Thoughts on the market/strategies

[charliep]

I will note that futures markets have taken a big dive in recent weeks in the face of what looks to be extremely big US soybean and corn crops. To put things into perspective, a 1 bushel per acre increase or decrease in US corn or soybean yields results in around a 2 million tonne change in US production.

These last few weeks, we have broken support on most of the charts. Improved basis levels will offset some of the decline in futures prices but we are not immune from what is occurring in the US.

Thoughts about marketing approach in today's world.

[charliep]

Below is Greg Kostal's thoughts on pea, chickpea and lentil outlook. This provides some perspective on areas that have been hit by too much rain.

[URL="http://www.saskpulse.com/uploads/content/140718_PerceptionOfCanSupplyVersusWorldDemand_Fina l.pdf"]pulse outlook[/URL]

[ado089]

This is going to be a tough year. We still have a transportation issue to sort through meaning depressed and volatile basis levels. There is a sub average crop for many. This highlights the importance of being able to access the world price when we have a good crop and world prices are strong.

How many locked in some canola futures when we got a look at $500? If the basis is floating still those could turn into $12-$13 contracts yet.

Moving forward from here I think we are probably set in a fairly narrow range now that we are priced closer to beans.

As for wheat, good luck. Glad I didn't grow any this year.

[crusher]

Paying close attention to the spot market. Buyers have premiums on occasionally to fill orders so have we have the truck always fueled and ready to go. Way, way, way too long around here but have a big crop coming in my backyard to ease some of the hurt. Iron budget will be 4 digits instead of 6.

[wakopa]

looks like i will do rather will 0n 30 per cent of my wheat,but that would be bragging so i stay out.

[freewheat]

Watching ag talk. Most corn guys need a rain in the next week. Huge corn needs huge rain. Soy is not made unless august rains happen.

Like a 50 bushel potential canola crop would need rain to finish filling, so too does 200 plus corn.

Calmness until this crop is made. There is LOTS of time for it to be "un-made". If it does not rain in the corn belt, try knocking of 20-30-40 bushels of yield. Then we are talking a big deal. If soy does not get august rains, all bets are off.

Relax, it is not too late.

If they do pull it off, we will be robbed. But what else is new, really? This is western Canadian farming. Tighten your belts, fellow farmers. No good thing lasts forever, we should all have that in mind, and contingencies should be in place. The ability to do things cheaply, and with low iron and land costing, will be far better than hoping the government/urbanites will suddenly care about farming in Canada. People worth millions on paper at least, driving half million dollar combines they simply could not do without, tend not to get much sympathy, just the way it is...

If the rains don't come to the corn/soy like needed, who knows?

[wakopa]

ya freewheat dad and i farmed 3700 acres with 42 ft hoedrill,760 massey and a pulltype co-op combine,now farmers with a thousand acres more need millons more for machinery and what a show,machinery parked by the highway,big talk in the coffee shop and big holidays,and hired hands.one person who knows said alot of these farmers putting on the show are one poor year away from going down.wish i was 29 years old,there is so much good big machinery to buy cheap.marketing is a game for me now and fun.instead of complaining im doing something about it.

[hobbyfrmr]

Free wheat, agreed. It's a catch 22 if we get a respectable crop prices will stay low. If we get a poor crop, prices may increase but we cannot capitalize because of the lower yeild. It will take at least another full year before there is some upward momentum. Only grain farmers like high grain prices. The rest of the industry needs profits and that has to come out of primary production.
Man, there is an abundance of newer bigger machines for sale. That's good if your in the market.
I do recall the bad old days with an "abundance" and/or "glut" of grain inventory. Lower prices, lethargic markets, coffee shop farmers used to say, " I can't afford another big crop!"

[charliep]

Just curious how you would define glut or abundance? My observation is the lives with a lot tighter inventories and just in time shipping. The difference between too much and too little really is not a lot in the big picture. What this tighter balance means is price volatility. The question then becomes if you live in a world of more price volatility and risk (risk being good and bad outcomes), how does a farmer market their grain differently?

Our problems in 2013/14 have never been international grain prices or lack of market opportunities. They were our ability to move our products to the customer. End result has been ugly basis both to futures for wheat and canola and wide discounts to international prices.

2014/15 still has story to be told but appears to be a lower priced year based on best information today. I think 2015 could surprise based on weather event or a geo political event like Russia Ukraine.

[charliep]

I should re-listen to Tom's word crime video and re-read what I write. The second sentence should be "My observation is the world lives with tighter inventories". My biggest editing problem is reading what I wanted to say, not what I wrote.

[hobbyfrmr]

Charlie,
Industry rhetoric creates a lot of price suppression. Just as supplies start to look tight, china will report they found 41 billion bushels of corn in a quonset some where in the middle of china. Prices stay flat for another 3 months.
I do find newagtalk market talk forum valuable. We might as well stay in tune with US production. There is usually some good insight to what is happening there. That usually has an effect on Canada prices. The difficulty delivering grain to export position is not going away anytime soon. CP went up from 115.00 to 198.00, CN Rail went from 49.00 to 74.00. They are not going to stop that recipe of success. Grain is not not on the top of that list!

[hedgehog]

Perhaps my landlord will be less keen to eject me now that the rent klondyke he anticipated is receding fast.

[charliep]

Haven't done but would be interesting to plot CN or CP share prices along side the US and Canadian stock indexes, would they out preform or under. Not sure over what period you are showing your change in stock prices but the dow jones moved 7,000 points February 2009 to 17,000 today. Lots here will tell you the indexes are at risk reflecting the underlying share values/economic challenges ahead. Railways will not be immune from this.

My experience is markets move up and down. The overall trend is up. The challenge is costs have as well. Farmers biggest risks are the capital (land and equipment) and debt side of their business.

[TOM4CWB]

Dear Charlie,

I would respectfully add that grain prices moving below our cost of production... in many places in western Canada this fall it will not likely cover the grain farm variable costs... let alone Capital and depreciation.

If growers are forced into selling at the present prices... with production down 30-50 percent from last year.... it will be a very depressing fall and winter in the grain sector. Thankfully livestock growers will take up some of the slack on income in local communities.

From the view I see today... tough year upcoming.

All the best.

[charliep]

I sometimes feel like a dog chasing its tail versus the expert some people like to label me/my peers as.

So we will have 1/3 less crop this year. Looking at gross revenue (yield times price), not good. Having said, is realistic to forecast a repeat of the 2013 crop every year? This whole last year, I listened to guys complain about producing too much.

Prices coming down as a result of lower international values. Okay. Basis levels improving as things unclog this fall/winter. Has happened with canola today. Stay tuned Use the marketing tools at your disposal to accomplish your business objectives/financial realities.

My interest is always been in working with farm managers to make money in a risky world (highlighting that risk is both good outcomes and bad ones). There has been a big difference in operations in 2013/14 between guys who marketed crop early at higher prices and got it moved versus others who struggled to move/price this last years crop.

I am going to find it interesting in how farmers approach the current crop year. Things have returned to more normal with August and September weather likely to add more twists and turns.