It's Time for a 'Rally' Call

[errolanderson]

This may be a much different grain
marketing year ahead (IMO). The collapse
of corn and now canola prices has
shifted cash prices trading ranges into
a much lower gear. Now your marketing
skills are needed in an attempt to
recoup market losses over the next crop
year.

For growers having protected prices via
cash contracts and put options, these
have turned golden. But now, these
waters have passed under the market
bridge. For growers needing cashflow or
bin space off combine, there are still
strategies to move the physical and
replace with paper. Congestion may
(will) be a problem this fall. In my
opinion, try to separate your delivery
and pricing decision. Move your lowest
quality first, if possible. Easier said
than done.

But to enhance your prices may take the
use of a commodity trading account. It's
just another tool in your marketing
toolbox. There are times when cash
contracts are the best route . . . there
are times when a commodity trading acct
is your best route. Both are needed
(IMO)in a successful farm market plan.

Remember, marketing never ends, even
after the grain leaves the bin. If cash
prices are disappointing (futures weak
and basis levels weak)it's time to put
market skills to use. This will be a
year of that test . . . .

[blackpowder]

OK, here's one.
moving all wheat in Nov off pile as no bins.
have basis contracts.
roll and price on rallys? calls?
basis contracts usually get neglected, just ask me.

[jdepape]

I'll add to this, Errol.

It is very beneficial to separate futures and basis
decisions (on crops with futures). Futures and
basis reflect two different markets, and are driven
by different factors.

If you have to move grain off the combine, best to
have forward sales to cover what you need to
move. If you haven't done that, move those grains
that you can't earn storage on and store those
that you can earn storage on. Then take the right
steps to actually earn storage.

Not keen on the idea of selling off the combine
and "replacing" with paper. Harvest is typically
the worst period for basis and, when basis is
weak, spreads are too. We have a saying
"markets don't earn their carry" - means that, if
nothing changes, the deferred months tend to
erode down to the nearby values. Getting long
futures in a carry market means this is working
against you.

Weak basis and a carry in spreads (like we have
right now in both wheat and canola) means the
market is poised to reward you for storing. But
you have to know how to exploit it. (last year we
picked up about 80 cents/bu in "storage
premiums" (carrying charges and basis
appreciation) on spring wheat.

If interested, I can show how -
john@depape.ca