Durum and canola contracting.

[errolanderson]

An inverted market is a SELL signal to the grower. The demand is on the front end of the crop year. These are amazing cash prices. Any drop in demand and bids can drop sharply into the new year.

Flax is case in point; the U.S. is our key buyer. Flax bids are astronomical $40 to $45 per bu heard. But once U.S. demand is covered, our prices will have to compete with sharply lower Black Sea values. Bids will tumble even with tight supplies as buyer demand fades. Canary seed bids have already backed sharply.

Remember, demand is king, not supply.

Realize that to some agrivillers that suggesting to sell the cash is not being a friend to the farmer. But if you continue to store unpriced, what are your price objectives? You should have targets with your buyers. You are also at-risk of a last half crop year market selldown should southern hemisphere proceed normally. These are amazing cash prices are exceptional, not the norm.

Should problems develop in South America, the spring market will remain strong, but will cash prices be higher than today? And if normal is the word, spring prices will be lower across the board (IMO).

Is storage worth the risk? That’s a decision for every grower.

[TOM4CWB]

[QUOTE=errolanderson;516902]An inverted market is a SELL signal to the grower.

...Remember, demand is king, not supply.

... That’s a decision for every grower.

Dear Errol,

Please include in your equations... that the vast majority of 'Growers' here on Agriville...

ARE VERY MUCH MORE THAN "GROWERS".

i AM NOT TRYING TO BE ARROGANT.

When we just got our asses handed on to us, 3/4 of our 'production' we 'grew' was used to fill much lower contracted prices... that looked great when we contracted them...

When I as a FARMER look at the drought map of western Canada... it gives me shivers up my spine.

We sold virtually nothing this fall that was not pre-contracted... with little left over for sales for the rest of the 21-22 marketing year... the 'inverse' discounting of our grain stocks from the 2021 growing season is less than helpful to our end use customers who need supplies 12 months of the year.

we FARMERS HOLD and own $$$M of capital assets... to grow food that is worth 10-20x less than the assets we must work with to produce that food.

This is a very uncomfortable position to be in. While there are certain realities that you bring to our attention, [thanks for that in advance] 2022 and forward will be killer times for many farmers... we can't afford to repeat 2021 marketing decisions... the supply chain will run out of food... if we do not get this 'right' .

Our farms are being attacked by everyone everywhere... Climate Change, Pollution environmentalists, Anti-GMO activists, massive input increases that we have no choice but to swallow, and government who thinks farmers are the geese that lay the golden eggs, that look greedy and whine about absolutely everything.

Go easy Errol, we 'growers' are on a steep learning curve... the school of 2021 had many expensive 'hard knocks'... the Futures markets were so volatile that losses of $10,000/day on small hedges were the rule and not the exception.

Hence the 'Sell cash once it is in the bin' it costs the least and creates the least grey hairs... perhaps!

Faith in the future of our political leaders and economic fantasy central banks... adds to the difficult times many many farmers face in 2022.

Thanks for your many interesting observations... they are appreciated Dear Sir... we live in interesting volatile times... and must manage our risk accordingly!!!

Cheers

[sumdumguy]

I thought you Tom would be in a position where you don’t have to pre-sell anything? Geez, we learned our lesson long ago from the special crops market (our friends thought the lentils were “good as in the bin” but not so). History repeats. Marketing is kinda like surfing. Get ready for the big wave.

[errolanderson]

Errol, you tend to sell fear in most of your posts, is there another side to you?

I sell ‘risk management’ in my posts.

Today’s economics follow no rules given immense market manipulation that is now losing-its-grip. And now the mad scramble by central bankers to hold this financial deck-of-cards together with little options left.

Stock markets are hitting daily record highs on central banks fueling investor greed, not true valuations.

Global commodity prices are already starting to come down. Yes, we are see inflation, but there is now incoming deflation creeping into cracks of market demand.

The foundation of inflation is; supply chain disruptions. The foundation of deflation is; weakening buyer demand.

If calling a spade-a-spade is considered fear mongling by some, then so be it. It’s up to every producer to make that management decision.

[TOM4CWB]

It is ignorant and frightening how crazy looking after a futures account on an only 10% hedge risk management program. And in 2021, it only cost money.

Few farms can cash flow the minimum $400/ac/yr needed to pay to grow a crop... depending on how productive your land is [more cost for better land- less for poorer land].

What will that number be in 2022? $500-600?

Our risks are increasing exponentially... just as the money supply increases... like the Tesla Central Bank money supply charts showed.

