Hot and Dry and Canola prices crash day two!

[farmaholic]

Ok, serious question Charlie. Since I have so much as admitted I don't have a clear understanding of the "functioning" futures market I need advice.

Let's say I have little to no physical canola to sell yet I still want to "participate" in the market. Let's say I have no canola for this example.

How do I get in, what do I need to do and what is it going to cost me, at this stage of the game.

[charliep]

I guess you made it through 2002 unscathed. That year is etched in Alberta farmers minds. A very difficult year but most made it through to farm again in 2003. Pain resulted in a lot of creativity that included finding enough to feed a rather large cow herd.

bucket. You are in a disaster situation. Just curious is you took the variable price option on your Saskatchewan Crop Insurance? Your coverage would a lot higher if you had.

[farmaholic]

ps, I would be certified insane if I thought is was a good idea to preprice any physical canola the way it looks today. If there is anything worth swathing, the next risk will be a wind that scatters the skimpy poorly anchored swath. I can't wait to put 2015 behind me.

[charliep]

You want a futures course. I will make easy. Set up a futures trading account. They will require margin money - good faith money to make sure you can meet the commitments you make on your futures contract. You will also have to provide a net worth/other financial to make sure you can meet their security needs.

Once you set, get long ICE canola or buy calls. Not so hard as speculator.

Most of you guys have taken courses so just a matter of application. Know when you are a hedger (pre-selling growing crop) and a speculator (long futures to take advantage of price improvement on crops you have lost).

[charliep]

I might comment that you actually could be accomplishing the exact opposite of your intent. Convince your export customers you have nothing for sale too early and they will take their business elsewhere where they can book supplies. Canada is not the only source of oilseed. Soybean oil has stalled out at 33 cents/lb. That is why the market would put in summer highs.

A better scenario would be to have production forecasts stay relatively high and have export business continue in short crop year.

To that extend, I like a market with volatility. Futures markets that surge to highs and then follow back only to be rewarded by another rally initiated by commercial demand. A sign of a healthy market.

[SASKFARMER3]

So JW what is the size of crop canola?! Will a rain save what's their? Does Alberta have s horse show up its ass and their crop will be saved!
USA has issues that's a gummy I lived mud and a bumper it doesn't make!
Yes we have a ok one but just 15 north and west it's ending fast!
Do JW show farmers how to bend over and take it!
The grain markets are a joke, and like I said before soy up do to flooding and planting not sure yet known! Well Americans are packing up the drills and calling it a year. Chicago might think different.
Plus your probably one of these genius that think the canola councils goal will help farmers! Or are you part of that group!

[charliep]

SK3

Why do you wake up at 6 every morning and celebrate failure?

[SASKFARMER3]

So their it is thanks Charlie you just confirmed why all Canadian governments in Alberta Sask and Manitoba publish each week bull shit reports so full of miss information their not even funny!
It rained in Regina so wow it's great !

[tweety]

Charliep, that generally is the way it is here in SK. Success is rarely admired by most. Not all, but most.

SF3 is pretty much the norm.

[hobbyfrmr]

Jwab, there is a truth in what you describe. I had a fishing trip with a very good friend of mine, we , (the farmer bunch) described the weather and nonsense market risks which we are subject to everyday. The working/ trying to diversify in other ventures guys had many good points as to where we the farmers are offered risk management tools to buy or not buy. These tools are not offered to other weather dependant industries like building construction, track hoe operator, road construction, carnival owners, ice cream shacks, small town pubs and several other ventures we discussed.
The conclusion was, any revenues (govt programs) outside of risk management program collections are simply used to bid up higher rents, higher land prices and new machinery. Larger farms pay big to have their specialists describe the programs in detail and discuss actions to maximize payment. I dont like it, But thats the way it is in a highly competitive farming environment. The reality is, its up to me to hire an accounting firm that is very well studied in agriculture programs. My large acre , high efficient , large volume producer neighbors dont just think about cost of production, they are watching interest rates, land values,making grain sales, fertilizer purchases up to 2 years in advance. They are far more skilled managers than myself for sure. Thats why they farm/control more land than I ever will! When all the fuss is over, their end game is land ownership. All the labourers will seek work elsewhere, the lease machines will go back to dealer, the rest to auction and these guys will have collected a very large farmland base to sell or rent out.

[dmlfarmer]

Charlie made a very important point! The more we say we have no crop, the less sales grain companies pursue. Most grain companies are multinational and will source grain for sales anywhere in the world. They book sales based on expected production. If we as farmers keep telling them the prairies have no crop they will not plan on selling any prairie production. Prices will not go up if there are no sales made!

Grain trading is a margin business. They really do not care about production problem other than knowing what side of the trade to be on at a given time.

Grain marketing is like playing poker. We know the hand we are dealt, yet instead of hiding that hand we jump up and down screaming how poor it is. Wake up folks, it is time we learned to play the grain poker game too and bullshit like the governments, traders, and grain companies do. If you want a higher price it is time to be telling everyone crops are improving and we will have lots to sell. Then come fall when reality hits the trade watch the prices rise!

[charliep]

Frustrated. I assume you read the Alberta crop report before you made the comment. I note the map and the general deterioration of crop conditions.

I note crop reports are read by a lot of people including importers. Are suggesting they should take all their business to other exporters because Canada won't even have one kernel of canola/other crops for sale. Perhaps the message to importers should be the realities of dry conditions on crop production but western Canada will have some available for export. The realities for everyone in supply chain is they will have to pay attention as the summer unfolds. No one knows the final results of this years crop.