Wheat Is Flying

[kamichel]

North Farmer how do you calculate a basis is good? we have declining basis for 3 years now in the CWB of course this cannot continue, at some point the basis must move in the farmers favor. We must remember the buy out, in case the market goes against the producer. If in favor of the producer the producer gets screwed. If against the producer the producer gets screwed. This year I am royally screwed.

[northfarmer]

the basis sucks and is not getting better, the point is it is likely the best option, you take the CWB out of the equation, as someone said, hold your nose and sign up....than you price agaisnt the US market when you want to.... i have been screww4d by CWB buyouts before and you must takes this into consideration when assessing this plan...

IMHO, i still beleive freedom to market is the ultimate answer but is not available for this decision cycle....that is the real piss off!!!

[boarderbloke]

Saskfarmmer3, i don't understand why you'd want to be a bridesmaid! we have so much market information available to us now days, up to date info, not like years ago!!! why not have taken a position on the KCBT to price your winter wheat, and a position on the MGE for your spring and durum wheat, you'd be good money ahead! the cwb is irrelevant and we don't need it, and the wce doesn't have enough liquidity. everyone and their dog knew that wheat prices we going up big time, particular after the Easter frost in the southern states, all you had to do was check "real time" temperatures in the winter wheat areas that weekend and combine that with the knowledge and experience you have with frost here on the prairies to know there was going to be major damage. on April 9th you could have bought sept KCBT wheat for 4.80 (after the frost) on April 3rd it was 4.55! just the news that frost might be coming and did occur lifted the price 25 cents/bus between thoughs dates. today it closed at 7.81, why does anyone complain about the cwb, it's irrelevant to making money in the market place! Carl

[charliep]

As a caution to bullishness, I would look at the old/new crop inverse on wheat (now $2/bu). If I were to be long anything, it would be new crop. I note kamichel cautions about the old/new crop spread a while ago (has gone from a buck to $2/bushel) but this has to correct at some time.

Will also note the interesting and perhaps confusing wheat/corn spread. From a conference call today, US corn has potential to achieve close to 160 bushels/acre (the number today was in the 156 to 158 range). They also noted the scrap for 2008 acres among US crops starting with winter wheat this fall.

Note the above because the wheat PRO not only includes existing sales but also crop sold in the June to August period in competition with new crop winter wheat. Farmer delivery patterns also impact CWB PROs - particularly if farmers speculate/hold wheat into the summer of 2008 with the objective of playing the which crop year game.

[charliep]

A curiousity more than anything else but a note that I can never brag about anything because I am always a student of the market (Markets are never wrong - just market analysts). From my student eyes, I wonder how long this rally will last. Other rallies have been driven by strong demand (oilseeds increasing vegetable oil and protein consumption in China, corn by ethanol, etc.). Realizing wheat is a basic human food item, it has never had legs in the past (growth in consumption has only been at the rate of population growth). Will be interesting if India (and maybe China) policy direction on wheat will put a sustainable long term optimism into the international wheat prices.

[melvill]

Just to echo Charlie's comments about caution on this wheat bull run. I had two phone calls today from bulled-up producers talking about $8.00/bu. wheat total payment delivered at the the local elevator. When I hear that kind of bullishness together with stories in the mass media - CBC and National Post - about how high wheat prices are, I worry about producers' marketing strategies. The last two days look like a very big blow-off to me getting ready for "the" a very large correction or a correction headed for a double top. The two producers I talked to haven't priced any wheat. One was waiting to lock in $7.50, the other for $8.00!!!

What do you think? Is this the big blow-off before the hard down turn or is it the first leg of a double top?

[Incognito]

In 10 days we took out the old high at the CBT, $8.00 and now the line intersecting the 70'sand 90's high at $8.52.

There is not enough wheat stocks and production is going south everyday.

Chart that.

[charliep]

No doubt things look positive (if western Canada can only put the 2007 crop in the bin with reasonable quality). Two experiences are keeping me honest.

Crop year 2002. The year of extreme optimism in the fall and a deficit in the 2002/03 CWB wheat pool account. Remember the fall of 2002 where the sky was the limit only to find out expensive wheat changes the dynamics of the market in many ways. Realize Ukraine and Russia don't have the wheat crops they did in 2002/are not issuing export licenses but suspect there will be a point they sell.

Corn in 2007. Watching corn top out over $4/bu and then slip to today's levels. Again realize will be spill over from wheat into feedgrains but the market responded with vigor in filling the supply gap created by ethanol. No crystal ball but I suspect there is no where on the planet that will not be growing wheat. Mother nature needs to cooperate but that is every year.

[Incognito]

CBOT wheat at $9.00 tonight Charlie.

The fat lady isnt even in the dressing room yet.

[charliep]

You are likely right. Will note the old/new crop spread is currently $3/bu with July barely moving.

Went back to 2002 and see the high was in September. Took a look at 2004 and saw similar the rally hold through the winter. Neither of these years had the same level of tightness.