new crop canola

[dfarms11]

anyone here price any yet? dec is at $8.05 at the bin yesterday. Should a guy price some at that?

[charliep]

Your comments on Alberta SPE barley and for that matter canola are accurate. Not necessarily worthwhile today (keeping in mind there is still 1 1/2 months to make a decision). Wheat (crop insurance price under the revenue insurance level) and some of the smaller crops that have less developed price risk management tools should be looked at over this same period.

Keep in mind there is also a plus in Alberta on the variable price benefit. Your crop insurance premiums are based on these lower prices. If prices increase by over 10 % this next fall, then your coverage on claims will also increase. Everyone will have a different set of management/risk factors but my thoughts in general would be to keep crop insurance coverage levels up versus spending money on SPE. Again, everyone has to the end of April to make a decision.

There is also a tie in between crop insurance/CAISP but there are so many uncertainties right now (only 3 provinces have signed on for negative margins) that I have been holding off making comments. Again, stay tuned.

[rain]

That not a bad bid. What area are you in?

[rodb]

We sold some at 8.03 on Friday. It is a start and one shouldn't get to carried away yet but if it is the lowest price I sell at I maybe able to buy a newer pickup truck.

You have to figure out your costs and decide if you can live with that price. Historically this is a very good price level. The kicker is the basis level that companies are charging right now. If you don't like the basis level you can go to the market and hedge it and wait for basis level to become more acceptable.

[frustrated1]

In the past we've always felt quite comfortable in pricing a few loads for fall at or around $8 to make sure we've got some cash flow. After our drought in 02 I've been leary as we had to buy out the contract, otherwise would have priced some. The memory of signing that cheque when we had NO crop is still a little too vivid.

[charliep]

Didn't mean to post the crop insurance comment in two places (don't know how it happened) but your comment about a drought year can be offset with using the variable price benefit (standard feature crop insurance in Alberta). If you want to be low cost, use the 60 % coverage level. If prices increase by more than 10 %, then coverage increase by the whole amount. Eg. Canola crop insurance price coverage is at $7/bu. You lock in a deferred delivery contract at $8/bu. Anything over $7.70/bu (November futures in October minus a $15/t basis) means your coverage is increased. If prices are below $7.70/bu, I am quite sure the grain company/crusher will be willing to walk away from the deal (money in their pocket). Another idea would be to get a neighbor to deliver and the two of you split the difference. Based on what we know today about new crop basis levels, $15/tonne Alberta average may be narrower than next fall as well.

Owning some out of the money Nov. canola calls can also provide some protection if this is a concern.

[craig]

I have price some canola at around $8.00 both at elevator and some through futures. I have noticed that our local elevator has gone from about a $18.00 basis and is now up to around $24.00. I would suggest that if we get 14 million acres of canola as many are suggesting, that basis might look pretty good come fall. Market new crop seems to have stalled at these price levels and no doubt if soybeans crash canola will likely follow. I appreciate the problem with hedging in dryer regions and also the problems with locking in when the markets are so strong. Nice problem when the decision is to try and guarantee good money verses waiting for even bigger opportunities. $8.00 works for me.