anybody lock in fall prices in April?

[Ron]

I am just wondering if anybody else locked in before seeding. I locked 10% of expected canola in at 7.50 in late may early june and I am so glad I stopped after that. this is also the first year I havent bought dec barley calls for protection (some of my rent is based on the cash price of barley). Did anybody listen to some of the marketing reports and lock in a big % of canola? Are you going to renew your membership? did anybody predict this possible outcome and recomend put options? I am looking for a new marketing advisor (not just because of this spring). Thanks

[wilagro]

We do. We treat them like peons.

[wilagro]

Best thing Saskatchewan could do is declare war on Alberta and then give up before a shot was fired. Alberta would turn it into a have Province. Sask is rich in government mismanaged resources.

[cowman]

This country was never built on being fair. Manitoba, Sask., and Alberta were created to be a market for central Canada. It has worked well for them with Ontario becoming an industrial powerhouse. If Alberta didn't have the oil revenues we would be a bigger basket case than Saskatchewan.
At the same time I do agree with you carebear. Alberta sends about 7 billion a year in equaulization payments to the federal government. Now a very large portion of that goes to Quebec. They in turn have the most supportive ag policys in Canada. That lets them not only compete but prosper at our expense.
Now Sask. also gets some equalization payments but obviously not enough. I doubt there is one person in Alberta who would rather see our money go to Quebec than Sask. and Manitoba! Afterall we are one people.
I just got back from a trip to Saskatchewan(hadn't been there for twenty years). I was impressed with the friendly people and how agriculture seems so important, not just to the farmer but to the general population(in Alberta its all about oil and agriculture is a dirty word!). The Sask. farmer has the same problems, hopes and dreams as his Alberta counterpart. I was also amazed at how much the government owns. Sask Tel, Sask power, Potash mines, liquor stores, lots of government buildings. Now I don't know if that is a good thing or a bad thing but it sure is different!
I hope in my lifetime I get to see us as one country, because we are one people.

[charliep]

Just thought I would post a thread from last spring about GPS but we talked about canola prices.

http://www.agri-ville.com/cgi-bin/forums/viewThread.cgi?1014011937

My experience is that no one (me included) can 100 % forecast prices. What I strive to do everyday is strive to understand the market, make the best estimates I can based on this information and then think about how to use this information in making a decision related to a marketing plan.

With benefit of hindsight and a risk management orientation, the best market strategy this spring was sales on a portion of your crop at over $7.25/bu and having some out of the money Nov. canola calls bought early.

Why not say the best strategy was to go 100 % unpriced? I don't know the exact number but about 7 years out of 10, the fall is the lowest price. Most farmers have somewhere between $50 to $100/acre of cash flow needs straight off the combine. My objective would be to have anywhere from 1/3 (high equity farmer) to 2/3 (high debt/risk) of my cash flow needs covered at prices that cover costs.

So what about a rotten year like this one - no crop. The variable pricing alternative that crop insurance offers will prove to be a good tool (see Tom4cwb comments in other threads). Calls are a good tool (keeping in mind they are an expense). Puts in todays market (may want to let market go higher but stay tuned).

A good advisor should be providing not just forecasts but strategies that work in a dynamic market.

What are others thoughts about forecasts and what you expect from market adivisors?

[melvill]

I can only echo Charlie's comments. Nobody, but nobody, but nobody has perfect foresight when it comes to marketing any product, farm commodity or pickup trucks.

There are basically two ways a producer can go about pricing his products. 1)Watch the market closely & hope to price as much production as he can or dares to at or near the price peak or 2)pay for the best information (and advice) he can afford and make the most informed decisions that he can at the time.

The problem with 1) is that it inevitably leads to doing nothing because we end up hoping that "the coming peak" will be higher than the last one we missed because nobody ever knows where the price peak is until after it has happened. Price-peak picking is further complicated by weather influences which even the most skilled forecasters have trouble with.

With 2) even with the best information and advice nobody can forecast the market perfectly. Hindsight is the only judge. However, if, and I mean "if" a decision is made based on the best information (and advice) available, it is still the best decision that could be made at the time.

In my opinion it is a waste of time and the more valuable mental energy to kick oneself all around the room because a pricing decision was made that didn't take advantage of an unexpected price rally. Remember 100% accurate foresight is impossible to come by. Even 70% accurate foresight is darn hard to find. Witness Nortel Networks profit picture.

[Ron]

I am just kicking myself for my decision to lock in some canola at a better price than I got for the last two years. My advisor was recomending to be at least 50% sold at the $7.00 mark (if my memory serves me correctly) and I wasnt comfortable with that percentage. I have used DDC's, GPO's, and call options in the past and I am wondering if I might be further ahead to not preprice anything untill I have it in the bin and know what I think the outlook is. I have friends and know older farmers who won't sell anything untill it is in their bins and am wondering if this is a better (safer) strategy. I didnt mean to ofend anybody and am sorry if I did.

[charliep]

No worries Ron. As you see in this thread, people (inclding me) say their mind - perhaps sometimes to excess. A bit like a hockey where the elbows/sticks come up sometimes. The important thing (within the rules of fair play) is that people are able to speak their mind but able to meet as friends after.

For me, this is a question I will be getting hundreds of times over the winter at meetings (perhaps why I reacted). Given the weather market, we are still in the heat of battle/summer so to speak. My learning will come this winter when I sit down and look at approach/what I said with the idea of improving into the future. The market for me is a continuous learning experience.

[charliep]

If farmers are going to have to know the ins and outs of the commodity markets to survive, 97% of us had better give the business up right now and do something else. You can't run a business on the wims of the market or you will pay dearly.

