Wheat! why our price is low.

[foragefarmer]

SKfarmer3

I wish what you are suggesting about reducing crop production world wide would work, but we as farmers can't even agree on topics here on Agrville. Never happen as there is someone somewhere prepared to pick up the slack.

As for input companies, just how many major players are there in the world? One conference call and their all on the same page.

I'm sure there are many on here who have already thought about this but, I figure I'll type it out.


John

Why sell to locals if lower bids?
Not all of us live near the border and where's the so called arbitrage that was suppose to come across the 49th? I realize marketing is a lot work and discipline but the Canadian dollar exchange rate factor being left out doesn't make sense.

[furrowtickler]

Hobby - problem is volumes of off grade costs you money long term

[jdepape]

foragefarmer:

"...where's the so called arbitrage?"

It comes from farmers - and dealers - who sell to the highest bidder. Something that isn't happening enough yet.

"... the Canadian dollar exchange rate factor being left out doesn't make sense."

Not sure what you mean but its not being "left out". On wheat, its in the basis.

[bucket]

Depape.

Explain this.

March mpls wheat is 6.27 usd.

Basis is close to zero here. But the net canadian price is less than 6.00net.

6.27 converted to cdn funds now is 7.30.

Why not call the basis minus 50 a tonne which is what it is?

Nothing like misleading the masses.

Basis is not right of you have to do another calculation after the fact.

In 2012 with a par dollar it made sense and you could look at Northern tier states prides and be within a dime. Par dollar and arbritrage was alive and well.

Maybe explaining today's basis clearly would help.

Charliep should chime in soon.

farmaholic - Any advice on today's topic?

[bucket]

And while we are talking basis they narrowing from minus 100 a tonne to minus zero/50 a tonne should say someone wants wheat.

Very few are taking delivery anytime soon locally. And as usual - trucking costs money.

[farmaholic]

Bucket, I am nothing more than a "simple" dirt farmer. Rely on the experts for advice or to give an educated debate...

When you fight a war on too many fronts you will likely lose the war but along the way you may win a few battles and as time goes by, you run out of resources and energy and hopefully raise the white flag before total annihilation and concede to the bastards...

I come here for insight on all sides of the argument.

[bucket]

Farmaholic

I come here to hear all sides. But no one can explain a zero basis and the fx.

You can't have 6.27 usd and a zero basis and end up at under 6.00cdn.

The formula is now futures minus basis minus an unknown to equal net cdn price.

[Hopalong]

Could be that Canadian graincos signed up basis and deferred delivery contracts earlier and are trying to honour these contracts.
Only way to slow new delivery contracts is unattractive basis or no bids.

[farmaholic]

Yup Hopalong, you're right. And so is Depape, its a signal. And hopefully that signal changes, but as long as the Beast is fed a steady supply, or never goes hungry, don't expect the signal to change. Then there's the Timfoil Hat theory which I like to wear and think there is some merit to as well.

[farmaholic]

ooops, I mean "Tinfoil" should proof read more...

[jdepape]

Bucket:

March Mpls at 6.27
Basis close to zero.
If Cdn price is less than 6.00 as you say, then the basis isn't close to zero.

Unfortunately, not all buyers treat FX the same way - can you say who's bid that is?

You say "basis is not right if you have to do another calculation after the fact". I agree - that's why I like the FX to be in the basis. Take the futures price (in USD), add the basis (which is often negative), and the result is a net price in CAD.

[bucket]

Depape

Just looked up the local bid on their app.

Futures price is 232 a tonne. Which is exactly mpls usd March price. Basis is plus .95 a tonne or 3 cents in I don't know which currency. And the net cdn price is 6.34 cdn.

Maybe you can make sense of it because I can't.

If they had a posted basis of minus 50 a tonne it would be more honest.

Although not long ago it was a plus 15 dollars a tonne. I missed that signal. My decision my mistake.

[bucket]

232 a tonne converts to 6.31 usd.

Just to be clear, if the basis of plus 3 cents has the fx in it, it's a pretty strange calculation.

[bucket]

Depape

Just check their app again so you can get which company it is.

233 equal 6.35 which is march usd mpls to the penny.

A minus 3.58 a tonne basis or 10 cents.

A net cdn price of 6.25 cdn.

All March futures.

Northern tier states have March mpls at 6.35 minus their basis of 25 to 40 cents for a net usd price of 5.95 to 6.15 usd a bushel. Convert that net price and you are at 6.90cdn.

System is working as well as when the cwb was in place and mandatory. And don't start on delivery opportunities there are none.

[jdepape]

I'm trying to figure out your 50 under.

If futures are 232/t, 50 under = 182 (4.95/bu). So that's not it.

If futures are 232 USD, converted to CAD at 1.1600 (0.8620 USD) means 269 CAD. Take 50 away from that and I get 219 (5.96/bu). Still not right.

Here's how I would dissect this.

Cash price is 6.34 CAD. At 1.1600, that's 5.47 USD. With futures at 6.31, your basis is 0.84 USD under.

Another way to do it is to convert the futures to CAD. 6.31 USD = 7.32 CAD. With cash at 6.34 CAD, the basis is 0.98 CAD under.

To avoid doing an extra calculation (like you said), most just imbed the FX into the basis. Take the futures in USD, add/subtract the basis (not USD nor CAD), and the result is a cash price in CAD.

I don't get your earlier post where you say "The formula is now futures minus basis minus an unknown to equal net cdn price." There is no "unknown" as you suggest.