How far can this deflate and not cause massive societal breakdown and chaos?

Japan has been on track for close to 20 years on this 'inflate yourself out of your problem' solution... which printing money by central banks globally have chosen to follow.

$20 Canola, $10 wheat, when the money supply has increased by 100%... land has increased by 100% [good corn/bean land in Iowa is $24,000/ac!!]... we had better adjust our mentality... this economy will not survive going back to 2016 prices... the new 'green revolution' assures that.

Better to understand the risks we now face, not just look in the rear view mirror!!!

Cheers

[TOM4CWB]

I thought you Tom would be in a position where you don’t have to pre-sell anything? Geez, we learned our lesson long ago from the special crops market (our friends thought the lentils were “good as in the bin” but not so). History repeats. Marketing is kinda like surfing. Get ready for the big wave.

SUMDUMGUY,

Good analogy... 'the big wave'...

Stormy weather, must be out surfing to catch that big wave... few of us have the cash flow to cash sell in the spring of the year, our grain production. 15-20% of grain sales minimum are at minimum expected to pay bills and living expenses. This year 20% is now 70% sold [short production] for many grain farmers livestock folks have had many costs go up exponentially as well...livestock income flat.

Good for you if you have no loans, not many here are in that position [certainly not my family]!

I think I noted some 'tongue in cheek' attitude, so sorry if I took the bait with a Rant! Grin

Cheers

[jazz]

errol, Biden just signed a couple more trillion of stimulus. Are you sure you think this is the end of the line?

I think some farmers want to make the market pay up for all the times we got screwed. Fair enough, but if you are sitting on a lotto ticket its getting close to cashing in your chips here. I wouldnt be be playing it too pretty these days. Take the win, move on, shore up your balance sheet because you may need that edge if crop prices come down and inputs stay sticky for a year or two.

Was chatting about inputs with the neighbor this am. Out of the blue he mentioned summerfallow for some reason. Had a great crop but sees the squeeze already happening and risk increasing exponentially. We have all pre bought inputs but what will the crop be and prices for it in 10 months. Huge unknown.

[TechAnalyst]

An inverted market is a SELL signal to the grower. The demand is on the front end of the crop year.

I completely disagree with how you are presenting this Errol.

Yes, the goal of an inverted market is to have you sell right away rather than incur the cost of storage then receive a lower price later on.

But it is in no way a sell signal suggesting the price will in fact be lower in the future. This past 14 months have been a perfect example with inverted markets throughout. Unless the supply/demand imbalance is resolved, the inverse simply moves forward into the spot month as delivery months pass.

In fact, one of the most important and easiest to track BUY signals of a producers career is the moment a market first goes inverted. It is the first sign that demand is outstripping supply by a significant amount. Some of the strongest rallies follow.

At this point, a warning sign to watch for would be a narrowing of the inverse suggesting the S/D imbalance is slowly resolving.

One last point, it should be watched within crop years more than old vs new. All the old vs new inverse suggests is that the trade is optimistic the new crop will be sufficient to look after the situation. And to make sure you don't carry old crop into new. I don't believe for a second it is a sell signal for new crop pricing.

I hope this helps anyone trying to make the difficult decisions regarding marketing.

[errolanderson]

I completely disagree with how you are presenting this Errol.

Yes, the goal of an inverted market is to have you sell right away rather than incur the cost of storage then receive a lower price later on.

But it is in no way a sell signal suggesting the price will in fact be lower in the future. This past 14 months have been a perfect example with inverted markets throughout. Unless the supply/demand imbalance is resolved, the inverse simply moves forward into the spot month as delivery months pass.

In fact, one of the most important and easiest to track BUY signals of a producers career is the moment a market first goes inverted. It is the first sign that demand is outstripping supply by a significant amount. Some of the strongest rallies follow.

At this point, a warning sign to watch for would be a narrowing of the inverse suggesting the S/D imbalance is slowly resolving.

One last point, it should be watched within crop years more than old vs new. All the old vs new inverse suggests is that the trade is optimistic the new crop will be sufficient to look after the situation. And to make sure you don't carry old crop into new. I don't believe for a second it is a sell signal for new crop pricing.

I hope this helps anyone trying to make the difficult decisions regarding marketing.

Tech, there was no mention of new crop. Sell sign for old crop (IMO). Agree, there is no sell signal for new.

[furrowtickler]

Errol and Tech , thanks for your respectful posts , you both bring insight that’s appreciated 👍