USDA Report

[charliep]

Just a note that today is a USDA report release. Slashed away at US soybean production with prices responding accordingly. US corn production up a bit from expectations with the grain markets taking bit of a dive.

Thoughts/strategies coming from today's information?

[timm]

local canola basis 46$,i have 1200 mt on farm ,any srategies .i keep looking at monthly soyoil chart and with latest usda soy prod #s one has to be a little bullish dont they???

[rain]

timm I am not expecting much for cash basis this coming year. with 1200mt of canola on farm you are going to want to take any good basis as it comes up. -$7.00 delivered is avialable down here for May delivery

[melvill]

timm, your basis is pretty bad but it's hard to tell what it might improve to without knowing roughly where you are located.

You may notice an improvement in basis after yesterdays (Sept 11) USDA report - very bullish soybeans.

[charliep]

From a $46/t basis, I assume you are in Manitoba.

The USDA report was optimistic to say the least. You are right on soybean oil increases as well. Canola will be looking like a good deal in here so likely room for improvement in futures. Is Nov. in the $360 to $370/t realistic? Maybe. What is needed to tighten up basis is to put some more export business on the books.

Strategies? I'll put my two bits in and look for comments. This price rally is occurring just as South American farmers are making seeding decisions. Unless mother nature steps in, soybean crops in Brazil and Argentina will continue to grow in size. With 7 MMT of canola to sell (6 MMT Production plus 900,000 t carryin), we (the canola industry) has a challenge to re-build demand.

1) Have a price target and sell futures in further out months (Jan. and Mar. under assumption these contracts continue to pay carry and basis levels will narrow by then) when achieved. This assumes you can take care of cash flow needs with other crops.

2) I looked at the strategy of buying puts on the way up but they seem expensive to me - look for others comments.

3) A strategy that may have some merit (tom4cwb will highlight the risk side) is looking at selling calls on the way up. Example - January 380 are bid $7.80/t as I write. You have the premium. If canola continues to rally and it hits $380, you would likely be short the market at this point. My assumption in this is that $380 futures (minus hopefully a better basis) is a target price you are willing to live with.

4) there are liley some CBT soybean oil strategies but I will leave this for the fun of discussion.

[timm]

thanks for the great input,more farmers should be doing this.380 is an excellent target and 7 under may is certainly acceptable(8.46/bu.),but where would that be .i am in se sask.