Is the 'trend' your friend?

[TOM4CWB]

Morning Charlie,

Since Canola is going down as fast as it is being harvested right now.... and good weather is forecast ... would it not be prudent to short the 2015 Nov to lock in a decent price for 2015?

Cheers!

[charliep]

As a part of a farmers risk management strategy based on their farms business needs, it is likely a good time for farmers to at least consider it. I note you are talking about shorting the futurues market (hedging). That means you have the ability to lift the hedge during the winter if conditions warrant.

My caveat is the decision isn't so much of a market forecasting exercise but rather determining a price you can live with and locking it in. To my definition of risk management, you are protecting against lower prices but you have also given up the right to participate in higher prices.

[Grahamp]

In theory I agree but I think we are late to enter. When the market broke through 470 or even earlier was the place to join the trend. I worry about joining a trend 6 months and 15% value move in. I like Tom Demark's (market analyst) response to the above mentioned cliche, "the trend is your friend unless it is about to end." Having said all of this I certainly wouldn't be a buyer while this slide is going on.