2.1.
7- 2-61
-1.9
-7.4
-8.9
8.5
4.9
7- 3-61
.2
-4.5
-5.6
0
7.0
78858-
4-1
1-61
2-61
3-61
4-61
9- 1-61
9- 2-61
9- 3-51
9- 4-61
12- 1-61
10- 2-61
10- 3-61
10- 4-61
11- 1-61
11- 2-61
11- 3-61
11- 4-61 4
12- 1-61
12- 2-61
12- 3-61
12- 4-61
1- 1-62
1- 2-62
1- 3-62 '
1- 4-62
2- 1-62
2- 2-62
2- 3-62
2- 4-62
0- 1-62
3- 2-52
.- 3-62
'- 4-62
4- 1-62
4- 2-62
- 3-62
4- 4-62
- 1-62
5- 2-62 4
5- 3-62
5- 4-62
6- 1-62 '
6- 2-62
6- 3-62
6- 4-62 4
9.2
4.5
3.1
2.9
6.1+
9.6
7.6
6.9
9.5
10.7
7.6
9.1+
10.0
9.4
9.2
7.0
7.5
4.1
6.5
0
0
-14.6
-14.8
-10.8
-10.1
-11.9
-13.9
-14.5
-12.1
-11.8
-11.9
-11.6
-11.6
-9.3
-9.1
-9.1
-4.0
-8.3
-7.0
-6.1
-3.7
-4.1+
-4.9
-3.6
.1
3.6
2.2
0
-0.9
-2.3
-2.3
-2.4
-3.5
-4.1
-1.1
2.5
-2.3
-2.6
-4.3
-2.5
L.
-1.1
-0.3
1.0
4.5
2.5
2.5
3.5
5.7
2.6
4.0
4.4
4.1
3.5
2.2
2.0
.2
1.'+
-3.1
-0.1
-1.6
-1.8
1.9
4.2
2.2
1.2
.7
1.5
3.6
.
1.2
2.0
2.0
1.0
-0.8
-0.3
-1.5
-1.1
-5.8
-3.1.
-4.5
-4.5
-1.3
.6
-1.6
-3.3
4.0
4.0
2.4
.2
0
-12.
-12.1
-10.3
-5.9
-9.8
-8.5
-8.0
-6.1.
-6.',
-5.8
-5.0
-2.3
-0.3
-1.1
-1.1
-2.1
.4
-0.6
.7
5.4
-1.3
.4
0
0
-1.3
1.0
.9
.6
0
.5
0
1.6
-1.0
-1.0
-3.8
-3.3
-2.3
-2.8
-0.3
.5
.1+
-0.'.
-1.8
-1.6
-2.0
-2.3
-7.0
-5.0
-6.5
-6.8
-3.0
-2.0
-3.9
-2.'.
.5
0
.7
16.2
11.5
10.1
9.4
13.1
15.9
13.2
-6.1
-3.3
-3.6
-3.9
-3.5
-3.6
-1.
-1.6
-1.5
2.6
-2.0
-0.3
.9
3.1
2.9
2.9
3.9
7.9
-3.3
-4.6
-41
-5.0
-5.0
-9.6
-7.8
-9.1
-9.6
-5.8
-4.9
-6.9
-8.9
-9.5
-6.6
-6.8
-6.9
-6.8
-6.6
-4.3
-4.3
-3.8
.5
-4.0
-2.3
-1.4
1.1
.1.
.1
1.1+
5.2
I'.0
°ORTLANr)
('854 PRI
11T
4454
7- t-62
7- ?-?
7-
-6'
7- +-52
- 1-62
8- '-62
8-
-5?
0°9tO16101611-
4-62
1-67
2-5"
3-6'
4-6?
1-62
2-6?
3-62
4-6?
1-6?
11-
-?
2.207
2.190
2.100
2.t8
2.170
2.145
2.140
2.140
2.175
2.125
2.123
2. 128
11- '-6?
11- 4-62
1?- 1-6?
2.115
2.110
2.115
2.150
?.14
2.14
2.14'
2.168
2.177
1?- '-6.?
7.151)
1212111122-
2.169
2.173
2.171
7.190
2.100
2.201
?.250
2.?59
7.243
2.230
2.211
2.231
2.725
7.275
2.?30
2.75?
2.765
2.261
?.?75
2.?75
7.755
2.105
?.0?5
2.035
1.095
1-62
4-6?
1-63
2-63
'-4'
4-61 4
1-63
7_.l
2- 1-61)
2- 4-63
2- 1-61)
'
2-60
-61
'- 4-6w
-
6- L$3
4- 2-6.3 '
6-5'
6- 4-51)
5
1-F1)
6- "-63
0- 1-5'
'-
4-f-"
F- 1-6'
6-
-
-3
F- 4-'
CHICAGO FUTURES PRICES
1.5
UAR
MAY
JUL
SEP
2.200
2.214
2.201
2.1Q8
2.179
2.124
2.149
2.156
2.146
2.109
2.084
1.995
2.034
2.034
2.350
2.073
2.074
2.070
2.056
2.045
2.083
2.085
2.231
2.200
2.234
2.235
2.220
2.170
2.195
2.233
2.199
2.140
2.134
2.045
2.681
2.078
2.090
2.109
2.113
2.103
2.091
2.035
2.105
2.105
2.117
2.105
2.115
2.081
2.398
2.101
2.103
2.074
2.073
2.069
7.366
2.384
2.198
2.?28
2.206
2.713
2.12t.
2.154
2.156
2.140
2.134
2.115
2.055
2.080
2.090
2.080
2.049
0
0
8
BASIS
DEC
1.968
1.051
1.963
1.385
1.995
1.988
1.391
1.985
1.963
1.953
1.950
1.056
1.955
1.938
1.029
1.020
1.933
1.939
1.013
1.913
1.931
1.379
1.961
1.024
1
0
1.056
1.938
1.920
1.938
1.941
1.048
.120
0
0
?.7tY
0
2.153
2.168
2.186
2.186
2.119
2.114
2.038
2.079
2.073
2.076
2.105
2.104
2.994
2.085
2.079
2.090
2.085
2.083
2.08w
2.096
2.069
2.078
5
2.O8
2.100
2.071
2.070
2.068
2.065
2.061
2.033
2.064
2.104
2.113
2.085
2.161
2.095
2.0°5
1.23
0
1.010
1.919
1.050
1.373
1.938
1.884
1.895
1.900
1.896
0
0
0
0
0
0
1.895
1.914
1.906
1.904
1.024
1.910
1.910
1.908
1.013
1.903
1.893
1.876
1.886
1.891
1.879
1.895
1.914
1.925
1.924
1.923
1.925
1.938
1.893
1.8°1
1.895
1.904
1.885
1.876
1.880
1.974
1.880
1.055
1.863
1.859
1.863
1.891
1.850
DATE
0
0
1.9O
1.936
1.933
1.933
1.943
1.939
1.938
1.939
1.033
1.927
1.003
1.915
1.920
1.900
1.921
1.938
1.951
1.945
1.949
1.946
1.924
1.910
1.908
1.915
1.915
1.899
1.890
1.894
1.889
1.894
1.868
1.873
1.87
1.886
1.909
1.868
DEC
MAP
MAY
JUL..
SEP
84484844 #44444488488844#44484#8444#4484#4484
7- 1-6?
-0.2
-2.4
.9
8.3
5.3
7- 2-62
-2.4
-6.0
-3.8
7.0
3.4
7- 3-62
-1.1
-4.4
-1.6
0
5.0
7- 4-62
-1.
