U.S. wheat rally. "Incognto"?

[furrowtickler]

Is the any way we can take advantage of this rally at this point in time. Maybe tom4 you may have an idea as well?

[lakenheath]

From what I am hearing, this dry spell in the southern U.S. will be offset by rising world stocks and a stronger Canadian dollar. I sure hope not, but how many year have we heard of depleted wheat stocks and then all of a sudden the market is in the tanks within a few months.

[melvill]

furrowtickler, one way to take advantage of the current U.S. wheat rally is by hedging your crop. That is done by selling Kansas City (CPSR) or Minneapolis (CWRS or CWHWS)wheat futures. Of course, that only locks in a U.S. futures value. You still have currency exchange risk (the risk of the Canuck Buck continuing to rise) and basis risk (the uncertainty of what CWB basis levels will be for 2006 crop).

Another way would be to buy Minnie or Kansas wheat put options. Options are basically price insurance not all that different from house or truck insurance. U.S. wheat put options do not protect against currency risk or basis risk.

However, doing something to take advantage of this rally, regardless of how imperfect the approach is, is still better than doing nothing!

The toughest trick for most of us is timing the hedge. Many of us feel that the hedge is not worth it if we can't lock in the highest price in a rally. In my opinion, that's not so. Locking in a potentially profitable price, which may or may not be all that close to the market peak, is really the important consideration.

Call me directly if you want to talk more.

[Incognito]

The International Grains Council released this today:
http://www.igc.org.uk/gmr/gmrsummary.htm

World wheat production in 2006 is forecast at 595m. tons, 20m. less than in 2005. The main reductions are expected in Russia and Ukraine due to substantially reduced winter-sown areas and possible damage from severe cold in January. In the EU, production is projected to rise by some 6m. tons to 129m., assuming average yields. Soft wheat plantings increased but there was a reduction in durum wheat sowings. Plantings of winter wheat in the United States were 2% higher than last year when, however, the abandonment rate was unusually low. Dry conditions in southern Hard Red Winter wheat areas threaten the condition of that crop. Total US production may be slightly lower than last year’s. In Canada, where most wheat is spring-sown, more rain is needed in parts of the Prairies.
_______________________________

If consumption stays the same as 2005, world wheat stocks will be drawn down by 13 MMT.

The CWB will have new basis contracts at GrainWorld. Learn to use the tools available to you. The FPC and the BPC are good risk management tools.

Lee gave you some good advise in the post above.

MGE March came close to closing at 4.00 today. Funds bailed on some of their short CBOT wheat position and piled onto their long corn position Wednesday. Watch what they do. The funds have been long red winter through the KCBOT for the past three months and are estimated 42,000 long today.

Any hiccup with the bread making wheat stocks in 2006 and this will get interesting. The CWRS PRO dropping today was dissapointing. MGE futures are 15 cents higher from the last PRO and the CAD dollar is a penny higher.

I am willing to retract/change/alter/differ/rethink this statement at any given time.

[Incognito]

Lake:

Your source at the Pool must be short wheat. Either that or has his gossip mixed up...

Funds have been short up to 60CBOT/long up to 50KCBOT since Sept to some varying degree.

Best,

[melvill]

Incognito, a little fainter praise, please. REaders might think that I'm paying you to be complementary. I also liked your "I am willing to retract/change/alter/differ/rethink this statement at any given time." line. That philosophy applies to market analysis and dealing with spouses. LOL.

The most important thing for any farm marketer is to receive (or take time to search for, if time allows) good, solid, up-to-date market info so you can make informed decisions.

And for CWB crops, take time to really understand the Fixed Price and Basis contracts. That way you can use them when opportunities arise. I see that for the 06-07 crop, the CWB will allow wheat producers to lock in a futures price beginning in Sept. '06. That means we're less likely to need a futures account for wheat price risk management.

In my post (above), I see my phone number was removed by Agri-ville software. Anyone wanting to phone me can search on the Alta. Ag. website to get my phone number.

[TOM4CWB]

Incognito;

Are dropping PRO's simply the CWB preparing to compete... and look like heros when they pull a rabbit out of the hat and raise them at the first sign of someone to compete against them?

What about market CHOICE?

Why on earth would I sign a basis contract with the CWB before I can get the best one... which will obviously happen after we move to a CHOICE environment?

DOes anyone here really think new PM Harper was bluffing on the CWB? WHat REAL evidence is there of a bluff?

[cropduster]

Am with you TOM4.......for me, it all depends on how long I(read banker) can hold my breath!!To others, don`t discount Incog and Melvill`s advice tho`.I am wanting to do just that,and am scouring this electronic gizmo for any solid info!! To think we could actually have the freedom to EARN our own way.....how refreshing for Canuckistan!!!!!!

[melvill]

Cropduster, I'm probably going to start a firestorm with this but . . .

. . . you said the freedom to earn your own way. My father-in-law, who is a non-farming business man, is always asking me why farmers don't have the freedom to go belly-up, like he had with a couple of his businesses. He's quite ticked off by what he sees as the benefits of crop insurance and things like NISA and (maybe) CAIS. He keeps remind me that freedom "a two-edged sword." (See you in Oyen.)

[melvill]

Those of you that are watching U.S. cash wheat prices, have spot wheat prices risen much with this futures rally or have the grain companies weakend their basis to remove a big chunk of the benefit of a futures rally?

[parsley]

Valid point, melvill.

We don't carry crop insurance or CAIS.

Parsley

[melvill]

Hey, Mrs. Parsley, can it be that you are mellowing? To quote my Yorkshire Grandmother, "Oh, perish the thought!" (grin).

In a much more serious note, my colleagues and I are hearing from farmer-clients that quite a few farmers are throwing in the towel. I'm hearing that auction houses can't be booked for any more spring farm sales. Out of every adversity comes opportunity, if we can figure out what it is.