Kodiak:
I need some clarification.
You say Yorkton/Harrowby crushers have been around $40 over. I track these guys daily online and the best has been 36 over by LDM (just recently).
Harrowby's best price so far has been 28 over.
Is the 40 over you mention a negotiated basis as opposed to a posted bid? Or was it when the bid was 17 over the May and the May/July was 23 over?
Don't understand the connection you make between futures deliveries and positive basis everywhere - "so that won't work".
When you take delivery, the cash basis doesn't factor into it. I think what you may be saying is - who will deliver when the cash price is higher? Who will pay 10 over futures just to sell it (deliver) at futures price?
You'd be right that that wouldn't be economic, but that's the whole point. We are getting to the point where futures delivery is more economic than paying a higher basis. So the long stands on delivery. But who is going to MAKE delivery? As it stands right now, no one. So the shorts in the market will have no choice but to buy in their short positions. But the longs may very well say, sorry, but I'm not selling because I want/need the physical canola.
All this leads to fireworks in the July. Will basis increase? Not likely - in another thread guys were talking about what price they need to clean out their bins. They may get it from futures.
You say Lloyd is going to have a tough time getting anything past Yorkton. Not sure what you mean - if Lloyd stands for delivery and someone gives it to them in southern Manitoba (their worst possible case), there's nothing Yorkton can do about it.
Why do you think basis can get much stronger than 45 over (at Lloyd)? you add "at some point the inverse just gets stronger too as buyers find that deliveries against futures is unattractive because would-be hedgers sell into a strong cash market". I'm unclear what you mean here - it seems to contradict your strong basis argument. If hedgers sell into a strong cash market, this would make futures delivery unattractive only if the basis they were selling remains below "futures delivery equivalent", which is another way of saying weaker basis, not stronger.
If my "cost" of taking delivery of futures as a source of canola for my plant is $45, why would I set my basis "much stronger"? Why would I go to say 80 over when I can get it so much cheaper by taking delivery?
Maybe I'm missing something.....
I won't comment about rolling basis contracts except to say sometimes it works, sometimes it doesn't. If a buyer does it, it is in his favour to do it.
When you say Nov could gain on July, do mean it could go to a carry or just narrow in the inverse? I doubt very strongly that we will be going to a July/Nov carry.
I need some clarification.
You say Yorkton/Harrowby crushers have been around $40 over. I track these guys daily online and the best has been 36 over by LDM (just recently).
Harrowby's best price so far has been 28 over.
Is the 40 over you mention a negotiated basis as opposed to a posted bid? Or was it when the bid was 17 over the May and the May/July was 23 over?
Don't understand the connection you make between futures deliveries and positive basis everywhere - "so that won't work".
When you take delivery, the cash basis doesn't factor into it. I think what you may be saying is - who will deliver when the cash price is higher? Who will pay 10 over futures just to sell it (deliver) at futures price?
You'd be right that that wouldn't be economic, but that's the whole point. We are getting to the point where futures delivery is more economic than paying a higher basis. So the long stands on delivery. But who is going to MAKE delivery? As it stands right now, no one. So the shorts in the market will have no choice but to buy in their short positions. But the longs may very well say, sorry, but I'm not selling because I want/need the physical canola.
All this leads to fireworks in the July. Will basis increase? Not likely - in another thread guys were talking about what price they need to clean out their bins. They may get it from futures.
You say Lloyd is going to have a tough time getting anything past Yorkton. Not sure what you mean - if Lloyd stands for delivery and someone gives it to them in southern Manitoba (their worst possible case), there's nothing Yorkton can do about it.
Why do you think basis can get much stronger than 45 over (at Lloyd)? you add "at some point the inverse just gets stronger too as buyers find that deliveries against futures is unattractive because would-be hedgers sell into a strong cash market". I'm unclear what you mean here - it seems to contradict your strong basis argument. If hedgers sell into a strong cash market, this would make futures delivery unattractive only if the basis they were selling remains below "futures delivery equivalent", which is another way of saying weaker basis, not stronger.
If my "cost" of taking delivery of futures as a source of canola for my plant is $45, why would I set my basis "much stronger"? Why would I go to say 80 over when I can get it so much cheaper by taking delivery?
Maybe I'm missing something.....
I won't comment about rolling basis contracts except to say sometimes it works, sometimes it doesn't. If a buyer does it, it is in his favour to do it.
When you say Nov could gain on July, do mean it could go to a carry or just narrow in the inverse? I doubt very strongly that we will be going to a July/Nov carry.
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