Basis levels for PPO's

[WRAPper]

Good Morning
I was just looking over the charts for the PPO's and the historical Basis levels I see where the CPS basis is -20
the levels for 05 were between -5, 5 give or take a little.
Where do the people on this site see basis levels moving too and what factors will influence them.
Will we see a 0 basis on CPS this year???

[charliep]

Just to add some interest to this discussion, I thought I might throw on the implications of changes in spreads between MGE (hard red spring) and KCBT (hard red winter).

Because of only having one pool for wheat ex durum and the fact CWRS is the main type grown, all spreads are done relative to 1CWRS 13.5 protein base grade in both the PROs and final payments.

In the CWB fixed price contracts, prairie spring and winter wheat are calculated off KCBT. Soft white is off CBT. Hard spring wheats and extra strong off MGE.

I highlight this because you also have to look at the implications of changes in spread between these two markets. If you go to the Minneapolis Grain Exchange website (http://www.mgex.com/charts.html?page=mspreads), they can do custom spread calculations between the different wheat futures markets.

I did this for the monthly nearby contract spread between MGE and KCBT. This spread has varied anywhere from MGE 20 cents/bu under KCBT to 60 cents over.

I will note that MGE December 2006 futures are at a 20 cent/bushel discount to KCBT - at the low end of the range.

A reason for the wider than normal CPS spread is expectations the current relationship between MGE and KCBT is not sustainable.

I will leave this as another factor to consider in the decision about how to handle CPS pricing decisions using the CWB contracts.

[WRAPper]

Charlie
So in looking at the spreads and the fact that the kansas wheat (winter) is trading at a premium over minni wheat (spring) Is this not a very clear signal if one is able to grow CPS or has winter wheat in the ground in their area to take a long hard look at locking in the futures at this level and wait for the spread (basis) to reestablish a more traditional trading range?? Or do I have it backwards.

Yellow Peas took a bit of a jump to around 3.65 down here the last couple days int he right spots. (4.75 in 02 dollars.)

BY the way I had the pleasure of meeting Mr.Melville on Tuesday.

[charliep]

I would agree with the strategy as a hedging tool (not commenting one way or the other on whether the market has stopped going higher). A couple of guys have called (Albertans)with the observation they can get close to $4/bu with a narrower basis. If you can make money at $4/bu CPS, a good strategy. I might also note you have locked in a lower valued dollar (raised in other threads).

Hopely Lee was on best behavior.

[WRAPper]

Of course he wasn't,real nice guy.

As far as the CPS goes we haven't grown any for a few years have been seing better returns from cwrs but still have seed and I believe this may be the chance to seed it on canola stubble under a pivot rather than barley. Thats kinda where I was going with this thread that 4.00 is attainable with a narrower basis in our area. 42- 45 deductions without trucking allowances is what I'm thinking next year.
Would take a heck of a malt crop at the current pro values to make what I believe is possible with CPS.

The trigger finger is getting rather itchy with the dollar slipping the last few days.

Thanks

[WRAPper]

might add also that one market commentary I read last night was suggesting the use of July 400 puts on kansas as a way of putting a floor under these levels and keeping the upside open.

[charliep]

Would also highlight the CPSR 5701 IP program. Add $5/bu in for the IP premium and the additional money paid to store (if required) and you are even closer to $4/bu (even with a $10 under basis).

[melvill]

Hey, WRAPper don't give me too good of a reputation. It'll spoil Charlie and my "good-cop (Charlie), bad cop (me) act.

[WRAPper]

Did I mention the fact he was high on doughnuts and badmouthing nuns on tuesday too.
I wonder how many calls the fbrs have got on the 5701 program lately, I'd look at it but looking at a full bins of treated taber seed I'd have to figure out the advantages of doing it. But it is nice to be able to plan something that might work, I will ask around Lee and see what kind of interest there might be in this area for the Lee Melville commodity bootcamp for next winter.
Nice calving weather today,amazing how much it can snow in a short period in March when it wants too.
Back to bedding.........

[WRAPper]

Lee wasn't really badmouthing nuns in case anyone is catholic on here, he was though being very hard on the box of doughnuts when I left. So that much is true.

[WRAPper]

I really don't post on here that often unless something really catches my attention and this CPS (kansas) rally certainly has.
I read last night where the price of wheat on the kansas exchange in the last 30 years has been lower than where we are 94-95 percent of the time only 5-6 percent have we been higher.

Where we farm CPS doesn't outyield CWRS by any great margin except under irrigation, last year with the amount of rain it would have but normally no.
However for those that do see a yield advantage or like the fact the grading is easier on the CPS I sure hope with the price situation they are looking real hard at this. Especially with the outlook for other grains the next year not being great.

To say it of course is one thing to do it is another, On our farm we've changed some acres around and dropped some canola and will replace the acres under irrigation with a circle of CPS this year. The first year in 5 that I will be growing CPS again.
I locked the futures in on 60 percent of the expected yield at 10 pm last night.
Have a good day all.