Durum and canola contracting.

[newguy]

Noticed that the month that is further away usually the contract prices move up in price.This year they either stay the same or drop.Does this mean companies want it all now ? If so I would think not a lot of risk in not being in holding out for a couple months till the first surge of contracts get out of the way and companies have to move up prices to get more grain from the bins.

[Guest]

market was inverted all last year also

[GDR]

Feed grains also. I would actually prefer a world where spot price is decent and they will take delivery, which is basically where we are at. However, being as it is not the norm I'm not real sure how to market. I suspect that they are hoping to buy marketshare now, not sure that helps the buyers later on but think it is a bit of situation of trying to panic guys into selling. Who in their right mind would forward contract grain in the bin for less money? If no supply offered why isnt that bringing forward months up?

[Old Cowzilla]

At this stage next years crop has not been made or lost so buyers already are starting to price for a normal crop. The only thing holding guys back from selling now ( who had a crop ) is the thoughts of holding a $30 canola ticket.

[newguy]

market was inverted all last year also

Durum market last year for what I remember thet always paid a bit for the longer you wanted to store it.

[AlbertaFarmer5]

Feed grains also. I would actually prefer a world where spot price is decent and they will take delivery, which is basically where we are at. However, being as it is not the norm I'm not real sure how to market. I suspect that they are hoping to buy marketshare now, not sure that helps the buyers later on but think it is a bit of situation of trying to panic guys into selling. Who in their right mind would forward contract grain in the bin for less money? If no supply offered why isnt that bringing forward months up?

It seems to me that they are backing themselves into a corner. With the backwardation in most of the grain markets, none will be contracted for future months within the current crop year. Nothing is going to change on the supply side before new crop.

So everything will be delivered as soon as possible, then when late winter and spring into summer roll around, there will be nothing on the books, and very little supply left. This might work for feed grains that can be replaced with corn, but good luck sourcing the crops that are grown almost exclusively in western Canada.

[Sodbuster]

If your not in need of cash flow you could sell your canola now under Nov futures and roll your contract just before it expires to the next month or when inverse is high and keep rolling. If you had done it last year, there were months that had $$150+ inverse between months. If done right last year you could of achieved close to a extra $400 a tonne assuming you still had not sold or if braver do it all on paper. Disclosure, past performance is not indicative of future performance , trade at your own risk.

[GDR]

It seems to me that they are backing themselves into a corner. With the backwardation in most of the grain markets, none will be contracted for future months within the current crop year. Nothing is going to change on the supply side before new crop.

So everything will be delivered as soon as possible, then when late winter and spring into summer roll around, there will be nothing on the books, and very little supply left. This might work for feed grains that can be replaced with corn, but good luck sourcing the crops that are grown almost exclusively in western Canada.

I agree but that could still go 2 ways. Either they pony up and pay more and holding crop works or they cancel trains and boats and shut down crushing capacity and then holding crop loses you money.

[Agvocate]

If your not in need of cash flow you could sell your canola now under Nov futures and roll your contract just before it expires to the next month or when inverse is high and keep rolling. If you had done it last year, there were months that had $$150+ inverse between months. If done right last year you could of achieved close to a extra $400 a tonne assuming you still had not sold or if braver do it all on paper. Disclosure, past performance is not indicative of future performance , trade at your own risk.

That works as long as you don't contract with Richardson Pioneer, they wont pay the inverse, they pocket the inverse themselves.

[Bushpusher]

That works as long as you don't contract with Richardson Pioneer, they wont pay the inverse, they pocket the inverse themselves.

I rarely deal with them anymore after figuring how much they pad their pockets. After 5 years of dockage discussions and being told “you must’ve hauled a bin bottom” when I didn’t. Always lower protein there too. Take a sample in harvest and they’re not bad but start hauling and somehow the grain lost protein in the bin lol.

[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