4 pp.The marketing time frame for crops can be divided into three parts--pre-harvest, harvest and post-harvest. This publication focuses on the more common post-harvest marketing strategies using forward contracts, storage, futures contracts, options and various combinations of these tools

McCorkle, Dean

Welch, Mark

Texas A&M University

Post-Harvest Marketing Alternatives
Risk Management
E-520
RM2-30.0 
02-09
*Assistant Professor and Extension Economist–Grain Marketing and Extension Program 
Specialist–Economic Accountability, The Texas A&M System.
The marketing time frame for crops can be 
divided into three parts—pre-harvest, harvest 
and post-harvest. Because of production risks, 
it is rarely a good idea to price 100 percent of 
expected production before harvest. Instead, 
it is advantageous to consider various pricing 
strategies that can be used for a portion of the 
crop(s) after harvest. The willingness to price 
a crop before harvest lengthens the producer’s 
marketing season and allows more opportuni-
ties to capture a desired target price. This pub-
lication focuses on a few of the more common 
post-harvest marketing strategies using forward 
contracts, storage, futures contracts, options, 
and various combinations of these tools. 
Storing Grain 
(speculative storage) 
Storing unpriced grain has been a common 
marketing strategy for many years. Like some 
other post-harvest marketing strategies, storing 
grain that is not priced places the producer in a 
speculative position.                                    
Rather than just storing grain out of habit, 
however, the producer needs to determine if 
there is an economic incentive to store. To deter-
mine this, the producer first needs to know the 
cost associated with storing the grain (storage 
rates, in and out charges, shrink, interest/op-
portunity cost, etc.). Next, the producer needs to 
have an idea of how far cash prices might rise 
in the future. If the producer expects the cash 
price to increase, he must determine whether 
the increase will be large enough to more than 
offset the associated storage costs. One way this 
can be accomplished is by reviewing the futures 
prices for upcoming months along with the cur-
rent futures price, local cash price, and storage 
costs. Table 1 summarizes the expected returns 
to storage for a hypothetical situation. 
Take the case of a corn farmer who has com-
pleted harvest in October and is making the sell 
versus store decision.  He can sell now using the 
December futures contract as the reference price. 
His local basis is +$0.10 per bushel.  Based on his 
area’s basis history, he anticipates the basis will 
strengthen $0.05 by March to +$0.15 per bushel 
and strengthen another $0.05 by May to +$0.20 
per bushel. The market is offering $.20 per bush-
el to store until December and $.30 per bushel to 
store until March. After considering cumulative 
storage and interest costs, it is clear that there is 
no incentive to store corn through March (return 
to storage = $0.50), while storing through May 
produces positive returns to storage (+$.02 per 
bushel). The type of storage used, commercial or 
on-farm, can significantly affect the returns. 
One must keep in mind that this method of 
comparison will never show much of a return 
to storage since the incentive to arbitrage the 
market will induce market participants to store 
grain whenever prices near full carry (i.e., the 
elevator will buy the grain, hedge the position 
Mark Welch and Dean McCorkle*
2and pick up the nearly risk-free price improve-
ment itself). For the producer, the forecast may 
be based more on expectations that are not 
already built into the market price, such as bet-
ter than expected exports or domestic use. The 
producer may also look at seasonal patterns or 
compare the current year to similar years from 
the past. While producers will come up with 
their own forecasts in many different ways, 
the important factor is whether they expect the 
increase in market price to exceed storage costs. 
Another important fact to remember is that 
holding unpriced grain in storage is a specula-
tive venture. If prices decline instead of rising 
after harvest, the producer stands to lose two 
ways. First, the price received for the grain when 
it is sold is lower than it was at harvest. Second-
ly, the producer must pay the storage costs.
Advantages of storing grain 
Extends the marketing season• 
Can take advantage of higher prices if • 
they occur
Can take advantage of strengthening • 
basis if it occurs
Disadvantages of storing grain 
Prices may not increase enough to • 
cover storage costs
Basis may weaken• 
Stored grain can lose quality• 
Producer is unprotected against falling • 
prices
Replacing Cash with Futures 
Another strategy that allows the producer to 
take advantage of rising prices is to sell the cash 
grain at harvest and buy an equal amount in the 
futures market (long position). This places you 
in a speculative position and you should consult 
with your tax advisor before initiating such a 
strategy. The downside to this strategy is that 
if prices decline very far, margin calls will be 
required to maintain equity in your margin ac-
count. If you are not prepared to handle them, 
this could cause cash flow problems. Know the 
amount of financial risk you can withstand 
before initiating a long position in the futures 
