Market Strategies for Fall

[charliep]

Any thoughts on market strategies? Observations and thoughts on my part:

1) Unless some new factor kicks in, prices are likely to stay where they are to slightly lower right into the winter. North America weather is the driver with conditions favorable to date. Feed grains are scariest given the BSE issue and the normal fears about a poor quality harvest.

2) Cash flow will be a key issue - particularly if you have a cow calf enterprise and think you may have to background this year instead of selling in October. I would suggest having a market plan will be critical this fall.

3) Watch basis levels. I suspect that they have potential to be wide coming off the combine as farmers scramble to sell off board crops to pay bills. I would be shopping the market for planned Oct./Nov. sales.

4) Options strategies?

5) Other strategies/opportunities?

[TOM4CWB]

Charlie;

The Bank of Canada lowering the intrest rate .25 of a point has caused the CDN$ to drop to $.717 this morning.

Could this be a sign that our fed has decided to lower the CDN$, and the short term implication is for a retraction to .65?

[TOM4CWB]

No, this is a sign that the BOC misjudged the economy when it raised interest rates twice this year and stalled out the economy. Everything was in their favour NOT to raise rates today but they did - don't think 65 cent dollars think 70 cents until year end and back to 75 cents again next year. The dollar was undervalued at 62.5 cents.

Was the dollar really that strong or other curruncies just that weak?

A good friend of mine says this about trading the dollar - "Beware the perils of proxy trading" and when is the best time to hedge the Canadian dollar? NEVER!

Wild cards: Quebec - any premier is still en francais; BSE - this is getting out of hand; and SARS and maybe Alberta seperation after the cowboys are done with the Feds.

Everything doesn't have to look like a government conspiracy, Tom.....lol

[TOM4CWB]

Larry;

You said, "Everything doesn't have to look like a government conspiracy, Tom.....lol"

I see more and more "Caos" but,

BOC surely has been listening to annalists on the CDN$ negative impacts.

Jean has done such a good job of boasting over the last 6 months, not the result of a conspiracy, simple economics... kick your best neighbour in the head often enough... and see what happens, especially when that neighbour is responsible for 70% of our wealth CDN creation!

Question on Winter Wheat.

Since the 10% US duty doesn't apply, why have CWB winter wheat spreads not improved more vs. CWRS/CPS?

Should we plant more Winter Wheat to take advantage of this?

[TOM4CWB]

I'll reply to the political statement and let Charlie handle the WW.

Poutine's bureaucrats called Bush a moron in early winter and then he was chiding them about their deficit and now the file is sitting on Bush's desk.

Who is the moron now?

We should pay that man to leave now. He is a buffoon and a national embarrasment. This is a western issue and not far enough on the radar screen to get attention from all the hacks in Ottawa. If this thing doesn't get settled by October, when the calves come in from the pasture - this will be a nightmare.

[charliep]

Like Larry, I will note/highlight your comment on the fact the countervail/antidumping is on spring wheat only - not winter.

Your question on spreads is relavent on its own. Too deep for summer discussion but this would require a discussion about how spreads are established within pools. I would expect that less than 1 % of farmers have an even base understanding of this process.

[TOM4CWB]

Charlie;

The spreads between 03-04 initials of different wheat classes and grades is even more critical on PPO contracts.

Pricing and going into PPO contracts blind could be very costly...

I see wheat midge all over our farm, just 50% of lowest thresh level on average... but it is there. An early frost and poor harvest weather are also wild card factors that really create major risk factors in costing big money if PPO contracts are signed up before Aug. 1.

Since profit margins are looking very low in all farm product areas, except maybe peas and canola for our farm. We have presold large %'s of Canola, and Peas usually have a late fall price premium so this will be watched closely and figured out when we know our what our pea grades are.

But adding to costs by risking PPO contracts leaves more questions and risk than using PPO's answers IMHO.

[rain]

Charlie fall hedging, short barley untill some country starts taking Canadian Beef. Start checking for new crop basis levels now and on a regular basis two to three times a week. Take the best December or March basis you can get and stay unpriced untill delivery.

Worst case scenario this year every barley producer in Canada contracts 15%of this years barley production to the CWB on the A series contract as feed. This will help out the domestic market considerably.