Grain Pricing Order

[cowman]

Every grain farmer within the sound of my computer now listen up.

This week lets all go down to our usual grain delivery point and place a grain pricing order (GPO) for canola to be delivered on the Oct. future 2002. Price as many tonnes as you feel safe doing on the new crop and place the GPO at $8.50/bushel. You can cancel the GPO at anytime if it is not bought up or if you want to sell at a lower price. Your only obligation is that you have to delivery your assigned tonnes in Oct. if someone buys your contract. Keep away as much as you can from Basis contracts and 90 day storage tickets as they lock your grain into that delivery point and your at the mercy of their pricing.

If more farmers did this sort of GPO this time of year the more Canola would receive the over $8.00 price as buyers would be wanting to lock in new crop supply. I know $8.00 would be obtainable if enought farmers did it and $8.50 may not be out of the question with a small weather scare were to happen this spring or summer.

Better start thinking about this way of marketing in wheat also because the CWB may just be history before long.

The Kernels Marketing Club.

[charliep]

I like your idea with the comment you may be a little rich on your price expectations. I would suggest being more of a scale up seller starting at $7.50/bu (maybe 10 % of your high yield scenario/15 % of your drought yield expection)

I thought I might put your price ideas in todays market terms. Nov. 2002 futures at $322/t. I will assume a local basis of $14/t (you can put your own regional basis in) or a Oct. delivery local price of $7/bu. The highest Nov. 2002 price has been between $330 and $335/t but only for a few days (price $7.25 with my basis). To get over $8.50/bu (again with my basis), Nov. 2002 futures would have to be over $388/t.

Others thoughts.

[ianben]

I agree kernal that is all it would take. We just need to fix a price.
Guys like Charlie could help by converting your $8.50 to local prices for us all. What would $8.50 be in UK,Manitoba, N. Dakota, France, Argentina, and Germany. I bet we would all perfer $8.50 to $7.00
We are all the same click away from this imformation.
Is anybody willing to provide it and allow us all to get a realistic price.
Show average costs of production for each country and exportable surplus explain percentage surpluses ie how much we each would have to store to get $8.50.
If we could acess this info would we ignore it and settle for $7.00

[ianben]

Charliep: I was a scale up seller this past crop year when canola prices were about $7.30/ bus this fall I put in a GPO at $7.75/bus. and one at $7.85 and another at $8.00. They were all bought up by the end of Nov. 02, except for the $8.00 one which I cancelled and sold for $7.97. I decided not to try and be a hero for 3 cents worth of pride.
Present day market indications aside, this is what I think.

Come April or May the market is going to want to buy acreage of canola, if it stays dry they are really going to want to buy acres. Present day market is a possible farce.

Guest what all independent farmers, are we going to be price takers or price setters. It cost you nothing to submit a GPO and you can also place an expire date on the contract.(ex.May 20th expire for an Oct deliver GPO).

I might sound alittle rich at $8.50 but if a large number of farmers would submit a GPO, buyers would have to come more to our asking price to obtain supplies for this fall.

I know a few farmers who locked in $6.00 price last spring for last fall delivery and wished they had done something else. GPO's are the way to go to obtain a satisfactory price for your operation. Right now with the present small carry over of supply and the dry weather conditions I feel $8.50/bus is a good bet GPO for Oct. delivery.

Have faith! The Kernel's Grain Marketing Club (Membership one...ME)

[charliep]

I am doing my thinking for the Grain World talk I am giving in Winnipeg so thought I might share what I will say for canola price forecast.

Average prices 2002/03.

Some cobination of yield and acreage that pushes canola over 6.5 million tonnes - likely average WCE canola futures somewhere in $310 to $330/t range.

Some combination of factors that result in Canadian canola production of less than 5.5 million tonnes. Likely futures average price in the $330 to $350/t range.

A price over $350/t (average futures would have to be consistently supported by CBOT soybean oil prices above 17 cents/lb. To support canola prices at the $388/t area for a $8.50/bu cash price, CBOT soybean futures prices would have to move over 20 cents/lb.

We are headed into some interesting and challenging times this year. My concern is not so much prices but rather soil moisture.

[TOM4CWB]

Kernel,

Setting "realistic" goals for pricing, then "speculating" with a limited amount of resourses (like using call or put options) is prudent, efficient and fair to our consuming customers.

Substitution of Canola with soyoil, olive oil, sunflower oil, and palmoil will occur if we price ourselves out of the market. There may be a small non-replaceable specialty market, and by growing a specialty canola, you could have had your $8.50 already!