Ron your last comment( wait till you have it in the bin is the best way to market) is the only way to go to be on a sound financial footing. You must tune your capital outlay to a safe marketing approach. Theres enought gamble in this business without promoting it with sales of product you done have. We have all kinds of people trying to advise us we can do better when their using our money.

Remember one think the USA sets the pace in the market. It is manipulated by goverment, large corporate processors and several other money mangement funds. The only thing that makes a true free market out of it is mother nature doing her dirty dance.

Canola is going to $12.00 a bushel, it always does when I don't have any.

Wheat would be 8 to 9 bucks if we didn't have a CWB in todays market.

Charliep and Melvill will laugh at my last comments but they laughed last march too when I predicted $8.50 canola on the nov. future. RUB RUB SALT SALT

[TOM4CWB]

Ron,

THE school of hard knocks is the most demanding of any learning experence...

Advisors need only advise, hopefully be innovative, and talk through different ways of doing things, hopefully ways that reduce risk and not increase it...

I bought back call options on 100% of what I priced this past winter of the 2002 crop... because of the dry subsoil situation...

We need to reduce risk and consider it seriously in all situations, marketing, production, finances...

Kernal is feeling pretty frisky, except we will all be really humbled when we take out the swather or combine harvester...

I see more and more wheat fields being written off and swathed for forage every day now...

Canola fields with any kind of decent stand are finished blooming, the short crop is literally short this year, some wheat is in the dough now, at 6 inches high, single head per plant, then in the low spots in some areas it is 4 feet tall and has just finished blooming...

What a headache this harvest will be...

[AdamSmith]

Hi Ron,

The anxiety you feel about your earlier marketing decision is as common as weeds in a field.

Here's a joke I heard this spring. What are the three things common to all farmers? Sex, Rain and Subsidies(you could insert grain prices here as well), their neighbours always seem to get more.

It's a good joke because there is a ring of truth to it.

Decisions made for the wrong reasons are bad decisions, decisions made for the right reasons are good decisions. Sometimes though good decisions cause what appear to be bad out comes and it is those decisions that can be the most disasterous to a farm operation. They most likely are not disasterous financially but they can reek havoc with the decision makers thought process and cause him or her to question their own ability to make sound decisions. You begin second guessing yourself, you may search for scapegoats, it can lead to true disaster.

We would all like to be right all of the time but that is totally unrealistic.

What is right for you may not be right for your neighbour and visa-versa.

For example a friend and neighbour of mine and I each grew winter wheat last year. I sold about a third of my production last Nov. for $3.70 bu. fob bin SW Manitoba. When I told him I sold a that level he said he wouldn't sell for less than $4.00. We had a long philosophical discussion about $3.70 bu vs $4.00 and after discussing the many many factors that come into play in the decision making process the one thing that was agreed to was the fact that one price does not fit all and that we were both quite comfortable with the marketing decions being made. His yield was less than mine, my variable costs were higher, his fixed costs were higher. My $3.70 would net my farm much greater returns per acre than $4.00 would for him.

I know this isn't the same thing as locking in for $7.5 and then watching the market go to $9.00 but the mindset needed to mentally deal with it is the same.I could have turned myself inside out all winter long because I could have sold wheat for fifty cents a bushel more later on, but I didn't. I believed then and even after selling the last of this stuff for $4.25 that I made good decisions all the way trough. They were good because they were made for the right reasons and I can easily live with them.

Be comfortable with your decisions and accept the fact that poor ones will be made from time to time. Just don't dwell on them, learn from them and realize new ones will need to be made tommorow.

[nakodo]

Aren't the price of stones the same in each province? I know glass house prices must be different, seems there are a lot more in Que, Ont, BC and Ab than elsewhere???

[nakodo]

And yet I seem to hear you saying we are different, well at least those Quebecers are different, and those Ontario people are different, and those lower mainlanders while they are different, and those foreigners are different, and those immigrants from the East coast while they are different?? or all we all the same??

[cowman]

Well people are people. Some good and some bad. I've met and worked with people from every province and just about every race and some were good and some were real SOBs!
The prairies share a common heritage and a common economy. So here we are in a drought and the govenor of the bank of Canada says our economy is booming. And I guess it is in central Canada. So up go the interest rates. Just what we don't need out here right now. The same thing happened back in the early eighties when the oil industry was in shambles after the central government destroyed it with the NEP. Our federal govt. is not the govt. of the west but a colonial dictator who cares nothing for the hinterland. Can we ever change that? No, we've tried. We vote in people and they can't do anything. On election night it's all over before they even count our votes.
Why is it that the lowest common denominator seems always to be what we should aim for? If the Americans or Europeans get a certain level of support why not the rest of us? Why do our provincial governments have to step in and do the bailing when it is so apparent that the federal government should be the ones saving the ship.
In Alberta we are in for a major, major wreck! Not just the old farmer but every last one of us. If the farmer goes down one hell of a lot of people are going down with him! I think we have about the highest per farmer debt in the country and no crops, livestock etc. means no one gets paid. Go talk to the feed dealers, auction marts, machinery dealers, fertilizer dealers. They know the wreck is heading their way and they are scared! And when they go broke who pays the wages of all the little government workers? It becomes a spiral because the fact of the matter is the only real wealth comes out of the ground (oil,agriculture,steel,lumber etc.)and all the rest of our economy fails without this.
So if Quebec, or Alberta, or America, or Europe try to save this industry that is a good thing. Lets try to get the common denominator at the high mark instead of seeing how low we can go.

[dalek]

Glass houses attract hail