The 5 cents profit is not guaranteed. The risk is the basis (difference between the cash price and the futures contract price). Any change in the basis will result in lower or higher profit, depending if the basis weakens or strengthens. If the difference (spread) between the cash price and the futures price strengthens (cash price increases more than the KCBT Dec contract price), profit from the hedge will be greater than 5 cents.

An alternative to creating a storage hedge (store wheat and sell futures) is to sell the wheat and buy KBCT December call option contracts. Buy one December contract for each 5,000 bushels sold.

If you want to use call options to simulate selling in one-third increments (harvest, last September, and mid-November), sell all the wheat. Then buy one December contract for each 7,500 bushels sold. One half of the calls may be sold in October and the other half in December.

The 33 cent storage and interest cost savings would be used to pay for the “at-the-money” KCBT December wheat call option contracts. If the December contract price increases between June and November, the value of the call option will also increase. The net price (cash price plus profit from the call option contract) received would also increase.

A third option is to just store the wheat and hope that wheat prices increase more than 33 cents between harvest and mid-November.

A strategy that is simple and tends to fit most producers' objectives is to sell one-third of the wheat at harvest, one-third in late-September or early-October, and the final third in November or December. This strategy provides cash to pay harvest costs. Cash is available for planting the next year’s crop. And, wheat is available to sell if wheat prices increase into the fall.

This third/third/third strategy allows producers to spread sales over time and to always be right, price wise. If prices are highest at harvest, one-third was sold. If prices are highest in the fall, one- to two-thirds of the wheat is left to sell.

Today’s market indicates that a storage hedge would produce a small profit from storing wheat. By harvest, the market signals will have changed and the strategy will have to be re-evaluated.