Roger, if I did an HTA contract for November beans this spring and this fall I want to roll it to May, what would the May HTA price be? Let’s say my November HTA is $14.25 with a 10-cent basis.  Let’s assume the May delivery basis will be 20 over the May. What would I receive for the beans in May?

HTA contracts do not have the basis set, so what the basis is for any delivery period you are talking about does not matter in terms of what the HTA price would be. Your delivery month should be when the basis is so firm it is unlikely to firm enough to cover the storage cost or the return to storage is less than the cost of storage.

The big advantage with HTA contracts is you can set the basis for any delivery period and catch that month with a very favorable basis.

To get from a November HTA to a May HTA, your merchandiser would need to “roll” the HTA from November to May no later than Oct. 30, last trading day before First Notice Day (for deliveries) on Oct. 31.

Step number 1: The roll requires the merchandiser to buy November bean futures to offset (cancel out) his short position (he sold futures when he agreed to buy cash beans from you).

Step number 2: To complete the roll from November to May, the merchandiser must sell May bean futures to replace his short (sold) November bean position he had to hedge your beans.

It is really just this simple: The merchandiser will buy November beans and sell May beans. 

If they buy November at a lower price than they sell the May, the price difference will be added to the price you had on the November HTA.

If they buy November at a higher price than they sell the May, the price difference will be deducted from the price you had on the November HTA.

In normal years, there will be 30 to 45 cents of carry from the November to the May. That would be what you would normally expect to be added to your November HTA price after rolled to May.

If it happened today

Right now, November 2022 is at $14.50 and May 2023 is at $14.09. To roll from November to May today, your HTA price will be reduced by 41 cents because the buy would be done 41 cents higher than the sell. Buying high and selling low loses money. The carry (return to storage) is a negative number.

The market is screaming, “Don’t store your beans!”

Historical example

On Oct. 30, 2020, November 2020 beans were $10.51 and May 2021 beans were $10.45. That roll would have reduced the HTA price by 6 cents. The market was not screaming, but it was casually stating, “Don’t store your beans.”

There has been no carry (return to storage) in the soybean market for about 20 months.

If the November to May roll was done on Oct. 30, 2019, the HTA would have gained 39 cents because the market was paying-up to encourage people to store soybeans.

If the November to May roll was done on October 30, 2018, the HTA would have gained 41 cents because the market was saying, in both years, “We don’t want your beans in the fall and we are willing to pay you to store them.”

What’s it cost?

Most merchandisers will charge one cent per bushel to roll an HTA contract. I know of one merchandiser who charges nothing. Many will charge two cents and some will charge three cents. That roll fee is subtracted from the net HTA price on the newly established HTA.

It is very difficult to pay for a grain bin when the return to storage is a negative number.  It is much easier to kiss a girl leaning away from you.

Wright is an Ohio-based grain marketing consultant. Contact him at (937) 605-1061 or [email protected]. Read more insights at www.wrightonthemarket.com.

No one associated with Wright on the Market is a cash grain broker nor a futures market broker. All information presented is researched and believed to be true and correct, but nothing is 100% in this business.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress.