Sterling Terrell

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You are here: Home / Potpourri / Commodity Hedging: The 4 Steps

Commodity Hedging: The 4 Steps

Commodity Hedging: The 4 Steps

Are you a commodity seller?

If so, here are the 4 steps to commodity hedging.

If you are a commodity buyer, reverse the words “lower” and “higher.”

#1. Can the price go lower?

– If your answer is yes – hedge your crop.
– If your answer is no – you have no idea what you are talking about.

#2. Did prices move lower?

– If your answer is yes – take hedge profits and add them to your eventual cash sale price. Then start back at #1.
– If your answer is no – go to #3.

#3. Did prices move higher?

– If your answer is yes – take hedge losses and subtract them from your eventual cash sale price. Then start back at #1.
– If your answer is no – go to #4.

#4. Is the current price still relatively close to your original hedge price?

– If your answer is yes – it may not be worth it to take profits or losses at this point.
– If your answer is no – go to #2.

Click here for a few ways to get better at commodity hedging.

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Filed Under: PotpourriTagged With: #Cotton, #CottonMarketing

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