Wheat basis question

[mcfarms]

Tom

Harvest was pretty much quick and painful lost most of the crop to hail in mid August . as well as trees and bins and windows and yard lights etc etc etc. worst storm I ever saw in my life, closest I ever want to be standing to a tornado ever again.
So don't have much grain really left to market here but some other things going on that have me assisting with marketing grain eleswhere.

Interesting times, thanks for the replies.

[TOM4CWB]

MC,

Sorry to hear you got shmucked.

Glad you and your family are OK... I hope?

Farming is always next year country... proof of that is always just a storm away!

With an early harvest for most it will be a long winter!

Cheers!

[jdepape]

McFarms:

When comparing US basis to a Cdn basis, you need to take foreign exchange into consideration.

I'm assuming all the prices you are using are from Thursday, Sep 27 - including the 1.16 Cdn basis. This means the following:

MGEX Dec futures - 9.14 1/4
Montana basis - 0.67 1/4 under (your calculation)
Cdn basis - 1.16 under (converts the price to Cdn)
Closing FX rate - 1.0196 USD/CAD

This means the net Cdn price is 7.99 1/4 CAD
Converted to USD, this is equal to 8.15 US

Basis the Dec futures, that means your local basis of 1.16 CAD is actually 99 1/4 US.

This doesn't explain the whole difference - nor was it meant to - but it shows you're only 32 cents away, not 49 cents. I agree with Charlie, there are quality differences that may impact that as well.

Also, consider the elevator system. Traditionally, we move more canola before Christmas than wheat, then wheat takes over as the major mover thereafter. So right now, the elevator system is trying to accept and move canola. In the last 5 weeks, farmers have delivered 25% more canola into the elevator system than wheat. Basis is used to signal what is wanted. I'm not sure yet what a good wheat basis is, but the 12 under canola basis (and better) that I've seen is a very good basis for this time of year.

This, and the fact that canola spreads are inverted and wheat spreads are at a carry also tell me the market wants you to deliver canola and store wheat.

The trick is earning storage on what you store. Not only can it be done, you increase you odds to get a better basis in the end.