wheat marketing question

[mbdog]

Scenario...saw basis improve from -150 to -70 on HRWS. Signed up DD, expecting futures to respond. Got cornered in what would seem reasonable strategy/Time ticking towards hand getting forced...futures continue to erode...basis at plus 15/doing the work futures should do. If basis/futures continue to diverge may have to pay them to take the wheat...lol...maybe.
What to do? Replacement strategy? Take your licks? Quit farming...lol?

[mbdog]

correction....signed basis only contract, not DD.

[redleaf]

Well first of all don't feel too lonely I bit on the same scenario and am now looking at the same scenario. My only consolation is that it was not a huge amount. Options that come to mind are, sell and buy back the futures and hope they rally or roll into a futures month. In either of those two scenarios I feel I could just be sending more good money after bad. I really don't have any good advice for you as I am painted into the same corner.

[Braveheart]

Mbdog, we've all been there. The first thing is to give yourself a break. You made a decision with the best information you had at the time. It was the right decision for you at the time.

First, if you live where I think you do you probably had a very high wheat yield. So, if you did nothing more than finish off settling the futures at these levels you'd make $$/bushel, right? Nothing wrong with making money.

Remembering your previous posts, you're probably a more advanced trader than many of us. But, if I was going to replace my wheat with paper, I would try selling some out of the money calls and would use that money to purchase call options closer to or at the money. I would stay out of futures, but that's just me.

[Braveheart]

Can't count this morning. The first thing was the first thing. The second first thing was . . . The second thing!

[mbdog]

red/brave...Ya I suspect I'm not alone....but got to deal with it. Unfortunately worst crop ever across the board in my world making it a double stinger.
Don't think/know if can roll basis contract forward...might be an option but likely the combined futures and basis differences currently on the table....most I can hope for is a crocodile tear from the grainco to try and make me feel better. Was thinking rolling to futures at some point but that's a timing crap shoot...hoping for inversion. And with minny/Kansas/Chicago spreads...which has the potential? Still can't believe the spreads. Options strategy...will look at and likely best of worst cases.
For those who think this is desire of reownership is speculating...under the circumstances it is not.
Who knows...maybe my plus 100 basis offering gonna hit yet...average won't be to bad...lol.

[countryguy]

I thought I was the only one..

[charliep]

Just a couple of questions.

What futures month/day you have to lock the futures portion in?

Grade you committed to deliver versus what you have in the bin?

How is currency calculated in your futures price in the contract?

I am with the others in that you will need to fill the contract. Timing pulling the trigger on futures and replacement strategies are topics I will leave for discussion. We have given up the gains in futures recently and sitting on a support area. Will need to watch what happens Monday.

[BreadWinner]

I really dislike locking in a basis on any commodity. It seems to always work against the farmer and it gives the buyer all the power. No we find it easier to pick a price and be happy. If we think futures will increase we lock in price and buy a call option and at least if they don't rise we are only out the cost of the option. Most times this is an emotional decision and we don't pick up and extra $.

[farmaholic]

What you guys are explaining is exactly what I bitch and moan about. That is a game I'm not willing to play and will leave the gambling to the professionals. Who ever they think they are.

I've had enough with the production risk and then pick a DD or spot price, then the only risk I have is the market going higher than my sell price and that.is enough for me. I don't have to "participate" in market rallies if I was satisfied and settled on my sell price, IMO. I dont have to incur extra costs buying calls and puts, most of which I've been told expire worthless. Or I don't have to make margin
calls.

I guess if you're netting out okay, and like it, to each their own. Best of luck to those who play....

[mbdog]

Charlie..dec and march. Got time on march....suspect trade keeps pressure on Dec basis contracts. Grade/protein committed has plus/minus factors at delivery. Another hope and a prayer there...Poor stuff going first unless plus factors improve. I have full intentions of delivering....wasn't suggesting I wouldn't...just on the wrong side is all and wondering about my options. Thought I'd share cause I suspect/guess a third of western Canada production is involved here.
I neither like/dislike using basis but it can weaken one's position....maybe. Waiting for cash...might have to wait a long time. Again...sound enough marketing option at the time, just on the wrong side of what the trade planned. Coulda/shoulda worked out better if basis wasn't being so abused.
Farmaholic...The trade is brutal and stacked against us. You know that. I'll use any/all means to market given my circumstances....I'm not saying what is going/has gone on in the wheat market is fair/unfair but how long can this basis charade keep going before futures actually do respond? Healthy to discuss all marketing tools in front of us. If futures made the pop they should have, we'd be having a different discussion.

[farmaholic]

MANIPULATION

[tmyrfield]

i think we've ll done it...it hurts but in my experience take the lumps now. Do not roll basis learned this with oats the hard way.

[mbdog]

farmaholic...that is such a harsh word. Somewhat Managed.
Tmy...ya bin there done that too many times. Crazy basis threw a curve at me this time. Lookin like gonna have to take lumps...for now.

[farmaholic]

I wonder how many market analysts/advisors play the futures market? You don't have to farm or produce and sell grain to participate.