market. Since the cash grain has already been 
sold, the producer will not benefit from any 
basis improvement. There also are a couple of 
advantages to this strategy. The producer does 
not incur storage costs, and the margin needed 
to re-own the crop in the futures market is only 
a fraction of the crop’s actual value, which al-
lows the producer to use the remainder of the 
cash to pay off debt, reinvest in the farm, etc. 
Forward Cash Contract 
With a forward cash contract, a grain elevator 
or feedlot offers the producer a set price for the 
specified delivery date. After determining your 
storage and interest cost from harvest through 
the delivery date, it is rather simple to deter-
mine whether or not the forward contract is a 
worthy marketing strategy. 
Table 1. Returns on storage.
It is Oct. now Dec. Mar. May
Futures price $3.90 $4.10 $4.20
Expected basis 0.10 0.15 0.20
Expected cash price $4.00 $4.25 $4.40
Less current cash price $4.00 $4.00 $4.00
Less storage and interest* 0.00 0.25 0.38
Returns to storage 0.00 0.00 0.02
*Interest calculated at 10% of Sept. cash price; storage at $0.03/bu./month
3Advantages of forward contracts 
Simple to use and understand• 
Eliminate risk of weakening basis• 
Eliminate downside price risk• 
Disadvantages of forward contracts
Prevent producer from capturing higher • 
prices (if they occur)
Stored grain may lose quality• 
Obligated to pay storage and interest costs• 
It is advisable to shop around for the best for-
ward contract price (strongest basis). Unlike stor-
ing grain unpriced, forward contracting involves 
no price speculation because the price is fixed. 
The underlying purpose of post-harvest forward 
contracting is to earn a return on one’s storage 
investment. Producers also may use this method 
as a way to move income into the next year for tax 
purposes. 
Store Grain and Sell Futures 
(storage hedge) 
Storing grain and selling futures is commonly 
referred to as a “storage hedge.” The primary ad-
vantage of a storage hedge is that it locks in a gen-
eral price level and reduces price risk because the 
hedger is short in the futures market (i.e., if prices 
decline, any loss suffered in the cash market will 
be roughly offset by a gain in the futures market). 
A storage hedge protects against changes in the 
overall level of market prices, but still allows the 
producer to speculate on the basis and capitalize 
on a strengthening basis if it should occur. You 
might consider this alternative if you are satisfied 
with the general price level but think you can add 
to that price by locking in a return on storage. 
Advantages of storage hedge 
Can capitalize on strengthening basis• 
Extends the marketing season• 
Protects against downside price risk• 
Disadvantages of storage hedge 
Susceptible to weakening basis• 
Prevents producer from capturing higher • 
prices (if they occur)
Stored grain may lose quality• 
Obligated to pay storage and interest • 
costs
Margin calls can squeeze cash flows, • 
especially when grain has not been sold 
yet
Assume a corn producer is contemplating a 
storage hedge for corn harvested in October.  
The local cash price at harvest is $3.80 and the 
December futures price is $3.90, thus giving a 
basis of -$0.10.  The March futures price is $4.10 
and the cost of storage and interest from Octo-
ber to March (4 months) is $0.25 per bushel. The 
futures market is offering $0.20 ($4.10-$3.90) to 
store grain until March. The questions are: 1) 
Are you satisfied with the current price range; 
and 2) Do you expect the basis to improve 
enough from August through December to 
provide a positive return to storage? The ex-
pected change in basis must be more than $0.05 
for there to be a positive return with the stor-
age hedge. In this case, the producer looks at 
his historic basis and sees that the cash price in 
March is usually $0.10 above the March futures 
price (a basis of +$0.10). The producer could 
sell March futures at $4.10 in October and store 
the corn until March when the hedge is lifted. 
Assume that by March, the futures price fell to 
$3.50 and the cash price fell to $3.60.
With a storage hedge, the general price level 
is locked in when the hedge is put on, but basis 
speculation continues until the producer sells 
the grain and gets out of the hedge. The key 
to using a storage hedge is to know your local 
basis. 
Another method of managing downside 
price risk associated with storing grain is to 
purchase a put option. In this case the cash grain 
is not sold at harvest, but is stored. The cost of 
this strategy is the combination of storage costs 
and the cost of the option premium. If prices 
rise, the producer lets the option expire worth-
less and sells the grain for a higher cash price. If 
prices fall, the put option premium increases in 
value and offsets the subsequent decrease in the 
cash price. This can be an attractive strategy if 
the producer wants downside price protection, 
but wants to speculate on basis improving. The 
4producer knows that the maximum cost with 
this strategy is the up-front cost of the option 
and the associated storage costs. There are also 
no margin calls with this strategy. 
Forward Basis Contract 
The two components of price risk in the 
local market are the changing price level and 
the basis (the difference between cash and 
futures prices). Both the price level and basis 
