New crop canola

[carebear300]

Well people I am calling on your experteise for a honest opinion. I am kind of new at this canola business and am just sort of getting accustomed to the marketing. Friday I priced 49 tonnes at 7.71 for next november delivery. Was that a good move? How much would it be safe to commit?(per acre in bushels) I think historically it isn't a bad price, and certainly better than the last two years. Sorry to be such a pain with such an elementary question. Really do enjoy all your postings(makes me think)

[JohnKenneth]

fwiw my target's 8.50/bu to start pricing new-crop canola but what does one person know... lots of talk but not a lot of concrete yet on this whole bio-diesel bandwagon.

all in all i think you can't go wrong selling a little bit at this price, assuming it pencils a profit and you've already booked the seed.

[broker]

also, only in my opinion, you should look to start at 10-20% of anticipated production once it pencils out to a profitable price. Too many people wait for the "high" and end up losing money. Once you are over the break even, pick some targets and start pricing up.

[SASKFARMER3]

For me it will 20% for november at 8:25

[craig]

Central Alberta Bids new crop bids over $8.00 yesterday. I have always used $8.00 as a trigger for some production. Other option might be to grap some basis contracts to price later. In the new world of hybrids and consistant 50 bushel yields,$400 gross per acre is attractive.

[chaffmeister]

Here's a thought - first, lock in say 20% of your anticipated production at $7.71/bu ($340.00/t) (Carebear, since you started this, let's use your numbers. I assume the 49 tonnes you sold is only a portion of what you expect to grow/sell.)

Then, sell an equal amount of Nov07 360 calls - notionally they are at $35.90, so let's call them $30.00 to be conservative - and even that may be too high but let's run through the example anyway. (Carebear, since you can't sell 49 tonnes of options, you could either sell 40t or 60t - depending on how you want to approach this.)

Assuming you get the options sold, if the market has peaked, the options will expire worthless and you effectively have sold a portion of your canola at 340 30 = 370/t ($8.39/bu).

If the market rallies further, and depending on how far it goes, you effectively have futures sold for another portion of your crop at 360 30 = $390. Take a basis off that and you get your cash price.

The nice thing about selling calls this early is that there's a lot of time to decay the premium. If canola prices haven't changed much before summer and we have a crop problem and a rally, you have a pretty good chance of buying the options back without a loss.

The tough thing is getting them sold in the first place. (I just checked the WCE website - Nov07 370 calls are showing a bid at $21.00/t...)

But whatever you do, make sure you fully understand what you're doing before you sell options.

[chaffmeister]

Seems Agriville doesn't allow plus signs.
Calculations in previous thread should read

340 PLUS 30 = 370/t ($8.39/bu)

and

360 PLUS 30 = $390.

[cottonpicken]

Or take the nov spot price of 12$.

[SASKFARMER3]

Where is November at $12.00 in the world.

[Zaphod]

Selling calls in a market that is going straight up is a big risk. Make sure you have deep pockets. My opinion is to make a small new crop sale at anything over $8. You can't lose money doing that.

[melvill]

I was at an AB Canola Producers Commission meeting yesterday and I mentioned $8.00 available for new-crop. I didn't get anything but a blank stare from the audience. My suspicion was that I was at Pamplona, not southern Alberta.

Sure enough, I was right. At coffee-break discussion, to a person, they said, 'Eight bucks is too low. I'm not pricing any 07 crop 'till it's at least 8.50'. Yup, it was Pamplona - you know fighting bulls and testosterone-crazed men running in front of them. I'm not sure but I think the people at the meeting were the four-legged part of Pamplona.

[cottonpicken]

Mevil if your in marketing,do you know whats going to happen the day the u.s dollar crosses .80?