HRS

[malleefarmer]

re basis
today in South Australia bais is $77.18 over cbot
8 days ago $106.57
15 days ago $130.10

Cash prices haven't changed much basis has weakened trader in Australia are now getting more comfortable with tonnes hence jdpape comments supply demand.

25 cent rally and falling aussie dollar wheat gained only $4 per tonne same as you guys theres still a mountain of wheat out there.

Our forward contracts for harvest nov/dec 15 are on $291 at present will be a flurry when it gets to $296 plus myself magic number is $304 and basis on these numbers haven't worked it out but would be $82/3 over cbot I would suggest strong basis sell cash weak basis sell futures gets hammered into us here

[ColevilleH2S]

Malle do Aus. buyers post futures and basis prices in US$ or AU$ per tonne?

The local buyer here does a screwy combination of posting futures in US$ and basis and flat price in CDN$. And when you point out the FX has not been applied to the futures number, they will point blank tell you, "the exchange rate has been applied."
[URL="http://www.prairiewestterminal.com/index.cfm?show=11&mid=4"]Cash bids[/URL]

[redleaf]

Lets call a spade a spade, it's gouging and there isn't much to be done about it other than complain because the grain companies hold the deck in this game. It takes some pretty deep pockets to hold two crops in the bin or even to hedge or margin that amount of grain. Fx is a nice little side line for the line companies and you can't tell me otherwise.

[farmaholic]

Its kind of amusing to hear the defenders of the status quo. Some have absolutely no skin in the game yet justify why it is the way it is.

I think we are on a slippery slope with basis and over time it will be more and more of a mystery as to what will be fair deductions.
-what deal do the Graincos negotiate with the RRs
-what will happen if primary elevators dont have to post their fees
-what are grain commodities selling for in port position
-no domestic futures market or dysfunctional existing ones

I know some guys who took $3.50 for high fus feed wheat, how does that pencil out? Their net over COP will be probably less than the RRs and Graincos net over their expenses to handle it.

[bucket]

You mean I am not the only one thinking these pricing mechanisms are more than a little off?

The actual basis in most cases is still minus 35 per tonne.

My MP says to take any discrepancy up with the grainco. They don't want to hear about any misleading pricing and will certainly not do a ****ing thing about it.

I also pointed out the actual price off the west coast is over 9 dollars canadian and has moved up 20 bucks a tonne in the last week. Now back that off to a prairie price and you see a bigger problem.


And for those who comment on prices and basis. Prices don't move up and basis don't narrow unless someone is buying.

Unless there another corollary to the basis and price equation.

[OneOfMany]

Question? why is it that the grain company's use MGE, when Winnipeg is available?

Would it be so they can use the exchange for their benefit? No!! they wouldn't do that!

[Braveheart]

John DePape, I found your definition of basis very helpful re the basis is a price. It was like being a student in a Marshall McCluhan class ("the medium is the message").

It rankles me that many farmers, and especially the ones that started farming post the really tough times (age 35 and lower) seldom pay attention to basis levels and focus solely on street price. Many of them have truly become over capitalized very quickly and look for cash to meet their next obligations and don't take time to watch market signals. They set themselves up as dependent on grain co "specials" which may not be special at all.

They become members of the victims club which meets daily on AgriVille.

[mbdog]

oneofmany....no volume/liquidity in wpg to effectively work is why.

[jdepape]

Redleaf:

You guys like to complain yet I don’t hear any solutions. Probably because you believe it when you say “there isn’t much to be done about it”. If you believe that the graincos hold all the cards, you are missing out on how to market better. No one is saying you need to hold two crops but yes, you need to have capital to market well. Yet, how many guys build up their cash reserves when times are good? I’m going to guess it’s a lot fewer than those who “invest” in their farm with new equipment or more land.

Last year, we helped guys get between $1.50 and $2.00/bu MORE for their canola by paying attention to basis and spreads. And yes, it took patience and discipline – and time. And it was risk free (except storage / quality risk).

To hear you say “there isn’t much to be done about it” is sad.

Why did the average CWRS basis in 2012-13 go from 180 (cents/bu) under to 25 under? Farmers weren’t selling enough and buyers had to pay up.

Why did the average canola basis in 2013-14 go from 60 under to 10 under? Farmers were reluctant sellers and buyers had to pay up.

Right now, the canola industry is working with a stocks-to-use ratio in the system of about 4.5 weeks. That means, at the current pace of exports and crush, it would take just over 4 weeks to consume all the stocks in the system. Current farm delivery pace is about 300,000 tonnes per week. What do you think would happen if guys just said screw it – and deliveries dropped by 1/3rd to 200,000 tonnes per week. In fairly short order, the system stocks-to-use ratio would shrink and buyers would be forced to raise their price (basis) to keep enough canola flowing.

So your problem is that too many farmers keep selling, keeping the pipeline flush with canola. The solution to your problem – IMHO – is to empower farmers to market from a better space. No more fire sales for cash or space; earn the carry in the market (get paid to store grain).

The sooner we get farms on a similar plain as the buyers (regarding how they approach marketing), the sooner this “problem” of low prices (basis) gets solved.

[charliep]

To add to what mbdog highlighted, no market maker. Hard to operate a futures market with just commercial hedging business.