Inflation… raise interest rates to slow Inflation???

[TechAnalyst]

Tom, I’m afraid I can’t let this go without adding another perspective.

It is noble of you to try to convince everyone not to go though what you did in ’21 but the outcome left you very biased. It is a bit like a loved one being seriously injured in a traffic accident then trying to convince everyone not to drive. Instead of simply trying to suggest avoiding predictable risks.

The other experience of ’21 was producers that let grain buyers worry about the hedge by signing a deferred delivery contract then experiencing a catastrophic drought. How stress free do you think it was for them facing unimaginable buyouts in some cases. Even having to use crop insurance proceeds to cover the buyback. Fairly stressful as far as I can tell.

And what now, the same situation unfolding with even higher stakes. How stress free do you think it will be next summer as a producer not willing to forward sell (or any significant amount) given the fiasco of ’21, only to watch prices collapse for a variety of reasons while waiting to have the crop in the bin to sell. Especially given the input prices.

I would suggest you may have misjudged your tolerance for risk and volatility and blame it on your risk management account. Given your description and the scars it left, you may have been much more suited to simply buying a put option, hoping it expired worthless and accepting the price protection wouldn’t have been quite as good if prices fell.

If I had my way (and I know it's not possible), every producer of canola would have a tonne/ac of Nov 22 $700/t put options for $12.30/t (that it settled at on Friday). With a $10/t basis, the worst they would do is $15.37/bu ($700-12.3-10 = $677.70/t). With crop insurance coverage of say 30 bu/ac, the minimum revenue would be $461/ac (30x15.27) with $676/ac minimum out of a 44 bu/ac yield. And unlimited upside potential in revenue (if Macdon is right).

Then do what they do best, grow a good crop and see how the chips fall.

That would my idea of reducing stress, and that is what can be done with a commodity trading account…

[wheatking16]

Tom, I’m afraid I can’t let this go without adding another perspective.

It is noble of you to try to convince everyone not to go though what you did in ’21 but the outcome left you very biased. It is a bit like a loved one being seriously injured in a traffic accident then trying to convince everyone not to drive. Instead of simply trying to suggest avoiding predictable risks.

The other experience of ’21 was producers that let grain buyers worry about the hedge by signing a deferred delivery contract then experiencing a catastrophic drought. How stress free do you think it was for them facing unimaginable buyouts in some cases. Even having to use crop insurance proceeds to cover the buyback. Fairly stressful as far as I can tell.

And what now, the same situation unfolding with even higher stakes. How stress free do you think it will be next summer as a producer not willing to forward sell (or any significant amount) given the fiasco of ’21, only to watch prices collapse for a variety of reasons while waiting to have the crop in the bin to sell. Especially given the input prices.

I would suggest you may have misjudged your tolerance for risk and volatility and blame it on your risk management account. Given your description and the scars it left, you may have been much more suited to simply buying a put option, hoping it expired worthless and accepting the price protection wouldn’t have been quite as good if prices fell.

If I had my way (and I know it's not possible), every producer of canola would have a tonne/ac of Nov 22 $700/t put options for $12.30/t (that it settled at on Friday). With a $10/t basis, the worst they would do is $15.37/bu ($700-12.3-10 = $677.70/t). With crop insurance coverage of say 30 bu/ac, the minimum revenue would be $461/ac (30x15.27) with $676/ac minimum out of a 44 bu/ac yield. And unlimited upside potential in revenue (if Macdon is right).

Then do what they do best, grow a good crop and see how the chips fall.

That would my idea of reducing stress, and that is what can be done with a commodity trading account…

This is great advice.

[TOM4CWB]

wheatking/techy,

I did buy the underlying puts at $700/t which cost about $18/t at the time I went short on 500t at $800 Nov21 Canola... hoping the market would go back to $700 and then I could have taken the short position off and had the $800/t by adding the further $100/t to the $700 put for insurance.

