Will Frankenstorm = Frankenmarkets?

[errolanderson]

This disaster is about the last thing
the weakened U.S. economy now needs to
absorb (IMO). Equity markets may become
uneasy which could ripple into the
commodity world. Maybe it is best that
Wall Street is closed for a couple days
for markets to digest.

A further crude oil break may continue
to pressure corn values. Natural gas may
be the winner as nuclear plants might go
off-line temporarily. New Jersey's
oldest plant is off-line, but placed on
alert tonite due to high water concerns.
There appears to be at least a dozen
nuclear plants in the pathway of Sandy.

It may take a few weeks for markets to
find their new balance. New construction
can rally equities once stability
reappears in markets.

Interesting days, weeks straight ahead
for all of us as markets adjust to yet
another bout of economic headwinds.

[wd9]

And that is the whole trouble with this
crazy ass "price discovery" system for
food. Being at the hands of jittery, out
to make a fast buck, soul-less Kevin
Oleary types determining the price of
food. Making money on this industry and
providing and contributing absolutely
NOTHING for or to it.

There has to be a better way.

[bucket]

wd9

Good point, but look at the types that are buying into the theory.

[charliep]

To highlight a previous comment. If like low volatility, you like low prices. If like high prices, then you have to live with volatility. It creates nice opportunities for those that are prepared.

I am always amazed by how different farm managers approach marketing. Some have price targets based on profit and average out their pricing during the year. Others live and die by every gyration of the market with the thought they pull the trigger on the exact day.

Been lots of opportunities to pull the trigger at good prices. Prices are not all that bad today even today. If I had any kind of outstanding bills/debt, anyone can be a trigger puller even today and sleep well. Bills/debt and $2 million plus of equity/limited debt, go for it. Speculate as much as you want. You can afford to take the risk.

[fjlip]

Fertilizer gouging, fuel prices a rip off, greed fueled land values, crazy risky rent, all we need is double digit interest rates and lower grain prices to tune us all in. Oh ya, even the weather ruins your best laid plans.

[dave4441]

Want to experience a market with limited public speculation?? Try trading lentils or canaryseed right now. It's not pretty.

[hedgehog]

many farmers who pulled the trigger last year are now having to write big cheques for the grain they dont have, the system sucks

[charliep]

Production is a risk in forward contracting.

The strategies here are to make sure you keep your contracted portion to a reasonable and realistic portion of your expected production.

Other tools that are in Alberta at least is that there is an ability to have crop insurance coverage levels increase to reflect prices at harvest time (variable price benefit) to protect against crop failure/buying a contract. There should be more creativity in crop insurance tools to allow this.

There are also weather based insurance products.

Some contracts have act of God clauses (a production disaster makes the contract null and void).

A final one is to use option strategies or other tools to protect against big rallies in a crop failure.

[errolanderson]

Investor attitudes have noticibly changed over the past few weeks from greed to fear (IMO).

U.S. GDP was recently estimated at 2% in the last quarter, up from 1.3% in the 2nd quarter. In my view, what a joke. Take out the hike in defense spending and the American economy is clearly recessionary. Now stir in Frankenstorm's impact which economists now suggest will cost the U.S. another 0.2% in GDP.

Maybe the Dow will put on a pretend smile tomorrow. But to me, there are serious market consequences ahead. Serious risks to commodity markets in general.

Risk management is prudent like Charlie is indicating.

[wd9]

Risk management? Risk against the exchange
is still the biggest farm risk. We are
using the riskiest problem to manage risk?
Seems quite cyclical.

Is there any other way to achieve price
discovery?

[riders2010]

YES all farmers stop competing against each other which in reality makes us all weaker and easy for those that NEED our product to manipulate.

Lock the bins and wait. Don't sign any price contracts without act of God. If no one offerred grain for a month it would change in our favor.

[charliep]

Perhaps the comment on futures markets are like that for democracy - a flawed system but better than anything else that is being offered.

I would highlight that ICE Canada canola futures contract is extremely effective - particularly this year.
The cash market is also offering good prices using basis as a guide. January futures yesterday - $620/tonne. Average cash price across Alberta (ACPC website) - $614 to $619/tonne. Futures quotes are slow this AM but soybean oil futures around 52 cents/lb.

[agstar77]

Premium back in for HRS, just after we are told nobody will pay extra for high protein. Apparently Japan and China will. I wonder who sold China HRS from Canada?

[wd9]

Charliep, how does safeway determine the
price of bread? Is it based on a bushel of
wheat? Definitely not.

One of the biggest challenges for farmers
is we are taking retail products and
creating a wholesale commodity. Seem
backwards to anyone else?

[bucket]

agstar77

Judging by the cwb PRO, I would assume the mental giants in winnipeg sold to Japan and china. History indicates they blow grain out at bargain basement prices.

And they might be buying wheat at 28 bucks a bushel again.