-.2
-3.0
0
4.9
8- 1-62 8
-0.4
-4.5
-2.8
0
6.0
8- 2-62 8
2.1
-2.5
-0.8
0
9.0
8- 3-62
-0.9
-5.5
-2.8
0
6.0
4
8- 4-62
-1.6
-6.3
-4.6
0
5.0
9- 1-62 8
-2.1
-7.4
-4.1
0
4.5
9- 2-62
1.6
-2.6
.6
0
7.6
9- 3-62 8
4.4
-0.6
1.4
0
0
9- 4-6?
13.3
8.3
9.0
23.3
0
10- 1-62
8.1
3.4
3.6
20.1
17.5
10- 2-62 8
8.1
3.7
4.2
20.9
17.9
10- 3-62 4
6.6
2.6
4.0
21.2
18.3
8
10- 4-62
77
4.1
4.5
22.6
21.7
11- 1-62
7.1
35
'..l
23.0
20.2
8
11- 2-62
75
4.2
5.1
23.5
20.6
11- 3-62
9.7
5.2
5.8
23.5
20.5
11- 4-62 8
12.3
8.3
8.9
25.5
22.9
12- 1-62
9.4
7.2
8.7
27.4
24.4
12- 2-62
7.5
5.5
7.5
26.7
23.7
12- 3-62 4
0
5.5
8.5
29.2
26.5
12- 4-62 8
0
6.5
8.7
28.4
1- 1-63
20.7
5.5
7.4
27.9
25.0
1- 2-63
22.9
9.9
11.1
30.1
27.5
1- 3-63 8
22.'
9.2
11.2
29.5
26.9
8
1- 4-63
21.5
9.9
10.2
28.6
26.2
8
2- 163
25.5
14.7
10.0
32.5
29.9
8
2- 2-63
27.0
18.4
18.7
33.4
31.3
2- 3-61
25.2
17.0
17.3
32.0
29.4
2- 6-63
24.2
16.1
16.2
30.5
28.6
3- 1-63
26.7
16.6
16.6
32.2
30.6
3- 2-63 '
23.0
14.9
17.2
34.0
32.3
3- 7-63 8
27.5
0
19.2
33.4
3i.7
3- 4-63 8
26.9
0
16.1
33.0
31.0
4- 1-63
28.0
27.9
13.1
33.1
32.0
4- 2-63 8
32.1.
32.4
14.9
37.7
36.3
- 3-63
33.6
34.5
18.0
38.9
37.5
4- 4-63
33.2
32.2
15.9
38.0
36.6
5- 1-63
34.2
33.4
18.0
40.1
38.6
5- 2-63 4
33.6
32.7
18.0
39.5
38.1
9- 3-63 8
34.2
33.2
0
40.0
38.7
4-61)
28.2
28.
0
33.2
32.2
6- 1-63 8
9.4
8.6
14.1
16.6
15.0
6- 2-63
6.6
55 11.0
13.7
11.9
6- 3-63 8
34
2.2
8.6
10.4
8.6
6- 4-67
7.1
5.7
11.1
14.5
12.7
C
aCQTLA9fl
CHICAGO FUTURES PRICES
9Tr
CA54 FICE
DEC
1AQ
'lAY
JUL
SEE
4444 #4444444 4#44#444444##44444844444444444444444444
44444
7- t-F
l.c0
1.930
1.956 1.905
1.348 1.867
7i.q,o
1.979 1.905 1.31.3 1.798
1.819
7- 3-6'
i.cso
1.981.
1.915
1.955
0
1.871
7-3
1.01
1.823 1.54
1.799
1
1.766
9- 1-6'
1.qGO
1.81.3
1.866 1.805 1.554
1.785
9- '-67
1.20?
1.866 1.995
1.843 1.553
1.911
F- '-6'
1.067
1.893 1.894 1.829
1.959 1.796
3- 4-6' '
1.590
1.351 1.383 1.838
1.570
1.701.
a- 1-63
1.991
1.881 1.911 1.871
1.585 1.820
9- '-6
2.001
1.910 1.931 1.890
1.600 1.878
9- 1-65
2.097
1.079 2.006
1.974
1.660
0
- 4-61
2.170
2.023 ?.048 2.023
1.695
IC- 1-63
2.125
2.075 2.063 2.038 1.655
1.675
IC- '-6'
2.150
2.115 2.113 2.083 1.740
1.758
10- '-61
2.171
2.136 2.138
2.099 1.778
1.743
10- 4-61
2.11.0
2.129 2.139 2.098 1.71.5
1.755
11- 1-63
2.165
2.176 2.178
2.138 1.740 1.750
ii- '-6
2.173
2.168 2.175 2.138
1.750 1.765
11- '-91
2.170
2.091+
2.119 2.079
1.671 1.685
ii- 4-67
2.170
2.126 2.151 2.115
1.699 1.701
1?_ 1-63
2.100
2.136 2.159 2.119
1.733 1.741
1?- 2-63
2.167
2.191 2.196 2.140
1.744 1.756
1?-63
?.165
3
2.188 2.130
1.766 1.783
12- 4-6'
2.170
0
7.191 2.1.41 1.766
1.783
1- t-E'L.
2.195
1.823 2.196
7.149 1.761+
1.783
1- '-6'+
2.251
1.829 2.221.
2.195 1.76
1.786
1- 7-66
2.271
1.314 2.230 2.198 1.754
1.771
1- 4-64
2.230
1.7°5
2.215 2.175 1.739
1.790
2- 1-61+
2.260
1.765
2.205 2.153 1.695
1.715
2- 2-64
2.245
t.75 2.22t. 2.169 1.679 1.696
2-64
2.25?
1.684
2.194 2.139 1.628
1.653
2- 4-61.
7.719
1.690 2.110
2.061+
1.626
1.643
.- 1-61+
2.145
1.693 2.000
1.990
1.620 1.641
3- '-60
2.11
1.635 1.979
1.960
1.568 1.589
'-61.
2.117
1.626
0.
1.955
1.960 1.580
3- 4-r
2.060
1.643
2
2.010
1.571.
1.595
1-6'+
2.590
1.650
0
2.030 i.1 1.600
4- '-64
2.221
1.583
2.060
1.519 1.540
0-64 '
2.221
1.583
1.519 2.041
1.521
1.539
6- 0-1-0
2.221
1.585 1.626 2.079
1.523 1.539
5- 1-61.
2.231
1.584
1.625 2.021 1.533 1.534
1_ '-61.
2.230
1.951
1.593 2.023 1.484 1.503
r..
'_
2.270
1.573
1.615
C
1.501.
1.525
- 4-61+
1.902
1.555 1.630
0
t.47
1.505
6- 1-64
1.568 1.625
1.629
1.499 1.910
.- '-54
1.590
1.521.
1.559 1.565
1.1.43
1.469
'- '-10
1.562
i.siq 1.553 1.561
1.1.15
1.1461
F- 4-1-4
1.590
1.1.06
1.531 1.5'9
1.393 1.423
fl
+
'7
DATE
DEC
MAP
MAY
JUL
SEP
844444444444 4444#44444444#444444444444444484
7- 1-63
2.3
-8.'.
4.5
10.2
8.3
7- 2-6' 4
9.3
5.7
11.4
16.4
14.3
7- 3-63 8
7.6
4.5
10.5
0
13.1
7- 4-63
12.2
9.6
16.1
0
18.1.
8- 1-63 4
10.7
91
1.5
39.6
16.5
8- 2-63
8.6
5.7
10.9
39.9
14.1
3- 3-63
11.1.