risk should be addressed in your post-harvest 
marketing plan. One method of managing basis 
risk is with a basis contract. This is an agree-
ment between a producer and grain elevator 
(or feedlot) that specifies the cash price upon 
future delivery as being a fixed amount in rela-
tion to the futures price (above or below), thus 
fixing the basis. Basis contracts eliminate the 
risk of the basis weakening but also eliminate 
the chance of further basis improvement. At the 
same time, the producer is unprotected against 
a decrease in the futures price. Other market-
ing tools such as a short hedge can be used in 
conjunction with basis contracts to manage 
price risk. For more discussion regarding basis 
contracts, please refer to “Knowing and Manag-
ing Grain Basis.” 
Sell Cash and Buy Call Option 
Producers who want protection against 
downside price risk but still want to profit 
from a price increase after harvest may want to 
consider selling cash grain and buying a call op-
tion.  This strategy also eliminates the costs and 
quality risks associated with stored grain. The 
purchase of a call option gives the producer the 
right, but not the obligation, to buy the underly-
ing futures contract at the specified strike price.  
Refer to “Introduction to Options” for a further 
explanation of options markets.
Advantages of selling at harvest and buying 
call option(s) 
Can capitalize on rising prices• 
Avoids cost of storage• 
Harvest sale makes cash available • 
sooner
Disadvantages of selling at harvest and 
buying call option(s) 
Call option premiums can be costly• 
Harvest time is usually when cash • 
prices are lowest
If the futures price increases, you sell the 
call option and your profit is the difference in 
Placing the hedge
October
March
Futures market
Sell March futures at $4.10 
and store grain
Buy March futures at $3.50
Cash market
Cash price offer $3.80
Sell cash grain at $3.60
Hedge results
Cash grain price in March
+ Futures gain/loss
– Storage costs
= Final price
Return on storage hedge
+ Difference in March – December
+ Expected basis change (Oct–Mar)
– Storage and interest cost
= Return on storage hedge
$3.60
$0.60
$0.25
$3.95
$0.20
$0.20
$0.25
$0.15
5Educational programs of the Texas AgriLife Extension Service are open to all people without regard to race, color, sex, 
disability, religion, age, or national origin.
Issued in furtherance of Cooperative Extension Work in Agriculture and Home Economics, Acts of Congress of May 
8, 1914, as amended, and June 30, 1914, in cooperation with the United States Department of Agriculture. Edward G. 
Smith, Director, Texas AgriLife Extension Service, The Texas A&M System.
Produced by AgriLife Communications, The Texas A&M System
Extension publications can be found on the Web at: http://AgriLifeBookstore.org.
Visit Texas AgriLife Extension Service at http://AgriLifeExtension.tamu.edu.
Partial funding support has been provided by the
Texas Corn Producers, Texas Farm Bureau, and
Cotton Inc.–Texas State Support Committee. 
the value of the premium when sold and the 
cost of the premium when purchased. If the 
futures price decreases, you let the call option 
expire and your loss is limited to the cost of the 
premium when you purchased it. For example, 
assume a producer harvested corn in October. 
The producer sold the corn at harvest for $4.00. 
The March futures price is $4.10 and the pro-
ducer buys an at-the-money call option for $.15. 
In February, the futures price is $4.70 and the 
value of the call option has risen to $.60 (deter-
mined by supply and demand of call options). 
The producer sells the call option and makes 
a profit of $.45 which, when added to the $4.00 
cash price, yields a net price of $4.45. If the fu-
tures price had fallen, the producer would have 
let the option expire and would have lost $.15, 
which would have yielded a net price of $3.85. 
Call option premiums can be costly, but are 
often cheaper than storage and interest. An 
attractive feature of this strategy is that the op-
tion premium is a one-time, up-front payment 
and the maximum loss possible is the cost of 
the option. To determine whether this strategy 
is favorable, compare call option premiums for 
the different strike prices available with your 
outlook for the market. What are the odds of 
prices rising enough to justify the cost of the 
call option? Because this strategy places the 
producer in a speculative position IRS rules are 
less favorable, and there is an upper limit on the 
amount of losses that can be deducted on your 
tax return in a given year. Consult your tax 
advisor for current tax regulations regarding 
speculative losses on options.  
What Strategy is Best For You 
Since the amount of production is not known 
with certainty until harvest time, producers 
usually refrain from pricing all of their antici-
pated production before harvest, leaving some 
portion of the crop(s) to be marketed during 
or after harvest. When updating and revising 
your marketing plan near harvest time, analyze 
the postharvest marketing strategies you feel 
comfortable with and weigh their advantages, 
disadvantages, returns to storage if applicable, 
and anticipated net price you think you will 
receive with each strategy. Making an informed 
decision and sticking with your marketing plan 
will ease the transition to the postharvest mar-
keting phase and make the marketing process 
much easier. 


