Inverse versus Carry

[farming101]

Here is the July 15/ Nov 15 spread

<a href="http://photobucket.com/" target="_blank"><img src="http://i1211.photobucket.com/albums/cc421/farming101/Jul%2015%20Nov%2015%20spread_zpsjz8d6lo8.jpg" border="0" alt=" photo Jul 15 Nov 15 spread_zpsjz8d6lo8.jpg"/></a>

[charliep]

Just have to check but the question might be why the inverse in old crop months. Not sure I can explain other than the nuances with ICE futures contract delivery.

[farmaholic]

Yes Charlie that is it. Or even month to month going further out(earlier on). I just have trouble putting the poorer prices paid earlier together with an inverse in the market. I am sorry if I am not making myself clear.

[mcdon]

Whether a spread is at an inverse or at a carry depends on a number of criteria. Stocks that are in a deliverable position (traders sometimes use carryout but that is misleading) composition of open interest, contract specifications to name a few.

[charliep]

Strong basis levels in forward months has created opportunty for some. You had opportunity to lock in July basis through the winter. You would have had the rally plus a strong basis.

[farming101]

Yes, get to know what is a good basis in the deferred months.

Another thing to consider is that fully one third of the canola that leaves the bin goes directly to a crush plant on the prairies.
These plants have to keep seed coming in regularly. Just a guess but I would think that across the industry they only have enough for two weeks even if they were full to the rafters.
Not sure what effect that has on futures market, but it does mean canola is always trading.

[mcdon]

Speaking of inverted spreads watch out for the july/nov bean spread. Something happened in today s market that made it very obvious. It is game on.