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.

[redleaf]

Thanks for your reply Joe. I'm not usually one to reply to threads, I prefer to just read what others have to say in hopes of sharpening up my marketing. So perhaps you are right when you make the accusation that I and perhaps others are whiners but it is no simple matter to market well. Example after last winters basis fiasco and well before I or anyone else knew the outcome of this years crop a $39 basis for wheat looked like not too bad of a deal. Cncerns regarding storage prompted me to sign a contract to lock of a delivery slot. Turned out the markets moved against me all fall and the basis was down to 0 when I was forced to price. Too bad for me .... Bad timing ..... Bad judgement .... Should have used options ....should have .... The list goes on. My point is how the hell can you ever know what to do when you have the markets plus basis fluctuating wildly. Yes perhaps I should market better and believe me sometimes I do or I wouldn't still be farming but if I and others are simply " whining" when we complain about gouging by line companies well I guess I will just shut up.

[foragefarmer]

John

You stated

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.

How many producers 30,40,50000 trying to market their commodities after harvest. Every farming situation is different, with regard to cash flow, shipping restrictions, space, grade, etc etc. How many major buyers in Canada of CWRS maybe ten. Very small percentage can haul it south of the 49th. Just how is it possible for producers to get on a "similar plain as the buyers"


How can you throw out such a blanket statement as that. Are you saying farmers should get together to form marketing groups or co-ops to have greater power when dealing with buyers. Or do we keep functioning as 30,40, 50000 individuals.

Please explain

[bucket]

Mpls is up over 50 cents a bushel in the past week and locally prices haven't changed.

Interesting.

[jdepape]

Theoretically, if every farmer out there refused to deliver grain, it doesn’t matter that there are only ten buyers – they would have to react by paying more. But you’re thinking “how do you get 50,000 farmers to act the same way?”

If every farmer out there reacted to market signals correctly, we would never see the extreme low bases (prices) as we’ve been seeing.

Rule #1: when basis is low (lousy), futures spreads are wide too. Both these market factors are pointing in the same direction. The lousy basis is saying “don’t sell”; the wide spreads are there to PAY you to store. When basis is bad, spreads are there to compensate you. You need to learn how to take advantage of that if you want to go toe-to-toe with grain buyers.

You don’t have to try to change the world by going all “collective” in your marketing. Just – even individually - take advantage of what the market is providing.

Rule #2: when basis improves, spreads will also tighten up – potentially to a point where the market is no longer paying you to store. THAT is when you sell and deliver. Why keep storing when the market isn’t paying you to store anymore? More importantly, why store at all if you aren’t getting paid or compensated for it? (Waiting is not a marketing plan – to earn storage revenue there are things you need to do – ways you need to act in the market.
Learn how and you will never need to complain about low basis (low prices) again because when prices are low, you will be getting paid to store your grain – AND getting better prices later when the market tells you its time to sell.

You don’t need to form marketing groups or coops; in fact that doesn’t give you any more market power if you don’t understand the three fundamental pillars of grain marketing:

1. Proper storage
2. Capital (cash, that is)
3. Knowledge – understanding how to extract more out of the market

[bucket]

Basis and futures have improved now try to find an elevator taking delivery of wheat in my area. Not really cost effective to have it trucked to Alberta because that where they are buying and taking delivery to help the railways.

Any gains just got ate up in tires and fuel.

Costs money / grain to put up bins so we can all get on the same page.