Market Analysis and Strategies

[TechAnalyst]

I know there's a world of hurt out there right now and I don't mean to be insensitive (it's impacting me too) but if there was ever a time to ask the question this is it - is there no interest in or need for helpful market analysis and strategies?

Is the information overload and lack of respect for anyone trying to help forecast price movements so extreme that no one cares anymore?

Or are there enough good quality options out there to satisfy those that are interested?

Given the volatility in weather and commodity markets that will only intensify over time I would think it would be the opposite but curious what others think.

I'm sure this will unleash quite a bit of anger but it would be interesting to see some constructive thoughts on the matter as well.

[sumdumguy]

“Predicting”, why don’t you call it guessing. The supply side clings to life by a thread.

#1 this crop in the next week can turn total flop to average in a few areas. If the smoke moves in, if the showers materialize, if the forecasted heat doesn’t prove out, if..if..if and you want price predictions. The flax we saw yesterday may yield 3 bushel an acre and that’s a 6 inch rain gumbo field. Canola looks yellow but its the little black seeds in the grain tank that count.

Lentils 8 inches high, still blooming and needing rain desperately to fill.

Its pretty hard to worry about selling this crop when we look at the darn forecast.

[jazz]

TA, of course there is a need for this type of information, but the problem is the manipulation and lack of transparency in our markets and economy in general. What tools do we have to cut through that.

If we just take commodities, how much of any price movement is attributed to real supply and demand and how much to speculation?

Same for the stock market, with the CBs in there buying bonds and MBS and ejecting stimulus out the other door, we have no idea whats real anymore.

Not saying we dont need to stay on top of it, but making production and financial decisions is becoming harder in the face of that.

edit in; Take 2020 for example, the amount of money left on the table by farmers who missed the rally because of poor market advice has to be staggering. Now there will be another rally and farmers will either not have the production or they will have to dump it to cover off bad forward contracts.

A staggering lost opportunity in canadian Ag this past yr. Has to be in the billions.

[blackpowder]

Market analysis and strategies always a good idea. Overload a problem. Also, greying the hedging/spec line.
Clients need to have same mindset.
Insight on what is happening the info we're looking for. Most have evolved beyond seriously asking what's going to happen.

[dmlfarmer]

Market analysis and opinions are only as good as the information on which that analysis is based on. And the quality of that information is really questionable. On the demand side, there is poor access of information on sales and pricing by traders and line companies. There is next to nothing available about future sales and pricing. So half of the equation is missing to start with. On the supply side, information is much more available but how accurate is it? Farmers take pride in lying to stats Canada on crop intention surveys. Big data collects production data continually at harvest, but how many of combine monitors have been accurately set by the operator? Crop insurance harvest reporting should provide reliable information, but who has access to it other than government and not all farmers participate in it. And Canada does not have a crop tour to actually put boots on the ground to get an accurate yield estimate as in the US.


Furthermore, the main users of market analysis are not farmers, but traders and especially speculators who have the financial resources to afford multiple sources of information and use this information for speculative gains and their own profits. Farmers will always be price takers, we will never have the market power to set the price. Yes, we may be able to capture price rises or minimize losses but those prices are at the whim of the buyer and we have no control over those. We will never see real demand/supply pricing when the speculator dollars in the market exceed those of producers and even buyers.

Complicating matters is the the fact there is the lack of real competition in the market. Oh, lots of competition on the supply side as farmers compete against one another for limited elevator space, train space etc but in truth there are few buyers and if not formal collusion, there is a friendship that maintains the power of the buyer over sellers.

[dmlfarmer]

Market analysts are great for providing market direction but will never be accurate enough to provide fixed pricing for Canadian farmers especially given climatic variability. Instead, know your costs and the price you need t be profitable at sell based on that not markets. Know your risk tolerance and insure production for those risks to cover costs. Chasing projected prices by selling what you hope to get rather than what you have may sometimes make money but as guys are finding out this year may cost the farm. Finally, if you want to chase the highest price, use the financial tools we have available before or after actual sale of production to set or speculate on price rather than contracts. Futures/options are where good market analytics are a benefit.

[Rareearth]

Yes there is a need for insightful and relevant information.

With global commodity supply and distribution in place, demand is relatively steady (seems to grow with population more than anything) and impacted by pricing and substitution opportunities. Insight as too the production prospects in competing export growing regions, this should be updated weekly or monthly. Fyi, if the big boys USDA have way over estimated this years canola production, if they cant get it right - or close who can, or will? Importers, grain traders brokers are all aware of those risks and opportunities,

Pricing is impacted by everything, currency, political food policy, religious tensions, price of oil- corn-soy, election timing, interest rates, news letters must incorporate all dynamics of influence. Would the newsletter pick and quote from other information sources, or would there be factual, editorial opinion?

Is there a news letter that talks about actual speculation and hedging strategies, with clear examples of dollars at risk and target pice exit objectives for a Canadian farmer? Every American farmer seems to use futures extensively.

This is why i like agriville

[blackpowder]

I for one will continue to make forward sales.
But I may likely look at the hedging equation a little differently. Once over say a 20% level, call premiums or spreads factored in as insurance on all bu after that.

[sumdumguy]

I would be more interested in a futures trading class. We have people right here on Agriville who could teach that couse but how can we engineer it?

[blackpowder]

Been to several over the decades.
I just lack the discipline to actively manage my account. Don't do it often enough either. I've found people who kind of do it for me.
Occasionally topping up the account requires a new mindset LoL.

If one never hedges or forward sells.
Cash sale of physical only after in bin. I wonder what the difference would be over a career??? One would have to factor the TVM on the inventory. Excluding bags, I'll not count bin costs as over time they pay.
I'm curious, any thoughts?

It makes a difference of course how many years in 20 you get an "average" crop. Here its ~18.
As well, some are in a poor movement or a higher grade risk area.

But still interested in opinions.
I'm thinking most on here are more sophisticated than they let on.

[Guest]

I would be more interested in a futures trading class. We have people right here on Agriville who could teach that couse but how can we engineer it?

And some of us (me) might never learn

[ajl]

Noted that Nov canola at a premium to deferred. Farmer buyouts likely concentrated in Nov. May indicate demand destruction. If interest rates rise china and others can no longer borrow to eat. Finally got some showers last night. Not much but will help the canola hang on for a bit longer.

[BreadWinner]

Options are very expensive to buy and most expire worthless. I have bought call options and put options but at the end of the day they averaged out and the broker makes the money. Probably a guy should be buying put options with these crazy prices but would probably cost well over a dollar a bushel and who can afford that gamble. But if you wanted to protect yourself when contracting grain you should be buying call options to protect yourself if you don’t get a crop and prices rally. It would offset the buyout. But then again you would be spending money and defeats the purpose of the contract.

[blackpowder]

I guess a call spread cheaper than buying back?? Cheaper than straight call.
Just an added mindset if going to stick your neck out too far.

[errolanderson]

I guess a call spread cheaper than buying back?? Cheaper than straight call.
Just an added mindset if going to stick your neck out too far.

Rallies won’t hold (IMO). Consider put options on these massive price gains. World financial markets are-a-changing . . . . Realize this is a contrarian view.