8.3
13.8
41.4
17.1
4
8- 4-63
13.9
10.7
15.2
42.0
19.9
q_ 1-63 4
10.9
7.9
11.9
40.5
17.0
9- 2-63
9.3
7.2
11.3
40.3
13.3
9- 3-63
11.8
9.1
12.3
43.7
8
- 4-63 4
14.7
12.2
14.7
51.5
0
10- 1-63
5.0
6.2
8.7
47.0
45.0
10- 2-63 4
3.5
3.7
6.7
40.5
39.2
10- 3-63 4
3.4
3.2
7.1
44.2
1+2.7
10- 4-63 4
1.1
.2
4.2
39.5
38.5
11- 1-63
-0.9
-1.3
2.7
42.5
1.1.5
ii- 2-63
.2
-0.5
3.2
42.0
40.5
11- 3-63
7.6
5.5
9.1
49.9
48.5
ii- 4-63
4.4
1.9
5.5
48.1
46.9
12- 1-61 4
1.4
-0.9
3.1
41.7
'.0.9
12- 2-63
-2.1+
-2.9
2.7
42.3
41.1
12- 3-63
0
-2.3
3.5
39.9
38.2
12- 4-63
0
-2.1.
2.9
40.'.
38.1
1- 1-6'.
36.7
-0.1
4.6
43.1
41.2
1- 2-64
42.1
2.6
6.5
48.1
'.6.'.
1- 3-6'.
45.6
4.0
8.0
51.6
49.9
E
1- 4-64
439
i.E
495
48.0
2- 1-64
49.5
5.5
10.7
56.5
54.5
2- 2-6'.
50.3
2.1
7.6
56.6
54.9
2- 3-64
56.6
5.8
11.3
62.4
59.9
8
2- 4-61.
52.0
10.0
14.6
58.4
56.1
3- 1-6'.
45.2
14.5
15.5
52.5
50.1.
3- 2-64
3-64
4-64
'
37.5
38.4
42.2
6- 1-6'.
4
445
33-
444555-
2-61.
-64
4-64
1-61.
2-61.
3-64
5- 4-64
6- 1-64
6- 2-61+
6- 3-64
6- 4-64
63.7
63.7
63.9
64.6
67.9
65.7
79.5
1.2
6.6
6.1
8.4
3.1
5.0
0
E5
0
0
8
60.2
59.4
63.5
63.7
61.5
35.0
-4.9
3.2
2.7
4.9
5.5
6.5
16.0
17.9
18.1
'+4.2
42.1.
45.0
49.1
51.4
43.0
47.0
49.5
68.0
68.1
68.1
69.6
72.7
70.5
44.5
7.0
12.2
13.9
IE.7
70.1.
0
69.9
69.1
69.7
74.6
72.6
47.1
-4.5
2.5
1.9
4.1
9.1
14.7
16.5
18.7
20.9
20.7
0
C-'
OPTLAJ9
)0TE
7- 1-64
7- 7-c4
7-
7- 4-54
- 1-54
8- ?-51
CA5I
RIC
1.555
1.5')
1.533
1.576
*
8- 3-51.
'- 1+-6t
1.515
1.515
1.610
°- t-64
1.10
C1
q
°- 4-64
13181111-
-51.
'-64
6-64 4
1-64
:'-4
12- 1-51+
1.02
12- 2-54
12- 1-54
12- 3-54
1.510
1.505
1.503
1.498
1.505
1.490
1.690
1.610
1.50)
1- I-5
1112222-
'-65
'-65
4_55
1-85
'-55
l_55
.-E5
1-F'S
1.500
1.0 5
1.r30
1.521
1.- '-56
1.51.1
r_
- 1-Si
8- '-55 '
-
-5
5- 4-65
'
1.0)
.- '-5
?...
1_55 8
'- 4-55
4- 1-5
1- '-Si
'.- 3-5 4
- i-SO '
5- '-55
6- '-65
1.1.95
1.'+70
ii- 4-54
11- '-51.
1.D5
1.1.90
1.1.91
1.531
1.518
1.571
1.541
1.O5
1.476
1.5o3
1.473
1.469
1.455
1.466
1.4(8
1.488
1.418
1.510
1.473
1.478
1.490
1.47)
1.47)
1.471
1.480
1.510
1.600
1.516
1.51)
CHICAGO FUTURES PRICES
MAR
MAY
JUL
1.1+95
-5l4 4
?_54
ir- 1-51+
Jfl-
DEC
4
1.480
1.500
1.528
1.526
1.511
1.511
1.491
1.4ql
1.51.9
1.51+6
1.519
0
1.417
0
1.1+15
1.1+99
1.441+
1.530
1.529
1.535
1.526
1.518
1.553
1.463
1.489
1.493
1.489
1.479
1.498
1.490
1.488
1.403
1.496
1.499
1.505
1.539
1.516
1.520
1.485
1.476
1.408
1.408
1.425
1.51.3
1.518
1.528
1.29
1.530
1.514
1.810
1.533
1.551+
1.569
1.560
1.555
1.529
1.515 1.2D
1.08 1.13
1.503
1.491
1.496
1.521
1.531
1.528
1.525
1.518
1.521
1.505
1.490
1.491
1.494
1.4°3
1.495
1.485
1.455
1.469
1.453
1.483
1.465
1.459
1.458
4
1.519
1.52
1.519
1.511
1.551
1.523
1.527
1.533
1.523
1.533
1.553
1.560
1.425
U
1.575
?2
1.1+96
1AT
1.389
t.+30
1.531
1.43
1.
1.523
0
1. ';80
1.621
1.521
1.539
1.513
1.519
1.493
SEP
1.573
1.1+79
1.1+40
1.41+4
1.435
1.436
0
0
0
1.513
1.818
1.520
1.525
1.561
1.538
1.540
1.511
1.500
1.503
1.1+73
1.510
1.451
1.443
1.508
1.489
1.471
1.516
1.514
1.500
1.488
1.489
1.510
1.483
1.1.91
1.1.29
1.1.1.8
1.481
1.523
1.520
1.510
1.509
1.509
1.519
1.503
1.431
1.455
1.468
1.454
1.476
1.1+54
1.480
1.480
1.474
1.476
1.458
0
1.1.83
1.1.21.
1.495
1.480
1.681
1.504
1.489
1.421
1.425
1.424
1.428
1.419
1.400
1.401
1.385
1.411
1.391
1.401
1.395
1.394
3
0
U
0
0
1.495
1.1.95
1.479
1.510
1.478
1.4qU
1.485
1.488
1.1+48
1.1.58
0
0
1.480
1.490
1.686
1.488
1.458
1.1.51
1.455
1.438
1.466
1.1+89
1.41.3
1.41+1
1.445
1.41+4
1.1+48
1.439
1.420
1.425
1.406
1.1+35
1.410
1.1+23
1.416
1.1+15
MAR
flC
BASIS
MAY
JUL
SEP
4434444444434444 4*443433334433883844**433*4
7- 1-61.
7.9
3.4
3.2
16.6
13.0
7- 2-64
2.7
-0.9
-1.3
10.0
9.0
778888999-
4-64
1-54
2-64
3-64
4-54
1-54
2.2
7.8
-2.3
0
-0.8
-2.5
-1.0
-2.0
-1.8
-2.6
1.7
1.2
0
.6
-0.3
2.6
0
3.2
1.9
1.5
-0.1+
-1.4
-1.8
-0.9
-1.5
-6.1
-5.3
-5.3
-6.3
-2.