English

Post-Harvest Marketing Alternatives

Texas A&amp;M Repository

Post-Harvest Marketing AlternativesRisk ManagementE-520RM2-30.0 02-09*Assistant Professor and Extension Economist–Grain Marketing and Extension Program Specialist–Economic Accountability, The Texas A&M System.The marketing time frame for crops can be divided into three parts—pre-harvest, harvest and post-harvest. Because of production risks, it is rarely a good idea to price 100 percent of expected production before harvest. Instead, it is advantageous to consider various pricing strategies that can be used for a portion of the crop(s) after harvest. The willingness to price a crop before harvest lengthens the producer’s marketing season and allows more opportuni-ties to capture a desired target price. This pub-lication focuses on a few of the more common post-harvest marketing strategies using forward contracts, storage, futures contracts, options, and various combinations of these tools. Storing Grain (speculative storage) Storing unpriced grain has been a common marketing strategy for many years. Like some other post-harvest marketing strategies, storing grain that is not priced places the producer in a speculative position.                                    Rather than just storing grain out of habit, however, the producer needs to determine if there is an economic incentive to store. To deter-mine this, the producer first needs to know the cost associated with storing the grain (storage rates, in and out charges, shrink, interest/op-portunity cost, etc.). Next, the producer needs to have an idea of how far cash prices might rise in the future. If the producer expects the cash price to increase, he must determine whether the increase will be large enough to more than offset the associated storage costs. One way this can be accomplished is by reviewing the futures prices for upcoming months along with the cur-rent futures price, local cash price, and storage costs. Table 1 summarizes the expected returns to storage for a hypothetical situation. Take the case of a corn farmer who has com-pleted harvest in October and is making the sell versus store decision.  He can sell now using the December futures contract as the reference price. His local basis is +$0.10 per bushel.  Based on his area’s basis history, he anticipates the basis will strengthen $0.05 by March to +$0.15 per bushel and strengthen another $0.05 by May to +$0.20 per bushel. The market is offering $.20 per bush-el to store until December and $.30 per bushel to store until March. After considering cumulative storage and interest costs, it is clear that there is no incentive to store corn through March (return to storage = $0.50), while storing through May produces positive returns to storage (+$.02 per bushel). The type of storage used, commercial or on-farm, can significantly affect the returns. One must keep in mind that this method of comparison will never show much of a return to storage since the incentive to arbitrage the market will induce market participants to store grain whenever prices near full carry (i.e., the elevator will buy the grain, hedge the position Mark Welch and Dean McCorkle*2and pick up the nearly risk-free price improve-ment itself). For the producer, the forecast may be based more on expectations that are not already built into the market price, such as bet-ter than expected exports or domestic use. The producer may also look at seasonal patterns or compare the current year to similar years from the past. While producers will come up with their own forecasts in many different ways, the important factor is whether they expect the increase in market price to exceed storage costs. Another important fact to remember is that holding unpriced grain in storage is a specula-tive venture. If prices decline instead of rising after harvest, the producer stands to lose two ways. First, the price received for the grain when it is sold is lower than it was at harvest. Second-ly, the producer must pay the storage costs.Advantages of storing grain Extends the marketing season• Can take advantage of higher prices if • they occurCan take advantage of strengthening • basis if it occursDisadvantages of storing grain Prices may not increase enough to • cover storage costsBasis may weaken• Stored grain can lose quality• Producer is unprotected against falling • pricesReplacing Cash with Futures Another strategy that allows the producer to take advantage of rising prices is to sell the cash grain at harvest and buy an equal amount in the futures market (long position). This places you in a speculative position and you should consult with your tax advisor before initiating such a strategy. The downside to this strategy is that if prices decline very far, margin calls will be required to maintain equity in your margin ac-count. If you are not prepared to handle them, this could cause cash flow problems. Know the amount of financial risk you can withstand before initiating a long position in the futures market. Since the cash grain has already been sold, the producer will not benefit from any basis improvement. There also are a couple of advantages to this strategy. The producer does not incur storage costs, and the margin needed to re-own the crop in the