Fusarium

[rain]

How much does it cost to do a test for fusarium?

Can any lab do it? Can grain companies do it on site?

[ianben]

Hi Charlie

Here in UK fusarium is becoming more of a problem too. Buyers looking for lower and lower levels.

We have two fungicides avaiable Folicur Tebuconizole and Amistar azoxystrobin.

For best control both need to be apllied and timing is critical.

Think our HGCA have done research on this.

Try web site www.hgca.com

[charliep]

Ianben - Hope all going well crop wise.

Rain - You are likely right that feed grain users can be patient in forward pricing their needs. Having said that, having at least some cash grain forward priced with a good basis/holding some corn calls as insurance is a good strategy for risk managers. The assumption is perfect weather for N. American feed grain production and this may not happen. Hard to see prices (at least for corn) pushed too much lower - could be a market that bleeds you to death by losing carry every time a contract goes off the board.

The futures contract specs. for barley futures are 1CW basis CGC tolerances - 1% fusarium head blight damaged kernels. The delivery spec. on feed wheat is 2%. Again, this is a visual grading factor.

The test for the presence of the disease on seed has to been done in a lab and takes about 10 days to 2 weeks to get results back. Elevator companies will not be able to do this at local facilities so it will have to be sent out to recognized labs. Cost of the test if something I haven't checked into but may be in the $50 to $70 per sample area.

[rain]

Charlie I posted a question to you a week ago about delivering barley against the futures.

If some one is now short with the idea of delivering against the futures. (Assume 0 tolerance provincially) as we get close to delivery I indicate I wish to take delivery. Short can not deliver is he not at greater risk?

[charliep]

WCE futures market delivery (western barley anyway) is sellers notice and location. A farmer in SK. can deliver against futures in his home region. It is the buyers responsibility to pick it up there. A buyer could take delivery of grain they don't want/couldn't bring into Alberta. They would be forced to sell it in the local cash market (quite likely at a discount to Alberta).

[rain]

So we run the risk short wants to deliver and no one will buy western barley futures because they do not want contaminated grain. Trade in barley futures could go the way of the flax, or wheat contracts in Canada.

This could be a real ouch to the futures contract.

[charliep]

Eventually, the futures market will find an equilibrium and basis will look after differences between regions/quality. Having said that, adding a legistated grading factor like fusarium will add more risk in between periods/crop years as the market negotiates this quality factor. Basis risk could be significant. This will prevent market participants from forward contracting even more than today.