BUT

The futures went to Nov21 $900 instead of $700/t... now with $100 /t futures call on maintenance... plus the added $50/t maintenance futures margin required at all times... = $150/t x 500t $75000 bank loan... plus the $18/t x 500t underlying Nov 21 Put cost...

so at $900/t Nov21 I bought the at the market Put... and sold the $1000 out of the money Call to reduce the cost [doing the [buy]Put [sell]Call spread]

And the Nov 21 market settled at Nov option expiry close [Oct 22/21]to $910/t if my memory serves me correctly...

So my 700$ Canola Nov 21 puts expired worthless, my $900 Nov21 puts expired worthless... I bought back my 1000$ Jan22 Calls I sold at $12-15/t in September 21... I took the $100/t loss in my margin account when I bought the $900 Nov Puts by taking the short futures Nov21 position off then... sold the cash at $923/t if my memory is correct... and were short at Cargill 20t be had to buy back because of a hail storm in September...

Complex to say the least. Have done this before a decade ago... used to buy out of the money puts all the time... but too often the expire worthless... just like the 'wise' folks who sell them want them to [80-90% of the time]!!!

As they say... Hindsight is always 20-20...

And Those goofy 'crystal ball' gazers... well those [rich wise smart] farmers need to keep the food on the table for broker's families... don't they!!!!

All by the textbook... step by step... day by day...month by month...

Agstar77 is incorrect about CWB marketing pools... they were worst possible option of all worlds!!!

Will look at possible minimum price contracts that allow one reprice at harvest... through grain buyers... have 10bu/ac risk free 22/23 Nexera at Bunge when the time is 'right'...

What a life! Too much Fun!!! Insanity is doing the same thing over and over while expecting a different result. That is why we are farmers... God Bless Canada

P.S. Just like the life of a burley wise fishermen! [the government is always after you!]

[TOM4CWB]

P.S. Just like the life of a burley wise fishermen! [the government is always after you!]

Too funny thinking about Peter and his taxes...

Since Jesus often was in the temples... they were owing taxes to Harrods temple crew...

The temple crew went after Jesus and Peter for the temple tax .... as every male Jew over 20 had to pay the yearly temple tax...

Sooo King Jesus told Peter to 'Go Fish'!!!

In the Sea of Galilee, there are fish that sometimes have coins in their mouths...

The coin in the fish's mouth is one of the miracles of Jesus, recounted in the Gospel of Matthew 17:24–27.
"In the Gospel account, in Capernaum the collectors of the two-drachma temple tax ask Peter whether Jesus pays the tax, and he replies "Yes". When Peter returns to where they are staying, Jesus speaks of the matter, asking his opinion: "From whom do the kings of the earth collect duty and taxes—from their own children or from others?" Peter answers, "from others," and Jesus replies: "Then the children are exempt. But so that we may not cause offense, go to the lake (the Sea of Galilee) and throw out your line. Take the first fish you catch; open its mouth and you will find a four-drachma coin. Take it and give it to them for my tax and yours."
...
"The Bible does not specify the species of the fish caught by Peter, but tilapia is sometimes referred to as "St. Peter's fish".

https://en.wikipedia.org/wiki/Coin_in_the_fish%27s_mouth

[TechAnalyst]

You make my point Tom, it wasn't your account or the puts that caused all the trouble, it was your desire to have a higher price and the way you chose to do it.

If you would look at put options like life insurance, hoping they expire worthless, it would have ended tremendously.

The $700 puts that cost 18 would have expired worthless, the cost would have been deducted from your $923/t cash price leaving $905/t less basis and coming out of a tough year in good shape.

I would take $20/bu and limited stress anytime.

But again, those are your personal preferences and risk tolerances so that's up to you. Just keep in mind others may look at things differently.

[TOM4CWB]

You missed a whole whack of costs...

At least Nov22 Canola is back up to $840...

So, short the futures?

Buy a call sell the cash?

Do nothing for now... till the canola is at least up??

'They" want us to trade our 2007 180hp big loader tractor [5100hrs] that cost new $166k... and will 'give' us $188k for it... if we buy a new one! Any guess what a new one 'costs'? $300k to boot???

Oh that shiny new paint... almost as hypnotizing as a PM hiding in his cottage with Covid after 3 jabs!!!