How to Hedge Organic Grains Using The Jacobsen

How to Hedge Organic Grains Using The Jacobsen

Farmers, Merchandisers, Traders, Crushers, and Consumer who transact conventional grains have benefited from their ability to hedge their risks using the derivatives markets. The Chicago Board of Trade started offering corn contracts with formal rules in 1865, the same year The Jacobsen began publishing.

Beginning in 2021, for the first time, commercial entities that wanted to hedge or trade organic corn or organic soybeans will have that opportunity using The Jacobsen data via Stableprice.com.

Purchasing Calls and Puts

Stableprice.com will offer call (call spreads) and put (put spreads) options on organic corn and organic soybeans using The Jacobsen data to settle each trade. This process will allow consumers to hedge their exposure with triple-A rated insurance companies as their counterparties.

This first of its kind product will finally enable organic grain traders to trade derivatives using the most trusted publishing company in the business. The products are available now, allowing you to trade immediately using our trusted data. The types of options that are available are both call options and put options.

To hedge, you can either buy a call option on organic corn, which protects you if prices rise. Alternatively, you can buy a put option to protect you against organic corn prices falling. You will pay a premium for the right to either buy or sell organic corn (soybeans) in both cases. The initial product offered by Stable price is a call spread or put spread, which means that the protection value is capped.

For example, you can purchase an $8-12 call spread on organic corn, capturing any movement between $8-$12 per bushel. Above $12, you will not be protected.

Average Price and European Options

Stableprice.com will offer both average price options and European style options. Average price options measure the average price calculated during the month versus the strike price, while European style options measure the strike price versus the last trading day of the month. If you are a Premium client of The Jacobsen we will calculate the averages for you. You will also see historical averages that can help you determine the most accurate strike price to use when you purchase calls and puts.

Triple A Credit

If you trade options with Stableprice.com, you will face a counterpart backed by Triple rated insurance companies, including AON. This product provides the peace of mind the industry has been waiting for.

Additionally, companies with exposure to fats, oils, hides, and hemp can hedge their exposure using similar concepts. The Jacobsen is one of the few companies with IOSCO certification and is considered the most trusted commodity price discovery source. If you are looking for more information about how you can hedge your organic corn or organic soybean exposure, please contact David Becker at [email protected].

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