_53
-5.3
-4.3
-6.0
-1.6
-2.2
-6.3
-5.9
-6.0
-6.1+
-6.0
-5.3
-4.4
-6.9
-4.5
8.1
5.2
2.6
1.7
2.1
1.7
-0.8
-2.0
-1.8
-2.3
-2.6
-1.9
1.0
'
8
0
-3.6
-1.7
-0.5
-2.6
-0.6
-1.8
1.6
-2.7
-1.0
-2.8
-1.1
-2.0
1.2
2.6
5.1
4.7
7.6
1.9
.7
59
-2.6
-0.4
-3.3
-1.0
-1.0
-0.9
-0.9
3.5
6.2
4.6
4.2
4.9
'
8
8
8
8
8
4
-1.8
1.4
-0.6
-3.1
-2.1
-2.8
-2.
-1.8
-1.5
-0.5
1.5
-0.1
-0.4
2.7
4.5
4.
8
4
8
8
45
5.1
8.7
8.5
12.7
6.0
6.1
6.0
0
1.2
1.1
-0.
1.7
0
0
0
0
0
0
-1.1+
.0
-0.3
2.2
-0.5
6.2
5.1
6.9
6.5
9.6
11.2
11.1
11.0
12.7
15.5
15.4
18.9
1.0
3.9
3.6
4.1
1.5
3.8
6.2
5.5
6.2
6.2
10.2
3.5
3.4
10.0
1.5
3.4
3.2
.2
0
0
0
3.1
-3.'.
0
0
0
1.7
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-3.9
-0.1
-1.0
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_45
11.7
11.0
11.7
10.7
9.0
6.6
7.5
6.0
-4.3
-4.8
-4.0
-1.5
-6.1
-2.3
-3.0
-0.9
-0.1
1.1
1.9
45
5- 1-65
5- 2-65
5- 3-65
5- 4-65
6- 1-65
5- 2-65
6- 3-65
5- 4-55
5.7
5.6
6.0
4.9
3.7
1.
2-61.
3-64
9- 4-64
10- 1-66
10- 2-64
10- 3-64
10- 4-64
ii- 1-61.
11- 2-64
11- 3-64
11- 4-64
12- 1-64
12- 2-5'.
12- 3-64
12- 4-64
1- 1-55
1- 2-65
1- 3-65
1- 4-65
2- 1-65
2- 2-65
?- 3-65
2- 4-65
1-65
3- 2-65
7- 3-65
3- 4-65
4- 1-65
4- 2-65
4- 3-55
4
'
3-61.
12.'.
12.
12.6
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2.9
2.1.
5.7
3.6
1.1+
2.1
2.0
2.0
2.6
2.9
4.2
6.2
4.9
4.5
7.6
9.2
9.1
9.0
10.5
13.4
13.0
17.0
10.2
10.4
10.5
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PORTLA'O
CHICAGO FUTURES RICES
93TF
CAS'-i PIC
DEC
MAR
MAY
JUL
SEP
$484848484444444 444*4 8444 4444444444484444444484444
7- 1-66
1.793
1.918 1.93
1.923 1.820
1.858
7
-65
1.925
1.980 2.025
1.995 1.886
1.920
7- 1-65 * 1.86)
1.925 1.963
1.936
0
1.865
7- 4-65
1.820
1.936 1.979 1.951
0
1.575
8- 1-66
1.81.3
1.914 1.959 1.931
1.798 1 .549
8- 2-66
1.86)
1.968 2.008
1.989 1.871 1.898
8- 3-66
1.343
1.985 2.031 2.020
1.886 1.915
8- 3-66
1.83)
1.948 1.990
1.978
1.851 1.871.
9- 1-66
1.815
1.954 2.013 2.005 1.889
1.875
9- 2-66
1.865
1.965 2.035 2.030
j9QL
j.894
9- 1-66
1.860
1.979 2.053 2.065 1.945
0
9- 4-65
1.830
1.830
1.885 1.890 1.785
0
10- 1-66
1.803
1.686 1.751 1.771 1.660
1.683
10- 2-56
1.700
1.720
1.781 1.800 1.666
1.693
10- 1-66
1.760
1.743 1.806 1.818
1.683
1.701.
10- 4-65
1.725
1.698 1.766 1.781 1.678
1.700
11- 1-66
1.713
1.715 1.776 1.785
1.713
1.736
11- 2-66
1.757
1.711.
1.781
1.790
1.709 1.733
11-65
1.71.3
1.760 1.820 1.830
1.753 1.736
11- 4-66
1.725
1.758 1.828 1.831
1.775 1.800
12- 1-66
1.725
1.786 1.856 1.878 1.838
1.863
12- 2-65
1.720
1.765 1.83u
1.851
1.813 1.835
12-66
1.71)
3
1.835 1.859 1.316
1.838
12- 4-65
1.72)
0
1.810
1.839 1.788
1.813
1- 1-67
1.730
1.798 1.749 1.776 1.720
1.71.5
1- 2-67
1.760
1.775 1.729 1.753
1.701
1.724
1- 1-67
1.7.J
1.758 1.683 1.713
1.680
1.764
1- 4-67
1.7)3
1.729 1.661
1.690
1.650
1.676
2- 1-67
1.67)
1.713 1.644
1.674
1.643 1.665
2- 2-67
1.660
1.733 1.563 1.691.
1.661 1.683
2- 7_57
1.56)
1.71.3
1.663 1.695
1.675 1.695
2- 4-67
1.713
1.830 1.769 1.788 1.750
1.771
3- 1-67
1.703
1.815 1.743 1.773 1.731
1.760
3- 2-6;' 8
1.73)
1.81.0
1.733
1.765 1.755
1.781
3- 1-67 8
1.733
1.939
3
1.870 1.850
1.888
8
3- 4-67
1.712
1.813
0
1.734 1.736 1.770
4- 1-67
1.763
1.891
1.931 1.813
1.803
1.835
4- 2-67 8
1.74)
1.7/6 1.815 1.703
1.684
1.720
+
2-67 8
1.750
1.743 1.78u
1.653
1.665
1.686
8
4- 4-67
1.753
j 126 1.763 1.623
1.633 1.666
5- 1-57
1.71.]
1.761 1.796
1.636 1.666 1.703
- 7-67
'
1.790
1.765 1.803
1.641 1.673
1.710
5- 3-67 8 1.79]
1.730
1.768
0
1.635 1.671
5- 1.-57
1.2Q
1.756 1.791.
1.661 1.700
5- 1-57
1.853
1.763 1.305
0
1.643
1.720
6- 7-67
1.78.J
1.748
1.784
1.794 1.651
1.690
6- 1-67
1.773
1.666 1.708 1.725 1.566
1.605
6- 4-i
1.76)
1.651 1.693 1.710
1.51.5
1.585
Ii
BASIS
DATE
DEC
AR
MAY
JUL
SEP
4444444884484448 14444444448844 14444444484444
7- 1-66
-12.8
-16.3 -13.3
-3.0
-6.8
7- 2-66
-5.5
-10.0
-7.0
13.9
.5
7- 3-66 ' -6.5 -10.8
-7.6
0
-0.5
7- 4-66
-11.6
-15.9 -13.1
0
_55
8- 1-66 ' -7.4 -11.9
-9.1
4.2
-0.9
8- 2-66 4 -10.8 -14.8 -12.9
-1.1
-3.8
8- 3-66
-14.5 -19.1 -18.0
-4.6
-7.5
8- 4-66
-11.8 -16.0
-14.8
-2.1.
