Markets Beginning 2015

[charliep]

any thoughts about the markets beginning 2015.

My two bits.

Crop futures markets basically are holding a trading range.

A surprise for me is CBT corn above $4/bu and soybeans above $10/bu.

An inverse in ICE futures Canada canola prices. The inverse is taken out of the cash market via basis but does create some interesting opportunities.

[boarderbloke]

charliep,,, " The inverse is taken out of the cash market via basis but does create some interesting opportunities."

charliep, is this not just the "market place", telling grainco's that they're wrong, by charging such a high basis for cash or nearby canola deliveries? The "market place" is not getting the canola seed it desires because of the widened basis grainco's are charging(even though the futures have risen), which inturn discourages nearby or cash selling of canola seed. Canola futures are raising inversely because the market place is demanding canola seed deliveries now, but grainco's are choosing to pocket most of the rise in price, just like they're are doing with wheats.

If deliveries are desired in weather like this, either basis charges will have to be slashed or a major rise in nearby futures will have to happen(without being consumed by basis increases),,, they should all remember, the crop wasn't all that big.

[farming101]

Translation:
Futures market is telling producer to sell, basis is saying no thanks, talk to us in April when the weight restrictions are on the roads.

[fjlip]

That's about it,101! Grains all green this morn, EXCEPT crude down 4% the most of all.

[boarderbloke]

farming101, I think more precisely,,, Grain futures rise in price, grainco's say thankyou very much!

[furrowtickler]

Sooner or later they will have to fill the rail cars. Happened to NWT in Mid Dec. They fuked around for too long then got caught with trains coming and the bunk house empty. Equated to a 60 basis in a hurry.

[charliep]

I recognize what you guys are saying but are there any strategies coming out of these markets.

Hustle for good basis in the nearby cash market and sell. Replace with futures/options in a further out month.

Watch the spreads in futures. Is the inverse likely to hold or at some point move to carry?

Watch for good basis in deferred months and lock in.

If your target price is $10/bu, deferred delivery contracts are pretty close these days.

[ado089]

March to July is $10. Basis at Cargill is $12 for both. The $50,000 question is will the basis improve $10 over the next 6 months???

[bigzee]

Best basis in my area -15, tempted to lock it in before it goes the other way. With the rally so far today $10 could be a possibility later this wk.
if that happens market will get flooded prices will erode.

[ado089]

Every GPO in the country must be getting hit today. March keeps bouncing off 450 every 20 minutes.

[ado089]

Did a couple of bins today for March delivery July futures picked up for $2.50 under today. Might not be the right move but I don't think it was the wrong one.

[charliep]

Just highlighting the nearby futures months have a higher price than deferred ones. Prices as I write for canola futures.

March - $450/tonne.
May - $443
July - $441
November - $430

Normally, there would be carry (interest and storage value) premium in old crop futures months. The market needs old crop canola until new crop becomes available and should be willing to pay enough to make storage worthwhile. Today, the futures market is paying more for nearby months than deferred - as highlighted in the other posts here, a signal it wants the canola sooner rather than later.

You would expect some inverse in new crop (November) but with a normal carryover this year (1 to 1.5 MMT July 31) and uncertainty about 2015 Canadian canola production starting with acres this spring could mean a tighter supply demand in 2015/16 and a new crop market that either tightens the inverse or moves to paying carry (interest and storage) right into new crop.

Hopefully this explanation works. I will leave for discussion the strategies that may come out of this. I will put the caveat on from my side that I am still think soybeans have a lot of downside. Canola will hold up better but is not immune for lower prices.

[Hopperbin]

Holy crap my 0 jan basis is now worth 10.52 per bushel.

[Hopperbin]

Charlie can you explain why one grain company can leave jan basis contracts open till jan 20. While other companies make you set futures price by dec 15 for a jan contract.

[ado089]

Stormin, what I did is what charlie is talking about. I did the basis contract for nearby a $12 under, July basis is also $12 under. There is almost a $10 spread from the March futures to the July. So by immediately rolling I improved my basis by $10 and get to stay in the market until June. There is a bigger spread to Nov but there are way too many unknowns for my taste to swallow that big of an inversion.