futures market is only a fraction of the crop’s actual value, which al-lows the producer to use the remainder of the cash to pay off debt, reinvest in the farm, etc. Forward Cash Contract With a forward cash contract, a grain elevator or feedlot offers the producer a set price for the specified delivery date. After determining your storage and interest cost from harvest through the delivery date, it is rather simple to deter-mine whether or not the forward contract is a worthy marketing strategy. Table 1. Returns on storage.It is Oct. now Dec. Mar. MayFutures price $3.90 $4.10 $4.20Expected basis 0.10 0.15 0.20Expected cash price $4.00 $4.25 $4.40Less current cash price $4.00 $4.00 $4.00Less storage and interest* 0.00 0.25 0.38Returns to storage 0.00 0.00 0.02*Interest calculated at 10% of Sept. cash price; storage at $0.03/bu./month3Advantages of forward contracts Simple to use and understand• Eliminate risk of weakening basis• Eliminate downside price risk• Disadvantages of forward contractsPrevent producer from capturing higher • prices (if they occur)Stored grain may lose quality• Obligated to pay storage and interest costs• It is advisable to shop around for the best for-ward contract price (strongest basis). Unlike stor-ing grain unpriced, forward contracting involves no price speculation because the price is fixed. The underlying purpose of post-harvest forward contracting is to earn a return on one’s storage investment. Producers also may use this method as a way to move income into the next year for tax purposes. Store Grain and Sell Futures (storage hedge) Storing grain and selling futures is commonly referred to as a “storage hedge.” The primary ad-vantage of a storage hedge is that it locks in a gen-eral price level and reduces price risk because the hedger is short in the futures market (i.e., if prices decline, any loss suffered in the cash market will be roughly offset by a gain in the futures market). A storage hedge protects against changes in the overall level of market prices, but still allows the producer to speculate on the basis and capitalize on a strengthening basis if it should occur. You might consider this alternative if you are satisfied with the general price level but think you can add to that price by locking in a return on storage. Advantages of storage hedge Can capitalize on strengthening basis• Extends the marketing season• Protects against downside price risk• Disadvantages of storage hedge Susceptible to weakening basis• Prevents producer from capturing higher • prices (if they occur)Stored grain may lose quality• Obligated to pay storage and interest • costsMargin calls can squeeze cash flows, • especially when grain has not been sold yetAssume a corn producer is contemplating a storage hedge for corn harvested in October.  The local cash price at harvest is $3.80 and the December futures price is $3.90, thus giving a basis of -$0.10.  The March futures price is $4.10 and the cost of storage and interest from Octo-ber to March (4 months) is $0.25 per bushel. The futures market is offering $0.20 ($4.10-$3.90) to store grain until March. The questions are: 1) Are you satisfied with the current price range; and 2) Do you expect the basis to improve enough from August through December to provide a positive return to storage? The ex-pected change in basis must be more than $0.05 for there to be a positive return with the stor-age hedge. In this case, the producer looks at his historic basis and sees that the cash price in March is usually $0.10 above the March futures price (a basis of +$0.10). The producer could sell March futures at $4.10 in October and store the corn until March when the hedge is lifted. Assume that by March, the futures price fell to $3.50 and the cash price fell to $3.60.With a storage hedge, the general price level is locked in when the hedge is put on, but basis speculation continues until the producer sells the grain and gets out of the hedge. The key to using a storage hedge is to know your local basis. Another method of managing downside price risk associated with storing grain is to purchase a put option. In this case the cash grain is not sold at harvest, but is stored. The cost of this strategy is the combination of storage costs and the cost of the option premium. If prices rise, the producer lets the option expire worth-less and sells the grain for a higher cash price. If prices fall, the put option premium increases in value and offsets the subsequent decrease in the cash price. This can be an attractive strategy if the producer wants downside price protection, but wants to speculate on basis improving. The 4producer knows that the maximum cost with this strategy is the up-front cost of the option and the associated storage costs. There are also no margin calls with this strategy. Forward Basis Contract The two components of price risk in the local market are the changing price level and the basis (the difference between cash and futures prices). Both the price level and basis risk should be addressed in your post-harvest marketing plan. One method of managing basis risk is with a basis contract. This is an agree-ment between a producer and grain elevator (or feedlot) that specifies the cash price upon future delivery as being a fixed amount in rela-tion to the futures price (above or below), thus fixing the basis. Basis contracts eliminate the risk of the basis weakening but also eliminate the chance of further basis improvement. At the same time, the producer is unprotected against a decrease in the futures price. Other market-ing tools such as a short hedge can be used in conjunction with basis contracts to manage price risk. For more discussion regarding basis contracts, please refer to “Knowing and Manag-ing Grain Basis.” Sell Cash and Buy Call Option Producers who want protection against downside price risk but still want to profit from a price increase after harvest may want to consider selling cash grain and buying a call op-tion.  