Canola Technicals

[charliep]

Actually I was thinking of a deferred delivery contract. I was wondering if Oliver88 would sign a July based deferred delivery contract that locked in $10.50/bu, would they take it? It may be a weird way of looking at it but I would want to be paid 1 percent a month to store. From my eyes, taking $9.80/bu for a December delivery would pay as well as taking $10.50/bu in July. 7 months at 10 cents/bu cost/month.

[SASKFARMER3]

Talk to your suppliers see how busy they are tweety

[charliep]

I have taken the topic off course because the initial questions were about the short term outlook and where prices are likely to go based on technical signals. I guess the question was do you look at deferred futures months and deferred delivery contracts to achieve a target price.

[farmaholic]

10000 bu @ $9.80 is $98000

10000 bu @ $10.50 is $105000

$105000 @ 1% = $612.50 (Lost interest 7 months not compounded)

$105000 - $612.50 = $104387.50

$104387.50 - $98000 = $6387.50 advantage of July contract.

Did you need the money for anything else other than stashing it in the bank at 1%?

Don't know if I should have taken the interest cost off the $9.80 or $10.50 price.

[farmaholic]

Yes Charlie and that makes me a hypocrite.

[charliep]

Just to be clear, I wanted 1 %/month or 12 % per year. Likely too greedy but I am not sure a 1 %/year is not too generous. My guess is everyone here has a target for return to store which is somewhere in between.

[errolanderson]

Why isn't anyone talking about protecting the downside in this market in this thread?

If you want to gamble on a higher canola price weeks or months from now in this uncertain global financial environment willing to sell at $10/bu the next time it hits . . . what if it doesn't? What if $9.50 canola turns into $8.50/bu canola by late winter?

My opinion on 'carry' is who cares? Global market risk is far higher than any canola carry move. If the market dumps, that is the least of your worries. China is in a serious recessionary slowdown. the Japanese bond market is basically a financial bomb. What if U.S. stocks get trashed? This is where your buyers are situated.

This is not the same world as when the U.S. Fed had the global market back with QE. But canola's recent strength is right now more a benefactor of money flow of outside investment money created by the instability of other outside markets.

If you want to gamble on higher prices later this winter, you may be right, you might be wrong. But I would suggest you consider some put options to stick in your back pocket as a guard. Or sell the cash canola now and buy call options if you want to re-open your spring price ceiling. This strategy is a lot less risky than storing unpriced.

Global markets are now battling deflation and commodity buyers hold the trump card. Commodity markets right now are driven by buyer demand not supply. That's the real risk as we head into 2015.

[Oliver88]

Charlie I am talking $10.50 for January delivery as a deferred delivery contract.
(Wouldn't be interested in a July delivery period)

[farmaholic]

Errol, a July $440 put is $25.10 or 57 cents/bu.

Seems kind of steep. Because I've never done this before, where's the "happy medium"? Reasonable price to protect at a reasonable cost? Recommendation?

$400 put at 10 bucks. Give up $40(90 cents/bu)of price protection to save 34.5 cents/bu premium????

[sawfly]

have had 9.70 targets in .
small ones like 3000 bushel.
every few weeks they get picked off.

it is not that i figure thats
what it should be worth.
but i will sell some just to hedge my bets.
could be one of those years
it just can not break 10.

if i thought us farmers had any discipline, we would all hold out for 11.
ain't gonna happen, farmers are too dumb to agree on prices.
chem and fertilizer co.s never sell at a loss no matter what the supply.
we are just not that bright

[SASKFARMER3]

Why are Soy still almost a dollar higher using usa dollar vs Canadian and price paid to farmers in ND vs sask.
Were getting screwed a dollar a bushel up here.
Merry Christmas.

[farming101]

Soymeal is the reason.
Velva ND Jan canola bid is 9.93 CAD.

[SASKFARMER3]

I do agree with Errol on one thing the down side. Similar year a few back the usa said had huge production and lots of hype about future production and prices tanked in January. Might happen again. Oil is dropping every day maybe a sign.

[errolanderson]

farmaholic . . . don't buy so much time . . . try a March put option. You wouldn't pay for so much time value. If this is an ass-kickin, it's gonna come sooner-than-later.

For example, a March $430 put may trade for $10/MT.

Wheat may start sharply higher this morning due to the crash in the Ruble. Russia hiked their bank rate 6.5% to 17% yesterday and it still doesn't support their currency. That's a collapse.

But this currency gain on wheat may be short-lived as this is a flat-out global credit rout. The global credit market is the devil.

China is pretending to be the U.S. Fed printing money, but appears too late to rescue their economy from fallout.

I'm genuinely concerned about what is happening right now in global markets.

[bucket]

Errol

Dumb question?

If governments can write down their debts by a meltdown due to banking incompetence, does everyone get to write down their debts or just the banks?

Basically do I still owe the same amount of money or does my debt get a haircut along with my savings?