Marketing is the "Art of knowing the possible" while being fair to the consumers who we must create value for, if they are to survive!

We said last year that the $7-7.50/bu was a fair price for ordinary canola, now if we demand $8.50 isn't this being greedy, compared to what all the alternative crop prices offer us for revenue?

Doesn't the saying go, "the hogs get slaughtered"?

[TOM4CWB]

You boys are being pessimistic and getting holy about gouging our customer. The customer has no feeling about farmers when the price is low.

I'am not looking a graphs and worrying about my poor customer, I'am flying by the ass of my pants here and giving my thoughs on what I think will happen with the market if farmers could give it alittle push.

Hey I'am wrong 50% of the time, how often are you boys wrong. I'am just trying to get farmers to be price askers not price takers. $8.50/bushel is not the principal of the matter but the attention getter.

Charlie you are forcasting yesterdays price not tomorrows. Hell a weatherman is as good as that. But your job doesn't allow for optimism like my job does.

I'am placing my GPO for OCT.delivery at $8.50/bus to expire on May 20. Done let me forget to let you know how it goes.

The Kernel

[charliep]

Kernel

Your approach to the market is right - a target price combined with a date to review your objectives. We may disagree on price targets but that is what keeps things interesting.

My thinking (putting in perspective that I will be speaking in front of 250 plus of my peers on Feb. 25) is to put together evidence as to where canola prices will be in the coming year. A challenge I face is to forecast world vegetable oil prices. There is some optimism but it has to be tempered by humungus world soybean oil supplies.

A comment I will make after 25 plus years in the business is that being consistently profitable is way more important than forecasting prices. Sounds like theory from an impractical ag econmist but should generate some discussion.

Charlie P.

[charliep]

Charliep: I respect your position in making a market prediction but I was hoping that in your speech that you would in still a little more optimism in the market. Experts such as yourself do influence markets by your analyzing information which is very hard to come by at times.

I do appreciate your efforts. The Kernel ( My GPO is in).

[rain]

If you all had been a little quicker you could have prices out $9.25 Canola. Problem is it is not roundup ready. Nexera basis was $80 offered in the Calgary region. 328 80 = $408 or $9.25 delivered.

Instead of GPO grow a product that pays a premeium. Round Up Ready (GMO) may have helped to hurt our industry. Europe uses GMO to ban imports and protect there industry. China appears to be doing the same thing.

As far as GPOs go I guess that is what all those guys in Northern Alberta who are holding their barley for $4.00 are doing. There is know more risk in having a basis contract then a GPO.

In a stocks falling situation work the cash market. In a rampant bull market work the basis.

You have to have some fundamental reason for picking a pricing number. $8.50 sound nice but how did you come up with it. $7.50 sound to low as we have seen conventional prices in southern Alberta from $8.00-$8.25 delivered so far this winter. Not enough people took thes levels and are wishing they had.

[ianben]

The GMO issue in Europe is consumer driven and not protectionism.
Farmers and governments too see the advantages of this technology but the media and public see only Frankinstein food.
Poor PR by Monsanto etc. and the BSE mistakes have componded to make GM a non starter over here.
Time and some good GM news are needed to get it accepted.
I hear GM rice with added vitA can cure child blindness where this is a problem in Asia.
This is the headline needed to get GM accepted not another Starlink

[ianben]

Rain: Nexera yields 30 bus/acre, roundup ready yields 45 bus/acre go figure.

With all the numbers that you produced, $7.50 not a good enought and prices that have hit $8.00 and $8.25 this winter why would you think that $8.50 would be that far out. You have got to consider canola carry out and weather plus soy supply. Is it stupid to ask for a price rather than take a basis and get screwed on a locked in future month. Basis is no better than a 90 day storage ticket, the end user has his supply, if enought farmers do it then the price to the buyer is of no consequence to them.

My reasoning is a gut feeling of $8.50 did you want me to say $5.50. I think my above reasons can justify asking $8.50. Its as good advise as you will get from any expert and I don't charge for my services.

Go ahead Rain live alittle ask for the price that you want, its a better way than taking a price. If you don't like $8.50 try $8.00. GPO's are the best marketing tool a farmer has, it helps to move the market up. It is about the only influence us farmers can put on the market, if only everyone would do more of it.

The Kernel

[ianben]

The canola market is starting to show signs of an upward trend boys, get them GPOs in now for Oct. delivery.

Remember we are trying to push the market up. Put it in for $8.50/bus. with expiry date of May 20/02. The expiry date will push them traders a little harder to gain supply. Do not take a basis contract.

Do it tomorrow to push the spring rally alittle. The Kernel