Canola stratagey

[ado089]

Is anyone taking advantage of this huge
inversion to sell cash and buy back July
calls? There's a great opportunity to
lock in $14 canola now and buy it back
for $12/mt for July. That's cheap
insurance if you think the price is
going up.

[bucket]

dumb questions

If you have the grain in the bin and its not spoiling and you think its going higher - why sell now?

If you spend $12MT on the canola you just sold you only net 13.75 a bushel?

Are you telling the trade you are happier with a lower price anyway and you given them their "fix" of canola so they don't need to pay more?

Do you think July is going to take a run at 640?

[bucket]

It may be that the trade knows the canola supply is going to run out and by getting farmers to deliver with the promise of higher prices either by options,or deffered pricing - once they have the physical - the farmers and the price doesn't matter because they can continue crushing.

At a certain point in the near future crushers are going to make the decision when to shut down. they have to know so they can issue lay off notices etc. When the rumours start about lay offs at a crusher, that is a clue to when they are slowing.

But when the physical product runs out it doesn't matter if they pay a million dollars a tonne - they won't be running.

The math on that has been done as well as when the supplies will be depleted to a point it won't be worth it to run.

I am sure charliep and errol have connections as to when the end point is for price and production?

Maybe they could enlighten us.

[ado089]

Since I'm down to one passable road into
my farm because of flooding I'm a big
fan of winter hauling. Worst case
scenario is I've sold most of my canola
for 13.75 picked up...best case is the
top pops off this market like the
technicals are beginning to suggest and
I'm out 25 cents. Also when prices get
too high paper may trade when actuals
won't.

[bucket]

I see what you are saying. You are speculating with the upside but basically got your price out of the market already. Makes sense.

Sorry to hear about more flooding issues. That sucks.

[ado089]

The good news is the email is starting
to pick up rock piles to build up roads.
The only hitch in my plan is that the
grain companies seem more interested on
bidding via basis as opposed to going to
the market.

[bucket]

That is why I asked the questions above. You don't seem to see the market bidding up and I don't think a call option would gain you anything if they continue to use basis to get the conala.

[crusher]

March futures are the highest they've been since early November, super aggressive basis. Just need some more bullish news from China. Best bids now are the line companies. Ah...the perfect storm is on the horizon.

[ado089]

Canola is at least $30/mt off recent lows with $15 of that happening in the last week. Going out to July on the Call gives you a chance to asses the S.A. crop as well as any early season new crop issues on our side of the equator.

[wd9]

I'm not shy to admit taking a bit more of
that $14 bu price today. Was on the 15th
too.

[SASKFARMER3]

Seems when it gets to 14 guys start hauling.
Funny one grain company phoned today and was trying real hard to get us to sell fall delivered canola for 12.35. Hm can you guess what I told him.

[wd9]

And why not SF3? It may go higher, yup.
But shoot 14 bucks, who da thunk 3 years
ago there would be a question to sell or
not at 14?????

[bucket]

thanks for making me feel like a schmuck SF3.

I signed some new crop at 12 bucks quite awhile back, mostly because if its a little tough I can dump it off the combine, and let them deal with it. Its easier to take a small load sampling than mess around with it in the bin.

[Choice2U]

ado...great strategy for taking advantage of a weather scare. If it occurs, you make money. If the rains come, you made money because the futures will fall and you sold the physical. One has to separate the paper trades from the physical just like the hedge funds. The commercials use the market for their benefit but the real market mover is the hedge funds. They will fire up any weather scare using paper way more than any present supply/demand balances. The likes of Bucket must not be scared of any downside if they are on the wrong side of the market. If the market moves up only $30/mt, you probably won't make much on your calls but if there is a major problem, you will make big time all with downside protection.

[bucket]

choice2u

I figure if guys say they are willing to spend $12/mt for an upside swing, I can set my pricing targets at between 13.75 - 14 bucks and still be ok.

I am sort of waiting for a punch through 610 on the may for more pricing. Some goes out in february because 14 is too hard to pass up. I was happy with it in the fall should be ok for some now.