Canola delivery contracts

[ALLFARMER]

One June 13 I could have locked in some sept delivery canola at $7.22/bu Today sept delivery is at $6.95/bu With that difference being 4% I am still happy I never locked in delivery. This is because a neighbour sent a crusher a chq for $30,000.00 last year after his crop froze. Which if any canola buyers let you lock in a price with an act of god clause included?

[TOM4CWB]

Allfarmer;

Buying Call options can mitigate the risk if the price rises and you have no canola to fill a priced contract.

There are some specialty Canola contracts that have production contracts, for instance the CanAmera HEAR contract that pays a constant price, no matter if it yeilds 10bu/ac or 30bu/ac, and there was an opportunity to lock in $10/bu on this contract, or go a basis above the futures.

CanAmera has been very good to deal with, as has Agpro, but a honest personal relationship and good record of fulfilling priced contracts is important in basis contract negotiations on the "Act of God" shortage situations.

Cargill has been good to us, but their contracts are less flexible in manycases.

Pioneer has served us well in the past, so it depends who you want to deal with, and who you trust.

I am not aware of Agricore United's present Canola policies, but suspect they are flexible to some extent, they let us out of a wheat contract in 2003 at no cost on the basis as well.

Being "fair" is what this is all about, and reputation is key for these buyers, I have found they want to be fair, if the farmer is honest and fair with them, IMHO.

[charliep]

A couple of other comments.

1)Everyone is different but it is one of the reasons for recommending to lock in crop in stages. With most farmers, I won't recommend going over half a comfortable low end yield scenario you use in your budgeting process. This one isn't chipped in stone and depends on willingness/knowledge of contracting alternatives that Tom talks about.

2) It is one of the areas where the variable price benefit really works well with crop insurance. If you can show reasonable cost coverage on DDC contracts, I would look at spending some extra money on crop insurance coverage (move from 70 to 80 %). In this case, crop insurance covers your loss both from the idea of yield loss and potentially higher prices.

3) The open/honest relationship with a grain company is critical. When you are in a disaster situation, let your farm representative know right away. They can work with you to pull the hedge off at the best time or may even consider rolling to new crop.

4) Something that has come up in previous recommendations on crop insurance is a program that would allow a farmer to set coverage price based on forward contracted prices (i.e. $10/bu mentioned in tom4cwb note - you would provide notice/documentation prior to some date in the spring and this would be your insured price). It has never been acted on but I know is still under consideration.

[ALLFARMER]

Thanks guys!