This strategy also eliminates the costs and quality risks associated with stored grain. The purchase of a call option gives the producer the right, but not the obligation, to buy the underly-ing futures contract at the specified strike price.  Refer to “Introduction to Options” for a further explanation of options markets.Advantages of selling at harvest and buying call option(s) Can capitalize on rising prices• Avoids cost of storage• Harvest sale makes cash available • soonerDisadvantages of selling at harvest and buying call option(s) Call option premiums can be costly• Harvest time is usually when cash • prices are lowestIf the futures price increases, you sell the call option and your profit is the difference in Placing the hedgeOctoberMarchFutures marketSell March futures at $4.10 and store grainBuy March futures at $3.50Cash marketCash price offer $3.80Sell cash grain at $3.60Hedge resultsCash grain price in March+ Futures gain/loss– Storage costs= Final priceReturn on storage hedge+ Difference in March – December+ Expected basis change (Oct–Mar)– Storage and interest cost= Return on storage hedge$3.60$0.60$0.25$3.95$0.20$0.20$0.25$0.155Educational programs of the Texas AgriLife Extension Service are open to all people without regard to race, color, sex, disability, religion, age, or national origin.Issued in furtherance of Cooperative Extension Work in Agriculture and Home Economics, Acts of Congress of May 8, 1914, as amended, and June 30, 1914, in cooperation with the United States Department of Agriculture. Edward G. Smith, Director, Texas AgriLife Extension Service, The Texas A&M System.Produced by AgriLife Communications, The Texas A&M SystemExtension publications can be found on the Web at: http://AgriLifeBookstore.org.Visit Texas AgriLife Extension Service at http://AgriLifeExtension.tamu.edu.Partial funding support has been provided by theTexas Corn Producers, Texas Farm Bureau, andCotton Inc.–Texas State Support Committee. the value of the premium when sold and the cost of the premium when purchased. If the futures price decreases, you let the call option expire and your loss is limited to the cost of the premium when you purchased it. For example, assume a producer harvested corn in October. The producer sold the corn at harvest for $4.00. The March futures price is $4.10 and the pro-ducer buys an at-the-money call option for $.15. In February, the futures price is $4.70 and the value of the call option has risen to $.60 (deter-mined by supply and demand of call options). The producer sells the call option and makes a profit of $.45 which, when added to the $4.00 cash price, yields a net price of $4.45. If the fu-tures price had fallen, the producer would have let the option expire and would have lost $.15, which would have yielded a net price of $3.85. Call option premiums can be costly, but are often cheaper than storage and interest. An attractive feature of this strategy is that the op-tion premium is a one-time, up-front payment and the maximum loss possible is the cost of the option. To determine whether this strategy is favorable, compare call option premiums for the different strike prices available with your outlook for the market. What are the odds of prices rising enough to justify the cost of the call option? Because this strategy places the producer in a speculative position IRS rules are less favorable, and there is an upper limit on the amount of losses that can be deducted on your tax return in a given year. Consult your tax advisor for current tax regulations regarding speculative losses on options.  What Strategy is Best For You Since the amount of production is not known with certainty until harvest time, producers usually refrain from pricing all of their antici-pated production before harvest, leaving some portion of the crop(s) to be marketed during or after harvest. When updating and revising your marketing plan near harvest time, analyze the postharvest marketing strategies you feel comfortable with and weigh their advantages, disadvantages, returns to storage if applicable, and anticipated net price you think you will receive with each strategy. Making an informed decision and sticking with your marketing plan will ease the transition to the postharvest mar-keting phase and make the marketing process much easier. 

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Post-Harvest Marketing Alternatives

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Post-Harvest Marketing Alternatives

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