Wheat Prices still bullish for next 6 mths

[malleefarmer]

With crop forecasts deteriorating by the day in aust, its the only bullish info left and last to harvest so whats the upside.
Europe is going to be fence to fence wheat with acres taken out of set aside programme and into wheat,if a bumper year was to happen in northern hemisphere could we see prices retreat 200 cents???? for 08 guess you have inevitable weather scares now and then to add volatility.

[charliep]

Agree it will be a fun one over the next winter. Will leave for others to answer your questions.

Just a question about the start and end date of the Aussie crop/pooling year? Our crop year ends on July 31 but the pooling year ends closer to end of September (varies by year/allows the CWB to sell inventory).

Similarly how does Australia handle the risk in the last half of the crop year when you (like us) are selling against new crop northern hemisphere winter wheat? Full year price pooling or two pooling periods per year? AWB attempts to move crop early to avoid the competition? Cash pricing tools?

[malleefarmer]

At the moment we have pool 05
unfinalized and 06 unfinalized and estimates out for 07 so in eefect we have three pools operating.
I try to sell for cash werever i can and we have drought induced prices at the moment,up to $290 per tonne on farm for feed barley and $275 for average grade wheat.

PS this is intended to be a "COMMODITY MARKETING THREAD" not turn it into a cwb bashing thread so opinions about how high or low futures prices will go not farm gate returns please.

[charliep]

Will note that the second story out on BBC world news is the record high wheat prices and concerns about impact on inflation.

The question is getting everyones attention worldwide.

[dalek]

Sold another 200 tonnes of 08 SRWW today for $181, now I have to find somewhere to plant it. There's going to be wheat in every nook and cranny in Ontario this fall.

[cottonpicken]

Thats funny to me charlie.

The truth is inflation causes high wheat prices.Not the other way round.

[TOM4CWB]

Charlie,

It is rather silly how media reports commodity prices!

If our grains double in value... the most recent example of this occuring being black oil... the inflation occurs because of the spending to increase the production of the needed commodity... not that a specific commodity cost going up 2X changes the economy base in the first place.

The cost of wheat or Canola is an insignificant % to the total food basket spending in developed western counties.

Alberta has an inflation problem because we have the resourses... not because we need to buy them!

[TOM4CWB]

CP,

I heard a CBC documentary on the "Moore" effect of technology... and the semi-conductor economy. Exponential growth... 4 decades of experience... and it is still a theory that most explains economics today!

Will we go over the top?

When I autotrac swath my Canola... using GPS technology... I can double the capacity of my machine, work longer hours with less total stress... it is simply amazing what is happening to our world!

[charliep]

malleefarmer had a good question as to what the wheat market is likely to do and for me, how does a farmer develop a marketing plan to position themselves for the future.

I would agree that the next six months look bullish. I am too chicken to forecast how high other than to comment that sometimes a signal for market highs in Canada at least is a front page article in the Globe and Mail and a convervation with a city person commenting how they have never traded futures/have opened an account to take advantage of a bull market that has nothing but upside potential.

Hopefully not off topic malleefarmer but my old position is I want to sell for cash at time of delivery (realizing I won't sell all my crop at once). I would also have 100 % of my old crop delivered/priced by March 31. If I were bullish after this, I would carry a speculative position (long futures/own calls).

New crop - Lots of stuff is going to happen this spring for crops. I like others here, would be hedging. Now or latter - personal preference, risk strategy, etc. Whimpy I know. I would seed more wheat acres and use the money I recieved through selling old crop to keep input use up/target bigger production. Realizing every wheat farmer in the world will be doing this, I would be hedging a good portion at some time through the fall/winter and perhaps early spring (Canadian seasons).

[Fransisco]

Cotton it's supply and demand that determine wheat prices.

Inflation is caused by governments firing up the monetary printing press.

[BennyHin]

Well there goes LIBERTARIAN Franny blaming the government for everything... this time inflation.
Hey Franny: the government isnt forcing you to buy a $50,000 pick up truck.

http://www.libertarian.ca/

[Fransisco]

Just making it a lot more difficult to pay for.

[malleefarmer]

Given the fact that the aust harvest wether it be good or bad will be well fasctored into prices come oct/nov unless of course we have a rain affected harvest.
But after that the only bullish factors can be weather with your planting progress in the northern hemisphere, and what are the chances of you guys having another dry year historically speaking.
A dry one here in aust after a serious drought just doesnt happen , i have records back to 1913 and hasnt happened before until know probably.

[charliep]

Just a note the problem (Alberta province) here has not been drought. We started excessively wet (lots of sloughs), proceeded into a hot dry summer (wouldn't call a drought given lots of top and sub soil moisture) and now have some rain at harvest (farmers here are in a better position to comment about quality). Harvest (at least in the north parts is just barely under way so quality at this point is an unknown. The south is different but will let others comment.

Weather variability is the factor here. Every year seems different which is maybe normal weather but it is making life a challenge.

You have highlighted the supply side. I am also watching the consumption side and trying to sort out the impact of the tight 2007/08 wheat on buyer philosophy/perhaps a desire to store more inventory.

Hopefully we get more discussion about your original topic. People are in the middle of harvest now so farmer participation will be lower than normal.