For those of you who have taken futures courses but have never gotten into the market, the feed barley market this spring is likely to provide a good opportunity to test the water so to speak. As long as it as dry as it is in Alberta, feed barley prices are likely to stay firm to move higher. As soon as it rains/prospects are good for reasonable feedgrain yields this fall, prices will come down. You need to have pricing targets/actions in mind to capture opportunities.
A couple of reasons I highlight this now.
1) If you don't have a futures account open, you need to take some action to get the account set up.
2) I would encourage aggressive sales of feed grains this fall as a way to pay bills. Other crops (peas and canola) will likely require some more patience/leeway in marketing into the winter.
3) New crop feed barley basis (delivered feedlot southern Alberta) is currently $5 to $6/t under Dec. futures. Assuming Southern Alta. stays dry, my thoughts are this basis will narrow to zero to /- $2/t based on tight supplies close by these feedlots/continued expensive trucking costs - similar to this past winter. Just to highlight, wide basis = sell futures/narrow basis = sign deferred delivery contract.
4) If I was a barley user, I would be using the above basis to lock in delivery commitments for next fall.
The final thing to hightlight to have a strategy going into the trade. Pick your entry point (eg. sell Dec. western barley futures $135 or better) but also have your strategy if it stays dry and the market moves higher - 100 % hedger in which case you will make the margin calls/carry the position or selective hedger in which case you will have stops in place (eg. keep a stop at $139/t under the assumption that breaking through here would indicate a pretty bullish situation). An piece from an experienced futures trader friend of mine, PLAN YOUR TRADE/TRADE YOUR PLAN.
A couple of reasons I highlight this now.
1) If you don't have a futures account open, you need to take some action to get the account set up.
2) I would encourage aggressive sales of feed grains this fall as a way to pay bills. Other crops (peas and canola) will likely require some more patience/leeway in marketing into the winter.
3) New crop feed barley basis (delivered feedlot southern Alberta) is currently $5 to $6/t under Dec. futures. Assuming Southern Alta. stays dry, my thoughts are this basis will narrow to zero to /- $2/t based on tight supplies close by these feedlots/continued expensive trucking costs - similar to this past winter. Just to highlight, wide basis = sell futures/narrow basis = sign deferred delivery contract.
4) If I was a barley user, I would be using the above basis to lock in delivery commitments for next fall.
The final thing to hightlight to have a strategy going into the trade. Pick your entry point (eg. sell Dec. western barley futures $135 or better) but also have your strategy if it stays dry and the market moves higher - 100 % hedger in which case you will make the margin calls/carry the position or selective hedger in which case you will have stops in place (eg. keep a stop at $139/t under the assumption that breaking through here would indicate a pretty bullish situation). An piece from an experienced futures trader friend of mine, PLAN YOUR TRADE/TRADE YOUR PLAN.
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