Marketing lessons

[bucket]

Farmers selling to feedlots is a hard number to quantify.

Yep sure is, but if the estimate is the feedlot is on a wheat diet with 20000 head eating 5lbs of wheat per day per animal, the equation gets a little easier. Maybe, maybe not.

But those cummulative sales take time to be accounted for in government reports. As opposed to large sales that have to be reported at the end of the week or end of day if the sale is large enough. I don't put alot of stock in any government report, especially in Canada.

If statscan finds 500,000 plus tonnes of canola this august when the exporters and crushers report to the CGC, then its really not an entity (statscan) worth having when you also consider they can fudge the numbers for two years after the fact.

Grainco's are currently using basis to find grain, that is a bullish event. Maybe, maybe not.

[btjadenlepp]

Yeah, I said the same thing about the
strength in the basis being bullish to
futures... about 3 weeks ago. Not
feeling so smart about that call right
now. I guess we're learning what the
actual correlation is between Prairie
cash and Mpls futures.

Changing the subject here but if any
grain companies are reading, could you
please stop harassing my clients to take
out wheat basis contracts? I get that
you're short but it's shitty risk
management in this environment and we
are all very tired of answering the same
questions over and over: 'should I take
this wheat basis? The elevator tells me
it's a great deal'.

Sure it's a very sexy basis, way to go.
But the downside in the flat price is
pretty limited here with feed buyers
paying a premium to your milling wheat
bids pretty much everywhere.

Unless of course you had an open basis
contract to U.S. futures, then you'd
have tonnes of downside price risk.

[bucket]

Why are they using basis to attract wheat instead of futures?

A premium for offer (as Viterra calls it ) gets there "fix" now without having to tell anyone they are in fact short.

You deliver and their need goes away.

[bucket]

Besides if my HRSW isn't worth more than feeding it to cows, why am I growing it?

Might as well switch to ethanol wheat.

This won't end well for end users that refuse to pay for quality.

I realize the graincos can switch stock to put the right product at the feed mill or feedlot, and use the quality grain for other sales but eventually that will catch up to them.

Saves them some money now, but when they finally realize the quality wheat is gone, things might move up dramatically. Maybe, maybe not.

[danpenner]

if we end up with normal growing season arent the winter wheat (lower quality wheats)going to drop in value sooner than the cwrs wheats, normal years tend to put premeums back into high quality crops
to me that screams of better basis levels to come on high quality wheats given a crop year with no real production issues

[hobbyfrmr]

High quality hard red spring wheat was a great
story propagated about 70 years ago by some
political entity to control/suppress the real open
market price of wheat.

Wheat in the world is bought and sold by protein
content, falling number and/or both.
It warms my heart and bank account that feed
wheat is valued very close to the milling prices.
Many farmers in my area have gone to growing
Andrew and crystal wheat. They grow high yields
and sell it on the open market for ethanol or feed.
They net more profit than the old HRSW elevator
screw job.
NET DOLLARS PER ACRE.
Nobody gives a shit about how beautiful and red
your wheat is and how you managed to combine it
without any rain on it.

[bucket]

hobby


Thanks for the reality check, I had got lost in my thoughts about how red my wheat was this year. Turns out, as you point out, nobody gives a shit.

Having said that, mosey on over to that other thread and maybe we can make a deal. The "for yooouu, today" special is gone and I have raised my price. Maybe you will be more interested.

[Oliver88]

Good point Hobby and others. If there is no
premium $ for hard red the acres will be shrinking
fast and be replaced with SWS or CPS varieties.

[hobbyfrmr]

Bucket, are you going to sell your farm and buy
one in Brazil?
I think you are up to something!

[Choice2U]

Brenda...Canola has a higher price for delivery today than September so they are telling me to sell now. Wheat on the other hand has carry in the market right through fall (if my terminology is correct). The market is not telling me to sell my wheat now. Maybe I used the "inverted" term incorrectly. Also, "locking" in profit is easy until you don't produce as much as you thought so two problems develop...first, your cost per bushel goes up when you produce less and second, 15% sold might end up being 50% sold as experienced in the past 2 of 4 years. That's why I use canola put options but have not got into US wheat options yet. Still trying to learn Kansas/Chicago/Minneapolis issues eg. buy Minneapolis only to see Chicago with a bigger run and spread between high and low quality drops and one wishes they would have been using Chicago.