-4.4
9- 1-66 ' -13.9 -19.8 -19.0
-7.4
-6.0
9- 2-66
-10.0 -17.0 -16.5
-3.9
-2.9
9- 3-66
-11.9 -19.3 -20.5
0
9- 4-66
0
-5.5
-6.0
4.5
0
10- 1-66
11.4
4.9
2.9
14.0
11.7
10- 2-66
-2.0
-8.1 -10.0
3.4
.7
10- 3-66
1.7
-4.6
-5.8
7.7
5.6
10- 4-66 4
2.7
-4.1
-5.6
4.7
2.5
Ii- 1-66
0
-6.1
-1.0
.2
-2.1
11- 2-66
4.3
-2.4
-3.3
4.8
2.4
11- 3-66
-2.0
-8.0
-9.0
-1.3
.4
11- 4-66
-3.3
-10.3 -10.6
-5.0
-7.5
12- 1-66
-6.1 -13.1 -15.3 -1.1.3 -13.8
12- 2-66
-4.5
-11.0 -13.1
-9.3 -11.5
12- 3-66 4
0
-12.5
-14.9 -10.6 -12.8
12- 4-66
0
-9.0 -11.9
-6.8
-9.3
1- 1-67 4 -6.8
-1.9
-4.6
1.0
-1.5
1- 2-67
-1.5
3.1.
.7
5.9
3.6
1- 3-67
-1.8
5.7
2.7
6.0
3.6
1- 4-67 4
-2.9
3.9
1.0
.0
2.4
2- 1-67
-4.13
2.6
-0.4
2.7
.5
2- 2-67
73 -0.3 -3.4 -0.1 -2.3
2- 3-67
-8.3
-0.3
-3.5
-1.5
-3.5
2- 4-67
-12.0
-5.9
-7.8
-4.0
-6.1
3- 1-67
-11.5
-4.3
-7.3
-3.1
-6.0
3- 2-67
-14.0
-3.3
-6.5
-5.5
-8.1
3- 3-67
-20.9
0
-14.0
-12.0 -15.8
3- 4-67
-10.9
0
-2.4
-2.6
-6.0
4- 1-67
-13.1
-17.1
-5.3
-4.3
-7.5
4- 2-67 4 -3.6
-7.5
3.7
5.6
2.0
4- 3-67
.7
-3.0
9.7
8.5
6.4
4- 4-67
2.4
-1.3
12.7
11.7
8.'.
5- 1-67
-2.1
-5.6
10.4
7.4
3.7
5- 2-67
2.5
-1.3
14.9
11.7
8.0
5- 3-67
6.0
2.2
0
15.5
11.9
5- 4-67
6.4
2.6
0
15.9
12.0
6- 1-67
8.7
0
20.7
13.0
6- 2-67 4
3.2
-0.4
-1.4
12.9
9.0
6- 3-67
10.4
6.2
4.5
20.4
16.5
6- 4-67
10.9
6.7
5.0
21.5
17.5
C"
ORTLAN!)
0'C
4484
7777888-
1-67
2-67
3-57
4-67
1-67 8
2-67
-67
8- 4-67
9- 1-67
9- '-67 8
9-67
°- 4-67
10- 1-67
10- '-67
IC- 8-67
10- 4-67
11- 1-67
11- 2-67
11- 3-67
11- 4-67
12- 1-67
12- 0-67
12- 3-67
12- 4-67 8
1- 1-63
1- 2-68
1.61))
1.61)]
l.F,O3
l.60t)
1.590
1.620
1.600
1.630
1.60)
1.591
1.613
1.600
1.611
1.591
1.590
1.570
1.575
1.585
1.590
1.605
1.615
1.6J
122223333444455-
4-68 8
1-68
2-63
34-68
1-63
2-68
"-63
4-63 8
1-43
0-68
3-63
4-63
1-61
2-48
1.671
1.675
1.71)
1.710
1.703
1.640
1.67]
-68
*
*
*
1.631)
1.651)
1.640
1.645
1.623
1.693
1.550
1.59)
1.630
1.653
1.65)
1.535
1.593
1.541
8
DAS IS
DEC
MAR
MAY
JUL
SEP
l.6u0
1.583
1.50
1.621
1.616
1.560
1.546
1.541
1.513
1.531
1.540
1.561
1.546
1.535
1.524
1.528
1.495
1.486
1.648
1.625
1.664
1.658
1.66
1.685
1.635
1.638
1.625
1.621
1.595
1.615
1.626
1.644
1.626
1.618
1.614
1.615
1.584
1.576
1.549
1.565
1.554
1.544
1.534
1.511
1.515
1.518
1.513
1.520
1.523
1.498
1.483
1.534
1.511
1.540
1.554
1.551
1.493
1.465
1.473
7- 1-67
7- 2-67
7- 3-67
7- 4-67 4
8- 1-67 4
8- 2-67
8- 3-67 *
1.7
-0.5
-2.1
-2.6
6.3
5.'.
-0.1
4
6.9
1.1446
j5
-5.8
-6.5
-8.5
-4.5
-1.8
-2.5
-1.1
9- 1-67
9- 2-67
9- 3-67
9- 4-67 4
10- 1-67
10- 2-67 8
10- 3-67
10- 14-67 8
11- 1-67
11- 2-67
11- 3-67
11- 4-67 4
12- 1-67
12- 2-67
12- 3-67
12- 4-67 4
1- 1-68 4
1- 2-68 4
1- 3-68
1- 4-58 4
2- 1-68
2- 2-68 4
2- 3-68 4
2- 4-68 4
3- 1-68
3- 2-66
3- 3-68
3- 4-68
4- 1-68
4- 2-68
4- 3-68
4- 4-68
5- 1-68
5- 2-68 8
5- 3-68
5- 4-68
6- 1-68
6- 2-68 8
6- 3-68
6- 4-68
8.7
6.9
5.3
3.13
.5
1.2
-1.5
-3.6
1.65'.
1.670
1.66i.
0
1.614
1.601
1.595
1.570
1.588
1.599
1.620
1.603
1.594
1.588
1.586
1.553
1.545
1.515
1.525
1.516
1.506
1.500
1)
1.481)
1.611
1.595
1.595
1.605
1.598
1.599
1.595
1.589
1.620
1.655
1.603
1.608
1.551
1.511
1.500
1.495
1.471
1.491
1.503
1.480
1.484
1.478
1.483
1.486
1.495
1.494
1.456
1.465
1.463
1.454
1.631
1.623
1.670
-49
6- 4-63
6- I-5
5-53
5- 8-63
6- 4-68
4
1.631)
1-
5-
CHICAGO FUTURES PRICES
CASH PRICE
1.1493
1.444
1.4L1
1.391
1.371
1.481)
1.481.
1.518
1)
0
1.594
1.555
1.543
1.539
1.515
1.535
1.546
1.539
1.491
1.446
1.436
1.419
1.52'.
1.525
1.516
1.520
1.548
1.491
1.484
1.430
1.386
1.385
1.368
1.343
1.363
0
0
1.518
1.473
1.461
1.4l+4
U
0
0
1.625
1.613
1.613
1.578
1.601
1.610
1.613
1.598
1.593
1.598
1.610
1.573
1.570
1.550
1.571
1.550
1.545
1.526
1.511
1.515
1.513
1.514
1.525
1.518
1.521
1.515
1.506
1.535
1.569
1.514
1.515
1.459
1.41
1.414
1.401
1.381
1.398
1.401
1.396
1.344
1.299
1.290
1.263
DATE
1.475
0
0
1.625
1.623
1.628
1.640
1.603
1.660
1.580
1.601
1.580
1.578
1.558
1.545
1.550
1.545
1.545
1.555
1.548
1.544
1.543
1.539
1.568
1.601
1.549
1.549
1.498
1.454
1.445
1.436
1.415
1.435
1.440
1.435
1.383
1.340
1.330
1.306
8-
14-67
MAR
DEC
0
14.9
5.4
6.5
6.6
6.2
7.5
8.9
12.9
12.5
114.2
16.1
-4.8
-2.5
-5.'.
