New Crop Risk Management

[errolanderson]

An opinion . . . but there appears to be
some excellent wheat cash contracts out
there for fall 2013 movement. Milling
wheat contracts heard around $8.50/bu,
feed wheat DDCs hovering around $8/bu.

New crop canola charts now show a series
of falling tops. 1 Can bids have now
slipped below $12/bu delivered for next
fall.

For growers not wanting to commit to
physical delivery, Dec '13 corn put
options may act as a general grain
market hedge. If corn goes down, all
grain markets will go down. Example, Dec
'13 corn puts are trading between 11 to
12 cents/bu and you can hold for an
entire year. A Dec '13 corn $6 / $5 put
option bear spread may trade for 33
cents/bu.

Note: If U.S. yields normalize next
year, new crop corn prices may have
significant downside. Time will tell.

Errol

[bucket]

Good luck to the canola industry if they drop the price to under 12 bucks for new crop, going into march 2013.

Canola acres will be shitcanned pretty quick.

They can go buy soybeans and pay the trucking, basically pay for tires and fuel instead of product.


These risk strategies on a 1000 tonne contract, what is the cost and potential profit on it?

Let's see the numbers.

[GreenValley]

In 2013, there will increase by .6 billion gallon ethanol and 28% increase biodiesel in 2013 of which soybean will use. So demand will be increase in 2013.


Here is quick inf from news.

EPA refuses to waive ethanol mandate

EPA is requiring 13.2 billion gallons of ethanol to be blended into gasoline in 2012, rising to 13.8 billion next year.

EPA Approves 28% Increase in Biodiesel Mandated for 2013

The renewable energy industry is applauding President Obama and the U.S. Environmental Protection Agency after the EPA approved a 28% increase in the amount of biodiesel mandated for use in trucks on the nation's highways for 2013. Biodiesel is made in a process that uses soybeans, while the production of ethanol is based on corn.

[errolanderson]

Key question affecting ethanol and corn prices may be; where will crude oil prices be in 2013?

1. Will they stay balanced between $85 to $90 per barrel and Alberta's budget will stay awash in the red ink?

2. Will they surge into $105 to $110 per barrel and Alberta has a hope of balancing their books? Believe Edmonton crude is now being discounted about $3 per barrel below West Texas Intermediate (WTI).

3. Will they break below $80 per barrel and Alberta's and Canada's economy will sink like the Titanic. Note: Canadian 3rd quarter GDP was a disappointing 0.6% released Friday morning.

Believe that ethanol and corn will adjust to the realities of crude, no matter what the mandate.

[ajl]

Another factor will be the US and Canada
in recession in 2013 which will cut the
demand for motor fuel regardless of
mandates.