Buyers going off July canola futures instead of May

[Oilking]

Farming101, so what is the point then of Ice futures posting the May contract if farmers cannot price based off of it. It's completely useless and irrelevant then. We shouldn't have to look at it then

[farmaholic]

101, to me its a deferred delivery contract. No matter how you price, someone in the line up could have gotten a better price after you priced yours, or a poorer price.

I know what I'm getting when I signed the DDC and that is good enough for me.

To me, signing basis or futures first has only transferred all, or the rest of the risk to you. Marriage can be an ugly arrangement.

It is obvious you have a way better handle on the tools in the tool box than I, so maybe my response should be, I dusn't know!

[farming101]

Some who have an open position may want to take or make delivery against the contract because it would mean a profit for them. Every one else has retired or rolled their positions.

Delivery assignments for futures positions can begin once you enter the delivery month for a given contract. Typically, the oldest outstanding position is selected to match the delivery request.

[URL="http://futures.tradingcharts.com/tafm/tafm10.html"]http://futures.tradingcharts.com/tafm/tafm10.html[/URL]
[URL="http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/sis10948"]http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/sis10948[/URL]

[farming101]

I mentioned a bit ago that we did a zero basis contract on April 17 for July delivery. This stuff has got to be gone so we're okay with locking it in.
Since then the basis widened out $10. So we don't have to worry about that.

Beware if the price skyrockets the basis will take away some of that price appreciation
I've seen it too many times.

[bucket]

Until you have an active spot delivery market working ....no one knows if you are getting fair value for the deferred or basis contracts IMHO.....some may disagree but for an open market to work you need to know if it pays to have bins....once again IMHO. ..

I like spot delivery ....the extra expense of options and waiting to know if you will deliver in the contract period isn't worth the headache.

I know guys that had January wheat contracts that were not delivered to pay his bills ....not a fun feeling for him and sfa he could do about it.

[errolanderson]

Grain companies always roll their contracts out of the nearby month well ahead. Liquidity of the near term declines and doesn't fairly reflect the true cash price. This goes for all commodities. A squeeze in the nearby is caused by a drop in open interest causing a price distortion. Grain companies roll forward to avoid this distortion which could be either sharply up or sharply down.

May not have explained this without confusing some, but standard business procedure. Hope this helps.

[farmaholic]

"Beware if the price skyrockets the basis will take away some of that price appreciation
I've seen it too many times."

Couldn't agree more--it is definitely a possibility.

But is it any different than the contracting company not being as aggressive with bidding on canola knowing "X" number of tonnes are going to come up the driveway regardless? In my simple mind probably not but if everyone signed basis or futures first would there be a need for a futures market. They know it's coming...sit back and wait. In my opinion we are using their tools to market our canola, if they are used---at that point do they assume any risk anymore?

[willy16]

I have got to the point where the only basis I will sign is zero or positive; so you can imagine how many that is. I would rather take the price and know what I have than put control back in to the hands of the merchant. There is no loyalty, you have to be as ruthless as they and keep the money in your pocket. Speaking of special basis prices, that is also assuming you are either on their call list or at the elevator that day to find out.

[blackpowder]

What's a lineup?

[farming101]

The idea that somehow farmers are in control of pricing if they hold back from selling has been kicked around forever. I don't subscribe to it.
It's suggested that last year 18.424 million tonnes of canola was produced in Canada. That's 812,359,483 bushels. I would think that every one of those bushels was grown by a farmer who would like to turn it into money this year. So every week on average 15,622,298 bushels are going to come up the elevator driveways. There is absolutely no where else it is going to go. When this is realized it becomes a lot easier to see that it is best to figure out how to keep the grain flowing off the farm and bringing in the cash to finance next year and hopefully provide for a few of the finer things in life. To me that's what it is all about.