-7.0
-7.14
.6
-0.9
-1.0
-0.3
.5
.2
10.2
11.7
114.0
1.5
6.5
6.5
7.7
11.1
11.5
11.1
2.0
1.5
7.7
4.2
8.9
13.4
12.0
9.5
7.9
18.5
18.2
18.7
18.9
21.5
21.5
22.0
15.9
15.2
SEP
0
0
0
-0.5
-1.3
0
.2
-2.14
-0.8
-2.0
-0.3
-2.5
-2.3
-3.8
-5.0
-3.3
-2.5
-1.14
-0.1
3.6
2.5
5.1.
.7
.5
3.5
1.9
5.5
7.0
10.4
11.9
10.5
15.7
114.6
8.14
0
0
25.1.
13.2
16.2
12.9
9.6
30.6
33.6
30.0
27.7
4.6
9.0
7.7
5.1
3.5
3.9
12.7
11.5
13.7
-2.6
-1.8
-3.14
11.1
15.7
18.9
15.4
12.1
0
14.6
15.14
14.5
15.7
18.9
19.5
19.2
10.5
10.1
16.6
13.5
18.1
22.7
20.6
18.9
16.9
19.2
22.9
0
6.6
8.9
6.0
2.2
-0.1
-2.0
-0.3
7.1
9.6
11.9
10.5
15.2
14.7
0
99
-6.'.
-2.5
.9
12.7
15.7
20.6
23.4
19.9
16.9
JUL
.4
1.7
3.0
7.0
6.5
8.9
10.9
13.0
15.0
3
MAY
1.5.0
15.2
16.6
18.5
18.14
12.0
12.2
16.9
16.6
21.0
25.9
23.5
22.2
20.7
22.7
12.5
0
0
.5
-1.1
2.5
3.?
7.2
8.5
7.0
12.5
11.5
11.5
12.7
16.6
16.7
16.1
7.2
6.9
13.1.
10.1
114.2
19.1
17.5
15.4
13.5
15.5
19.0
21.5
26.7
29.5
26.0
23.4
I-
U-I
ORTLAP)
CASH FRICE
IITE
77778-889999101510101111-
1-61 '
2-63
3-63
4-61
1-61
2-65
3-68
4-63
1-63
2-63
3-61
4-61
1-63
'-63
3-63
4-63
1-63
2-63
11
168 '
1112121212111-
122-
27333364-
445l
4_53
1-68
2-63
3-63
4-63
1-69
2-69
-69
4-69
1-69
_59
3-69
4-69
1-69
2-69
3-69
4-59
1-69
-59
3-69
4-69
1-69
_5q
8
8
MAY
JUL
SEF
1.411.
1.1+40
1.423
1.421
1.391
1.365
1.335
1.314
1.315
1.293
1.305
1.296
1.311
1.3C0
1.273
1.465
1.21.8
1.1+83
1.320
1.319
1.284
1.448
1.445
1.414
1.394
1.365
1.343
1.345
1.318
1.335
1.295
1.308
1.303
1.333
1.348
1.338
1.403
1.254
1.285
1.41+0
1.363
1.371
1.364
1.333
1.305
1.280
1.255
1.255
1.233
1.246
1.205
1.216
1.211
1.240
1.253
1.490
1.480
1.480
1.450
1.470
1.420
1.430
1.47u
1.1.53
1.440
1.41+0
1.453
1.45)
1.455
1.493
1.505
1.500
1.500
1.49i
8
1.271
1.1.70
0
1.4P
1
8
1.483
'
1.1.70
8
1.475
1.480
1.1.35
*
8
*
8
8
1.'+15
1.1+24
1.1.19
1.261.
1.276
1.270
1.300
1.313
1.306
1.373
1.371
1.335
1.341.
1.320
1.311
1.31.6
1.351
1.353
1.331.
1.355
1.344
1.346
1.331.
8
1.391+
8
1.463
1.460
1.395
1.398
1.389
1.363
1.343
1.1.5)
1.1.03
1.1.03
8
1.394
1.394
*
1.1+16
1.1.11
1.1.16
1.1.11
1.373
1.398
1.393
1.418
1.43w
1.428
1.443
1.423
1.415
1.393
1.399
1.485
1.475
1.460
j55
1.455
1.455
1.455
1.455
1.473
5.. 4.59 8
1.1.7.3
6- 1-59
0- 2-53 8
1.1+95
8
1.496
1.435
1.433
8
6- '-69
0
1.426
1.428
1.1.71
-bI
1.291.
J..285
1.485
*
BAS IS
MAR
8
6-
CHICAGO FUTURES PRICES
DEC
1.'+35
1.385
1.371
1.348
1.363
1.309
1.295
1.31.0
1.309
0
0
3
0
DA'E
1.1+03
1.21.3
1.378
1.351
1.215
1.193
1.191
1.174
1.194
1.31+5
1.313
1.331
1.296
1.316
1.31
1.343
1.356
1.353
1.401
1.1+00
1.390
1.368 1.370
1.37.3
1.370
1.341+
1.340
1.341 1.340
1.370 1.355
1.373 1.341
1.379 1.345
1.363
1.340
1.379 1.345
1.379
1.335
1.370 1.348
1.358 1.348
1.334 1.314
1.325 1.313
1.329 1.315
1.323
1.306
1.279 1.275
1.259
1.259
1.271
1.273
1.274
1.268
1.294 1.293
1.293 1.285
1.286 1.294
1.326 1.323
0
1.323
0
1.354
1.430
1.301
1.631
1.279
1.1+01
1.260
1.1.06
1.273
0
0
1.345
1.373
1.388
1.381
1.428
1.425
1.396
1.403
1.371
1.368
1.383
1.366
1.370
1.366
1.373
1.368
1.373
1.376
1.31+0
1.344
1.31.1.
1.335
1.305
1.288
1.299
1.291.
1.320
1.315
1.321
1.345
1.344
1.1+03
1.335
1.310
1.286
1.300
7- 1-68
7- 2-68
7- 3-68
DEC
8
12.7
10.9
11.6
11.7
16.5
14.0
17.5
21.5
21.7
4-68 '
8- 1-68
8- 2-68
8- 3-68
8- 4-68
9- 1-68
9- 2-68
19.1.
9- 3-68
23.5
'
9- 4-68
23.4
10- 1-68
23.9
10- 2-68
21.5
10- 3-68
18.7
10- 4-68
21.7
11- 1-68
16.0
11- 2-68
17.1
11- 3-68
22.1
11- 4-68
20.6
12- 1-68
21.
12- 2-68
21.9
12- 3-68
0
12- 4-68
0
1- 1-69 '
0
1- 2-69
6.5
1- 3-69
4.6
1- 4-69
55
2- 1-69
5.4
2- 2-69
5.7
2- 3-69
9.1
2- 4-69
8.0
3- 1-69
6.2
3- 2-69
7.6
*
3- 3-69
10.0
3- 4-69
11.7
4- 1-69
4.7
4- 2-63
6.1
4- 3-69
3.9
1.- 4-69
1..'.
5- 1-69
7.7
5- 2-69 '
7.2
5- 3-69
7.7
5- 4-69
3.5
6- 1-69
10.7
6- 2-69
12.1.
6- 3-69 '
13.7
6- 4-69 '
12.0
7-
MAR
7.6
57
5.9
5.9
10.5
8.4
11.6
15.5
jS7
13.5
17.6
17.4
18.0
15.5
12.7
15.9
10.7
11.9
16.9
15.6
18.0
17.9
12.4
13.4
14.2
14.6
11.1.
