canola hedge

[A990]

hi every one -first post- would like to hear your thoughts-
I am 50% sold (canola)-was comfortable 3 wks ago but lately I wonder if ther might be some real upside to this market.
So if you're bullish would you replce youre cash sales with canola calls or soy or even corn?

[mbratrud]

Your only 50% sold. The market isn't really bullish if this crop comes off. You still have 50% to sell. For that hopefully the market goes up. Have you seen whats happening to basis levels and futures today. I would sit tight at 50% sold. If you go long futures you will regret it, if you buy a call it will expire worthless. There is no good way to protect yourself from basis risk, basis levels have widened by over $20 per tonne in the last 60 days and probbaly will another $10 with the drying programs out there. price increases do to demand from cruchers are likely to come largly in the form of basis strength. 1 mans opinion good luck with your decision.

[Zaphod]

Seasonal lows are Sept/Oct. Don't get too twitchy and wait it out is this man's opinion.

I agree with SF3 (don't often do that) that there will be some sizable crop losses and it will get a lot tighter yet. Of course all this assumes that China will get back into the market soon.

[furrowtickler]

There was good upside to this market until this A.M. I hope this is not a domino effect with even more crops getting blacklisted.

[ado089]

Grains/oilseeds could pop yet given what gold did last month and oil last week. As soon as we get out of th harvest slide here we could see a pretty strong rally. That said ag commodities didn't plumit like others.

[A990]

thx everybody,
I know,how could anybody be bullish today (I must be a farmer!) but have you seen corn- from summmer high 475 to 300 back to 405and still going.But I didn't intend to talk my position just thinking about the best way to pull the trigger-if I did.

[Hopperbin]

I am not typical here, but if I am bullish I hold grain. That is what I do, produce grain and sell it. Wish I could have 50 percent harvested but besides that if I was 50 percent sold and bullish I would just hold the product.

[Choice2U]

Welcome A990. Volatility in the market is what scares the hell out of me. I do not consider a swing of $40/mt over the year as volatility and options to cover this type of movement are probably not a good idea because as a previous poster indicated, options often expire worthless. Firstly, pick a $ amount that you are prepared to lose ie. $2K, $5K, $10K depending on your size and risk level and use options as a way to protect yourself from major swings. Example - I sold some new crop canola in early August for over $9.50/bu. but there was a hell of a frost concern so I spent $9/Mt on a call about $25 - $30 out of the market to cover this tonnage just in case there was a major frost. We didn't get a frost so my net on this canola plan was $9.68 - $0.20 = $9.40. Hindsight says I was wrong to buy the call but as an overall plan I am happy as I still netted out higher than today's price. If we would have had a major frost in Canada and US, $600 canola could have been in play and my $9 call would have made me look like a genius. Last year, I put $2K in an account and drew out $7,900 for a net gain of $5,900. This year, I put $3K in an account and the account value is about $2.5K so I have lost on paper about $500 bucks right now. We were told not to panic in early October at 70% harvested, now its late October at 77% harvested and panic is setting in. The US is major behind and who knows what'll happen. If they get the crop harvested, markets could go down steeply so a put on some tonnage may be warranted. If the US crop has a significant harvest disaster, markets will probably climb and your put will be worth nothing but piece of mind in a worse case scenario.

[Choice2U]

PS - My put comments should only relate to cover a drop in price on canola still in the bin. Your comments about a call to cover canola already sold has merit if the US crop doesn't come off as good as expected.