Cash Canola ?????

[chaffmeister]

CP:

The term is backwardation.

There’s nothing abnormal about backwardation (an inverted market). A carry market (contango) is no more “normal”.

Backwardation is not rare. Happens all the time, particularly in the ag markets.

Spreads are one of the most important factors/signals in futures markets – and probably the least understood. Most farmers watch basis levels closely and have a good sense of what is a good basis. But how many really understand what the market is telling you when you see an inverse or a carry?

Even Bernacke got it wrong when he thought the contango (carry) in oil futures meant that the market was predicting higher oil prices. Problem is, the message has nothing to do with forecasts (futures markets don't forecast). A contango in oil simply means that the market has too much oil and is giving an incentive to store it. If anything, its bearish.

[Hopperbin]

Padron maybe you are tight, right sorry. LOL
http://www2.barchart.com/dfutpage.asp?sym=RS&code=BSTK&section=grains

What really does this cash price mean anyway?

[mbratrud]

There is often confussion with Terminolgy especially at the elevator level. Many people talk about futures when refering to forward selling cash. If your selling futures your selling paper if your selling cash your selling physical..

Cash price would be what you are selling your physical for today.

Futures used for hedging purposes by traders ie. Cargill are rolled out of the nearby futures month usually by the third week of the month prior. For example many traders would have rolled there Jan Futures position to March before Christmas.

As a result the Open interest in Jan is almost non existant. The Only time someone would still be in Jan is if they wanted to take physical or Deliver, which is a whole other animal. Doesn't happen often with Canola.

So when refering to Cash easiest description is the Value for physical today. When referring to Feb, Mar and so on, the proper term is Deferred Delivery Price.

As a person who works with producers to help them understand this stuff, it drives me nuts when I talk to an elevator agent about forward selling and they refer to it as futures, it's not a wonder that guys trying to figuire this stuff out get confused. They use the futures prices to determine the Cash price or the Defered Price.

That's just my opinion though I'm sure they think they are just as right as I am.

[mbratrud]

Cash Priced refered to at Barcharts would be a cash price in S'toon which is Par point for Canola

[mbratrud]

Cash Priced refered to at Barcharts would be a cash price in S'toon which is Par point for Canola

[cottonpicken]

???????
Thanks for telling me what the term is.

Are we watching the same ball game.

I'll call it "rare" and you can call it "happens all the time".Although funny enough i do expect it to become the norm.And another funny enough i cant pry my own investment favorite without a fifty percent mark up.Talk about backwariZation.And another funny enough i dont find that bearish.

If your reading to much Krugman,i would advice you to stop,hes a hack imho.

"whats going to make it rally"

Have you been away for last 18 months.

The disindgration of the worlds reserve currency as a tangible asset is one.

The debasement of all the currencies of the world is two.

The popping of all major asset bubbles sans bonds is three.

You and mbtraud will do well in the future hanging on to your fractional reserve notes "like" they were gold.

[cottonpicken]

PLEASE<PLEASE<Please........bet against me.

[chaffmeister]

Cottonpicken:

We weren’t talking about macro economics. This <b>IS</b> a commodity marketing forum - we were talking about mundane day-to-day grain marketing issues - something in which you appear to be totally disinterested.

Not sure where you get the idea that inverses are rare. We see them just about every year in just about every ag commodity. As well, until just recently the crude oil market was commonly inverted. But it’s been in “contango” (carry) for over 4 months now. And what has that market been doing? Been going down. A lot. The move from backwardation to contango in oil futures was a fundamental clue regarding a switch in the stocks to use balance changing dramatically. Inventories have been building as demand plummeted and the market is looking for storage. “Contango” spreads are how the market pays for storage.

If you didn’t read this signal, you might have made a substantial trading mistake. Such as: (1) staying long and reducing your trading capital unnecessarily, (2) loading up on the long side too early, or (3) missing a great opportunity to go short.

And since markets are all related, the oil market was telling us a lot about the health of the global economy. Astute traders saw reduced demand for just about everything. And reading the spreads in oil contributed to a correct view of the world right now.

I recall a post you put on Agriville a few months ago where you say you had no idea why the markets were going down. So I guess you missed some of these markets signals – you’ve been so bullish you can’t see straight. Longer term, I agree with your view of the world – but in the mean time, there’s been a lot of opportunity from the short side.

Regarding my question “what’s going to make it rally”, you missed the point. Badly. I really don’t care what you think but the fact that you missed the point makes me think others might have as well. So I want to be clear.

We were discussing futures spreads and the messages they provide to those marketing grain. And, since a “contango” structure is not a forecast of higher prices (as some think), you should not hold unpriced grain waiting for higher prices because of it. I didn’t say anything about being bearish - it’s just not a forecast of higher prices. You have to look at other influences for a bullish signal – hence the somewhat rhetorical question “what’s going to make it rally?”

I’ll put a real sharp point on it. I’m not asking the question. I’m saying those making marketing decisions should be asking the question. I sure hope you’d agree with that since this is where your DYODD comes in. From my perspective, due diligence includes reading and understanding what the market is trying to tell you.

[Zaphod]

Just to reinforce the point, soybean futures are in an inverse (or whatever the other term is) right now. That tells me the trade is expecting a lot more bean acres in 2009.

[cottonpicken]

I understood why,i just didnt understand why people would be so stupid and run into bonds.

This futures market signaling thing IS up for debate.You even said "bernake got it wrong".

That alone is evidence enough that the issue is much more complex than you are giving it credit for.

And i do agree 100% on listening and learning about what the market is trying to tell us.