roll canola March basis or not?

[Daylate]

Futures are $10 less in July so that would put us into positive basis and give us time for some swings. Good in a or bad?

[vvalk]

Will they give you the $10? Usually they pocket that inversion

[charliep]

I agree with taking the money now. There is usually some administration cost to rolling. If you want to be long, open a futures trading account, wait for a market dip (either futures or calls) and buy a further out month.

You might also want to look at the canola marketing thread below - mcdon has a different approach. Start with your market opinion/what you want to accomplish and pick the best tool to meet your needs.

[errolanderson]

Personally, not a fan of rolling basis contracts . . . ever

Producer usually always takes a hit, plus it just adds to pricing procrastination and added business risk.

Why not flat-price the cash and replace with May/July call option instead? If the market doesn't rally and in fact weakens into spring, you are only at risk of a loss on the call option premium, not on the total value of your cash canola.

food for thought . . . .

[jdepape]

What you do with basis and spreads should have nothing to do with your flat price thoughts/opinions.

If you are waiting on a rally to price, there are two ways to do it:
1. Wait - as you are.
2. Price out your basis contract and buy futures or play in options. (And like Charlie suggested, buy something deferred (but still old crop).

I'm not a fan of rolling basis contracts in a carry market - BUT, in an inverted market it is definitely worth looking at - but only if they are willing to give you the spread. If not, if there's no gain, and you want to stay exposed to the market, just price the cash and get long futures.

If they will give you the spread, you could roll to the May first, pick up that spread, then later on, roll to the July, and pick up that spread. As things are going right now, both spreads - Mar/May and May/July - have room (and good reason) to move higher. Depending on your timing, you could actually pick up closer to $25-30 (instead of $10). You only do this of course, if you believe the spreads will invert further.

The way I look at it, when you pick up on spreads (like rolling basis in an inverse), futures don't have to rally as much to hit your flat price targets.

Looking at Errol's strategy, I would suggest picking up whatever you can in spreads by rolling, then, if you want to protect the downside (in futures), look at buying puts.

Think of it this way - what you pick up in spreads, you can invest in puts - you can now stay long (exposed) with a floor price (that was paid for).

[mcdon]

option # 3,
price out basis contract, open futures account and tell your broker you want to buy the spread.

[bgmb]

If you deal with bunge they will give you the inverse and not charge you an admin fee.

However some companies like Richardson will not.

If they wont give tou the inverse open a trading account, sell the canola and buy futures.

[bgmb]

This is why the government is having to step in and regulate grain contracts. A few big companies like Richadson are throwing their weight around. Refusing to give farmers the inverse on a basis roll is theft nothing more nothing less.

[bgmb]

Farmers need to shop their grain around. I have sold basically 0 grain through the local big 5 line companies the last 2 years. Smaller companies and brokers have been able to beat their prices by a big margin.

[mcdon]

bgm, I agree with the theft of the spread, if you can open an account and buy the spread then there is no reason why a company shouldn't as well. The grain companies are taking advantage of those farmers that have little experience with futures markets.

[farmaholic]

"Sell the Canola", just so you can play in the futures/options market? And how does this practice do farmers, as a whole, any good? The ****ing canola is gone, in the hands of those who no longer need to come to the market, then why should it ever rally... Please tell me I'm wrong and point out where. Because of my ignorance, I may not be seeing the whole picture...

[farmaholic]

.......crickets

[fjlip]

You are bang on, the system is for billionaires not us.

[BTO_farmalll]

aFarmin,

You Wont Get an Answer Outta The Likes of Charliepee, error, Dape, er' Others!!!!!! They Dont Work fer You and No You Cant Sit With Them and No You Cant Hit The Blunt!!!!!!!!

[farmaholic]

Maybe its such a stupid analysis of the solution it doesn't warrant a response?