Canola

[farming101]

No shortage of commercial stocks at the moment. The amounts in the chart do not include what is on the lakes and on rail. Maybe another 100-110 thousand for week 18 give or take

[errolanderson]

No shortage of commercial stocks at the moment. The amounts in the chart do not include what is on the lakes and on rail. Maybe another 100-110 thousand for week 18 give or take
[ATTACH]9337[/ATTACH]

Soyoil futures have collapsed nearly 15% from recent highs. This is also bothering canola. Crude oil weakness and EPA changes on bio-diesel mandate now pressuring global veg oil markets . . . .

[TechAnalyst]

Puts and call prices are unreal. Used to be able to buy way out of the money calls for a few bucks, now you have to go to $300 out of the money Nov calls to get down to $10.

Close to the money puts used to be had for about $20-25, now $70-80.

What’s up with that and please correct me if I’m wrong?

You are not wrong, especially if talking about Nov '22 options.

The price of an option is influenced by risk. The greater the volatility and/or the greater the time to expiry, the greater the risk, the higher the price.

You can't get much more volatile than $75-80/t ranges over two days. And you can't do anything about the 10 months to expiry.

The one thing you can do to deal with the cost is to sell an option to help pay for the one you want to buy. With full intentions of buying back the short option once it looses its value.

For example, if you want to buy a put to have a minimum price guaranteed (given the messed up input costs), you could sell an out of the money call to help reduce the cost. Then you have a minimum and maximum price. In that case, if prices pull back after seeding like they seasonally do, you cover the short call to leave your upside unlimited.

If you don't like capping prices, you could buy a near the money put and sell a way out of the money put. It may only protect the first $2-3/bu downside but that's the most likely risk covered for a reduced cost.

Interesting times...

[TOM4CWB]

"....For example, if you want to buy a put to have a minimum price guaranteed (given the messed up input costs), you could sell an out of the money call to help reduce the cost. Then you have a minimum and maximum price. In that case, if prices pull back after seeding like they seasonally do, you cover the short call to leave your upside unlimited.

If you don't like capping prices, you could buy a near the money put and sell a way out of the money put. It may only protect the first $2-3/bu downside but that's the most likely risk covered for a reduced cost.

Interesting times..."

Selling out of the money Calls to cover Purchased Puts... still leaves margin calls to be made if the market price approaches any where near the Call Strike price, a real headache [gut knotter] unless you have a big cash surplus...

Forward Selling the cash grain is magnitudes ahead of any other move... there was no [grain buyer] appetite to roll unfilled Contracts ahead this year... should have been a better alternative...

Concern now that milling wheat will have difficulty breaking free from corn prices... [to move further up]

Fall 22 Canola prices will be very volatile... Nov/Jan 23 can rally up easily into spring 22 back to $850... think it could be an obvious mistake to pay $70-80/t to lock in a $680/t fall 22 price... too early... cost of production / risk reward looks far too little...

Inflation at 7% for our farms... in real terms 2022 cost of growing 2022 Canola has increased 50% .... so the average 2021 selling price of $700... needs to be much closer [Nov22 Jan 23] to the $840 it has tested already...

The $640[Aug 15th] - $740[Dec 1st] - base in the Nov 22 Canola gave uptrend support... [$758 dec 10th]...

There is no longer a need to wait to see what 2022 Crop Insurance levels will be... as it sure looks likely the $750/t mark will be fairly close to fall 2022 Canola Crop insurance value. This then further supports the uptrend base...unless a big 'black swan' event derails support. Mini Dec22 Spring Wheat at $9.10 further supports 2022 Canola...

Cheers

[TechAnalyst]

Forward sales are the best bet on production you Know you will have. Unfortunately, '21 highlighted the risk of being too confident.

Hope that the market will be rational for the next year isn't a very good risk management strategy as far as I can tell.

As I mentioned, if uncomfortable selling calls to offset price protection, you could always sell further out of the money puts. The idea is to do something to offset the significant time and volatility portion of the cost.

If you were to sell out of the money calls to reduce cost, there are ways to minimize margin call risk. In the event prices rallied significantly, you could offset the short call by buying a nearer to expiry call (less time value) or spend a bit to roll strike prices up. Keeping in mind you expect to be benefiting with your cash canola as prices are rallying.

There is no silver bullet and nothing is free or easy. It's just a matter of doing the best to protect oneself from a disaster that could risk the farm.

[farming101]

March 1033 resistance hit today

[Guest]

$26.71 for non gmo today !