Basis Variability in Montana DNS wheat prices/basis

[redleaf]

Well I will probably get burned for this and some wil say I am just a piss poor marketer, (probably correct). But here goes. I just don't think we will ever get a straight answer as to why we are getting royally screwed on basis and fx. All the rhetoric about booking a good basis and 20/20 hindsight marketing be damned there is a couple of dollars missing. Well not missing I think we know where they are going. One more point I would like to add j booking a great basis can backfire if the futures month you are booked into go against you. Yes you can always roll into another month but do that a couple of times and that great basis disappears along with further declining futures. I know I've been there without options to protect myself.

[Braveheart]

I'm not saying to go south. Let's just not sell grain when the basis is weak or not good enough. When farmers sell into a weak basis, grain cos have not much need to improve it, and they're already warehousing grain they likely didn't have a sale for.

We don't need to form co- ops or cartels, we all just need to store our grain until the companies have to come with stronger basis. Yes, it would take financing, cash advances or what else to cash flow our farms but it would help bring discipline to the marketplace.

[charliep]

I will let others jump in on other things. Perhaps I would ask what your risk is if you book a favorable basis? If you have crop in the bin, will you not lose the same amount of dollars as having signed the basis contract? I realize that you have more opportunity to postpone a pricing decision but that is not a guarantee of better prices.

[charliep]

Perhaps to my points.

Over the past 90 days, there has been a 60 cent per bu range in Montana wheat basis between high and low.

On any given day, there is about a 50 cent per bu range between different grain companies bids.

MGEX wheat futures have declined about $1 / bu over the past 6 weeks.

[Braveheart]

Caseih, yes I am close to the US. Right now the price in ND is not that attractive. Basis has been weak.

Elevator managers in ND are reluctant to to take grain from anyone other than regular customers because movement has been really slow. Railcar availability is lacking. One manager we've dealt with said their high dollar must be hurting sales because his book is empty.

However, we've had good luck sending producer cars. I'll caution by saying those were priced a year ago now, and producer cars ordered as soon after Aug 1 as possible. There are more than a few US companies buying CA wheat this way, but I can't give you their names on this site for reasons. Sorry.

Your best luck into an elevator is in Minnesota. I don't know how far you are, but try Markit County Grain (correct spelling) in Argyle, MN. They have a website. Also, Walsh Grain in Park River, ND. Walsh will post on their website when they are unable to take CA grain.

It sounds like you have the wheat everyone wants. Wish I could help more. Good luck.

[Braveheart]

Charlie, for me, 3 things. It takes basis risk away. It won't erode any on me.

Second, it gives me access to the delivery system. Without contracts nowadays access isn't a sure thing.

Last, it pays bills.

The futures side is what it is (low), but, futures can be rolled, bought back if expected,to,rise, options used, etc.

[Hopalong]

Two parts to our elevator cash price, futures and basis.
Both set by free market competition.
Used to hear same type of criticism over futures markets, that speculators were making obscene profits from their efforts.
At least on AgriVille, criticism seems to have shifted to graincos.
Some suggest conspiracy and collusion as reason for low prices but think for most part,as well as with high prices, supply and demand are main drivers.
Most of us also see competition as a driver to make free markets work effectively.
Distressing to hear others say that we should conspire among ourselves to restrict competition and production.
The very thing that we get so upset about when others do it.

[charliep]

I will highlight as well that basis is only one component of price. From a year ago, farmers who sold this past winter for an ugly basis put more money in their pocket that others who sold later for a better basis. Losses on the futures side resulting in more pain than gains from better basis.

Pick your poison. Just have a plan.

[wmoebis]

What would price be if basis were figured as a % of futures in stead of straight $ bet the FX would be added on then.

[charliep]

I am going to post the delivery specifications for the MGEX spring futures.

[URL="http://www.mgex.com/contract_specs.html"]MGEX wheat[/URL]

[cottonpicken]

We have seen a HUGE move in the dollar,15% since the start off the crop year ,lots of offside trades to be covered.

[tstep]

All I can say is it's one **** up system