Full Alert on New Crop Pricing

[charliep]

Welcome come back everyone.

Just a note to highlight that Nov. canola futures closed above $300/t and Dec western barley futures close to $135/t. These are good prices to do some new pricing if you haven't got a portion done already.

Things to note.

1) Western Canada currently has the highest feed grain and oilseed prices in N. America reflecting our drought. Any rain across Alberta and Saskatchewan and some of this premium will disappear. WCE was closed today but all US grain markets and soybeans took another hit today. As a note, 8,000 t of US corn has traded into the Brooks area for about Cdn $138/t track or $144/t delivered feedlot. Current cash prices in S. Alta. are running $138 to $144/t - depending on shipping timetable.

2) I would use cash flow in determining how much to price. If I were in solid financial shape/comfortable cashflow wise, I would have enough crop sold to cover anywhere from 1/4 to 1/3 of my Oct./Nov./Dec. cash flow needs covered. If my financial shape was poor/heavy cashflow commitments, I would push to a half/two thirds (using 15 to 20 % increments at a time). I realize the scare around getting a crop in the current environment but this shouldn't be an excuse for total inaction. The priority sales to meet fall cashflow commitments would be calves, crop cash advances, feed grains, lentils, some canola (I would keep canola lighter just because of the tighter supply demand balance this year).

3) Watch basis levels. I suspect they will be narrow this coming year for both feed barley and canola. If you can't get a decent basis, sell futures.

Anyone else have any thoughts about how to approach this fall's marketing plan?

Charlie P.

[charliep]

Just a note to re-highlight the above. Keep an eye on your crop/yield potential but at least some pricing (even if based on your low yield scenario) is encouraged. Have price targets and actions. One thing I forgot to put in last time is the CWB Producer Pricing Options as a way of improving fall flow. Basis on Thurs. was $19.47 over the converted MGE Dec. wheat futures - at the high end of recent values. The discount to the PRO is relatively high at around $10/t but likely reflects the risk in the current market.

Any other comments on planning cash flow for this fall?

[melvill]

Gave a presentation on the CWB PPOs on Friday in Milk River. One producer there says its so dry and their soil so light that a gopher "far___g" causes a dust storm.

Almost everyone there was so afraid of yield problems that no one was willing to commit new-crop wheat to the PPOs. However, several of them were quite interested in commiting old-crop wheat to a PPO - either a Fixed Price Option or a Basis Option. Here's how. Deliver old-crop wheat on the C or D contract calls, put it in storage until August 1, then "deliver" it on the PPO. Grain companies say they won't charge any storage from now to early August.

That strategy gives a better price than old-crop and helps with fall cash flow. A producer doing this needs to be careful about using the Basis Option, then rolling the basis forward and then waiting 'till next spring to lock in a futures price.

Lee

[TOM4CWB]

Lee,

Delivering on 2001-02 is a good idea, and worked out well last year.

The procedure worked exactly as you indicated.

Feed Wheat broke 135.00 yesterday, and now I am short on some of my 135 Oct 1 Calls.

What should a good basis on this new feed wheat futures be? Can I deliver in Edmonton against these futures? What should the charges be to deliver against this futures position?