13.1
13.4
15.1
17.6
17.9
15.0
15.6
0
0
4.7
6.1
3.9
4.4
3.7
4.0
4.2
2.7
7.2
7.7
9.5
8.1
MAY
5.0
3.2
3.5
3.6
7.6
5.5
8.7
12.5
13.2
10.5
14.5
14.2
14.7
12.2
9.2
12.7
7.7
9.0
13.7
12.7
1.6
14.9
10.0
11.2
11.6
11.7
9.1
9.6
11.0
12.7
1.1
15.0
13.1
14.2
18.1
20.1
17.9
18.1
16.1
1.6.2
16.9
14.4
0
0
6.5
6.4
8.4
7.4
JUL
SEP
23.6
19.5
19.1.
0
0
6.7
4.2
7.9
12.2
13.7
10.9
16.9
18.0
17.7
22.7
20.1.
23.7
27.9
27.6
24.6
14.'.
0
0
13.4
13.5
11.2
8.4
10.5
8.2
5.2
1.1.2
8.1+
7.9
10.0
13.5
13.0
16.0
15.0
11.5
14.4
14.9
14.0
12.5
13.7
13.2
13.7
17.1
16.2
14.5
15.9
18.5
20.1
17.7
18.7
16.2
16.7
16.1
14.7
14.7
11.6
19.4
21.6
22.5
20.7
.2
6.5
10.9
9.7
12.9
12.2
8.7
11.9
12.5
11.4
9.7
10.7
10.7
10.9
14.
13.1
11.6
13.0
15.5
17.2
15.1
16.1
13.5
14.0
13.4
12.5
12.6
6.7
16.0
18.5
19.9
18.0
I-
c.
ORTLA0D
C659 PRICE
D\TE
777788.89-
1-6
7-69
3-69
4-69
1-69
2-b9
3-59
6-59
1-69
59
9
99IC11161011111111121?1212111322223336444555566-
3-69
4-69
1-69
'-69
5-69
4-69
1-59
2-69
3-69
4-69
1_63
2-69
3-59
4-69
1-7j
'-71
3-73
4-73
1-73
2-71
3-7)
4-73
1-73
2-70
3-73
4-7]
1-73
7-73
3-73
4-7)
1-7J
2-73
3-73
4-73
1-7)
7-73
1.42,
1.+25
1.420
1.620
1.375
1.37)
1.381
1.375
1.370
1.403
1.403
1.410
1.615
1.418
1.445
1.451
1.650
1.473
1.485
1.493
1.511
1.513
1.515
1.521
1.533
1.525
1.533
1.523
1.520
1.513
1.523
1.523
1.525
1.530
3
0
1.438
1.431
1.431
1.20
1.55
1.575
1.565
1.556
1.595
1.56)
1.573
1.571
1.513
1.565
1.53
1.532
CHICAGO FUflJRES PRICES
MAR
MAY
JUL
1.351
1.380
1.348
1.31b
1.290
1.310
1.311
1.331
1.336
1.354
1.359
1.341
1.348
1.354
1.368
1.356
1.355
1.403
1.405
1.410
1.426
1.453
1.)5
3-7
5- 4-7) 4
DEC
'
1.421
1.431
1.4b5
1.464
i.443
1.440
1.468
1.441
1.439
1.441
1.460
1.453
1.441
1.425
1.438
1.413
1.425
1.453
1.441
1.483
1.393
1.410
1.185
1.356
1.330
1.345
1.350
1.366
1.368
1.385
1.390
1.374
1.381
1.396
1.405
1.394
1.355
1.423
1.424
1.430
1.1+33
1.455
1.448
1.475
1.455
1.444
1.455
1.435
1.440
1.496
1.533
1.524
1.505
1.513
3
0
1.463
1.470
1.488
1.483
1.464
1.443
1.454
1.435
1.445
1.475
1.475
1.515
1.399
1.410
1.393
1.358
1.340
1.360
1.360
1.370
1.368
1.385
1.393
1.379
1.385
1.400
1.414
1.403
1.395
1.419
1.428
1.633
1.430
1.41.5
1.434
1.463
1.433
1.421
1.428
1.408
1.416
1.1+51
1.483
1.476
1.466
1.471
1.443
1.455
1.451
1.465
1.800
1.459
1.483
1.453
0
0
1.433
1.468
1.468
1.501
1.260
1.284
0
0
1.325
1.346
1.335
1.350
1.335
1.345
1.350
1.338
1.340
1.350
1.365
1.360
1.348
1.368
1.383
1.385
1.375
1.385
1.378
1.405
1.374
1.366
1.371
1.360
1.359
1.373
1.399
1.395
1.383
1.381
1.375
(.375
1.373
1.378
1.403
1.398
1.371
1.354
1.370
1.345
1.353
1.380
1.364
1.406
SP
DATE
1.294
1.308
1.289
1.258
1.239
1.256
1.256
1.274
1.293
1.316
0
0
1.361
1.375
1.390
1.385
1.373
1.393
1.408
1.413
1.401
1.410
1.398
1.426
1.390
1.383
1.391
1.380
1.378
1.393
1.415
1.414
1.400
1.400
1.395
1.395
1.393
1.396
1.420
1.411
1.390
1.375
1.388
1.366
1.375
1.403
1.390
1.429
BASIS
MAY
MAR
DEC
SEP
JUL
444444 8444448444444444444444444444444844444
7- 1-69
7.4
3.5
2.6
16.5
13.1
7- 2-69
7.5
1.5
1.5
14.1
11.7
7- 3-69
7- 4-69
8- 1-69
8- 2-69
8- 3-69
8- 4-69
9- 1-69
9- 2-69
9- 3-69
9- 4-69
10- 1-69
10- 2-69
10- 3-69
10- 4-69
11- 1-69
11- 2-69
11- 3-69
11- 4-69
12- 1-69
12- 2-69 8
12- 3-69
12- 4-69
1- 1-70
1- 2-70
1- 3-70
1- 4-70 8
2- 1-70
2- 2-70
2- 3-70
2- 4-70
3- 1-70
3- 2-70
3- 3-70
3- 4-73
4- 1-70
4- 2-70
4- 3-70
4- 4-70 '
5- 1-70
5- 2-70
5- 3-70
5- 4-70
6- 1-70
6- 2-70 8
6- 3-70 '
6- 4-70
7.2
10.4
3.5
6.4
2.7
6.2
0
35
2.2
3.0
1.0
2.0
.5
5.0
2.2
4.5
2.5
3.2
5.5
13.1
16.2
13.6
11.4
12.4
10.1
7.7
8.4
.7
.0
0
3.1
3.0
1.5
3.1
4.7
5.5
7.2
7.5
6.5
8.0
9.0
10.2
10.2
10.2
10.2
13.2
11.7
13.2
9.7
0
5.'.
45
8.
6.0
6.9
4.4
.9
3.14
.2
.2
4.6
4.1
6.9
6.7
6.1
7.7
9.4
9.5
6.7
8.0
8.0
1.5
1.0
3.6
3.4
1.9
4.0
5.6
6.5
1.5
8.1+
5.5
3
0
8.2
9.9
9.'.
11.0
9.9
8.9
4.5
5.6
7.7
8.5
8.2
.0
.1
6.1
6.0
7.7
5.0
6.2
3.0
6.5
8.6
7.0
9.5
8.0
5.7
5.7
2.1.
-2.0
-0.4
1.5
1.2
0
11.1+
0
13.6
12.4
12.5
14.2
11.9
14.5
13.2
15.2
14.0
10.7
9.5
9.7
11.2
9.6
12.7
11.6
13.5
12.0
10.9
9.7
7.5
6.5
97
7.5
8.0
6.0
7.6
4.2
8.7
10.9
9.7
12.2
10.4
6.9
2.7
4.4
54
5.4
6.?
10.0
12.4
10.0
8.5
10.6
7.7
11.7
0
0
13.2
8.2
8.2
7.9
0
14.6
16.4
15.1+
17.0
16.1
14.?
11.1
12.2
13.?
14.4
15.5
17.7
20.2
18.7
18.2
19.7
18.9
21.6
20.0
22.5
21.2
17.0
18.6
17.4
4.0
5.5
6.5
7.7
7.7
7.7
7.7
10.9
9.5
11.2
7.9
13.0
14.7
13.4
15.0
14.2
12.7
9.5
10.6
12.0
12.5
13.5
15.7
18.2
16.7
16.5
18.4
17.0
19.5
18.2
20.2
19.0
14.7
16.0
15.1
-J
PORTL4JD
CHICAGO FUTURES PRICES
O3T
CASH FICE
MAY
DEC
MAR
JUL
SEP
4484448484 44444444#4444884484#44444848848484444444444444
7- 1-7)
1.593
1.1+45
1.1+80
1.480
1.368 1.394
7- 2-7u
1.580
1.483 1.510
1.505 1.420
1.1+35
7- 3-70
1.623
1.493 1.513
1.503
0
1.41+0
7- 4-70
1.463
1.529 1.554
1.543
0
1.475
8- 1-70 '
1.500
1.510 1.529
1.505 1.430
1.461
8- 2-73
1.495
1.539 1.564
1.51+0
1.480
1.1+89
67U
1.561
1.600 1.633
1.623 1.579
1.550
6- 4-73
1.570
1.629 1.660 1.643 1.560
1.576
9- 1-70
1.573
1.649 1.680
1.655 1.561 1.594
°- 2-70
1.560
1.701 1.723
1.698
1.583 1.668
9..
1.630
1.659 1.685
1.670 1.590
0
9- 4-70
1.600
1.683 1.703
1.675
1.568
0
to- 1-70
1.580
1.700 1.700
1.678 1.578 1.589
IC- 2-70
1.603
1.720 1.746
1.724 1.613 1.641
10- 3-70 '
1.640
1.721 1.736
1.729 1.595
1.615
10- 4-70 *
1.663
1.740 1.750
1.724
1.610
1.628
11- .-73
1.685
1.789 1.799 1.780
1.675 1.698
11- 2-70
1.720
1.760 1.779
1.765 1.650
1.673
11- 3-70
1.720
1.698 1.719
1.710 1.605
1.630
11- 4-70
1.723
1.673 1.700
1.690
1.594 1.610
12- 1-70
1.770
1.708 1.723
1.713 1.615 1.590
12- 2-73
1.770
1.655 1.666 1.658
1.569 1.589
12- 3-71)
1.750
0
1.678 1.665
1.590
1.608
12- 4-73
1.770
0
1.681
1.598
1.620
1.665
8
1- 1-71
1.783
1.674 1.666 1.655
1.600
1.626
1- 2-71
1.763
1.656 1.709
1.689 1.624
1.643
1- 1-71 8
1.763
1.660 1.695
1.675 1.618
1.611
8
1- 4-71
1.760
1.640
1.651
1.621
1.571
1.593
2- 1-71
1.770
1.668
1.696 1.665
1.598 1.618
2- 2-71
1.780
1.65g.
1.693 1.649
1.576 1.601
271
1.783
1.626 1.590
1.641 1.560
1.578
2- 4-71
1.755
1.599 1.656 1.608
1.528 1.549
3- j-7j
1.760
1.616 1.675
1.628
1.548
1.566
3- 2-71
1.715
1.614 1.669
1.626
1.543 1.565
-71 '
3
1.771
1.603
1.593 1.533 1.053
4-71
1.770
0
1.593
1.530
1.593
1.590
4- 1-71
1.755
1.600 1.628
1.603 1.533
1.553
'- 2-71
1.780
1.601
1.595
1.621+
1.528 1.546
8
4- 3-71
1.760
1.640
1.583 1.600
1.663 1.644
1.765
4- 4-71
1.611 1.638 1.620
1.554
1.570
5- 1-71
1.840
1.571 1.593 1.585
1.514
1.531
5- 2-71
1.85)
1.568 1.574 1.598
1.509
1.519
5- 3-71
1.85)
0
1.540 1.SSb
1.494
1.504
5- 4-71
1.750
t.62.
0
1.578 1.590
1.639
1)
DA'E
48844448
7- 1-70
7- 2-70
7- 3-70
7- 4-70
8- 1-70
8- 2-70
8- 3-70
8- 4-70
9999-
8
MAR
14.5
9.7
11.0
7.0
5- i-fl.
5- 2-71 8
5- 3-71 8
5- 4-71.
JUL
SEP
11.0
7.5
22.2
16.0
19.6
14.5
0
0
-1.5
33
.7
1.7
-6.9
-1.0
-4.4
-4.0
-5.9
-7.9
-9.4
-2.9
-6.9
-7.3
-9.0
-11.0
-15.8
-8.8
-10.3
-12.0
-14.6
-9.6
-9.0
-11.4
-5.9
-8.3
-0.5
-4.5
-6.3
-7.3
-8.5
-13.3
-7.0
-7.5
-9.8
-12.4
-8.9
-6.4
-9.5
-4.5
.6
1.5
3.0
5.7
1-70
2-70 ' -13.6
-5.9
3-70
1+-iD '
-8.3
1-70
-12.0
-12.0
2-70
3-70
-8.1
-8.3
4-70
1-70
-10.4
-4.0
2-70 '
2.7
3-70
8
4.7
4-70
6.2
1-70 8
10101010111111111212- a-n 8
12- 3-70
12- 4-70
1- 1-71
1- 2-71
1- 3-71 8
1- 4-71 8
2- 1-71
2- 2-71
2- 3-71
2- 4-71
3- 1-71
3- 2-71 8
3- 3-71
3- 4-71
4- 1-71 8
4- 2-71 8
8
1+- 3-71
4- 4-71 4
BASIS
MAY
DEC
2.0
4.7
11.5
10.4
0
7.2
8.9
0
10.6
10.4
10.0
14.0
10.2
12.6
1.4
15.6
14.4
16.1
16.7
17.7
15.5
18.5
12.
15.4
26.9
28.2
31.3
12.6
11.'.
5.1
6.5
12.9
7l
8.7
9.0
9.9
8.5
10.6
0
0
12.7
15.6
10.2
12.7
24.7
27.6
29.4
11.1
11.2
8.5
17.2
12.5
7.1
8.5
15.9
10.5
13.1
13.9
14.7
i3.2
14.9
17.7
17.7
15.2
17.9
12.1
14.5
25.5
25.2
0
0
7.0
1.5
-1.5
1.0
.9
-1.8
1.0
3.2
8.0
3.9
.6
1.0
-0.8
-2.4
-10.3
0
0
-1.3
-0.9
-4.1
2.5
5.0
1.0
7.0
12.0
-1.3
4.7
.2
4!
12.6
15.5
20.1
16.0
3.2
9.5
11.0
18.0
18.1
142
t.0
10.
18.0
13.6
14.2
20.9
11.2
20.4
22.0
22.7
21.2
23.2
23.7
24.0
22.5
25.2
18.2
21.1
32.6
34.1
35.6
17.2
15.4
11.1
14.9
18.7
15.2
17.9
20.2
20.6
19.4
21.0
21.7
22.0
20.2
23.4
16.
19.5
30.9
33.1
34.6
16.0