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CWB basis contract or Pool ?

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  • jamesb
    Senior Member
    • Aug 2009
    • 772
    #1

    CWB basis contract or Pool ?

    There is one week left to lock any basis contracts or FPC on wheat. FPC value is under PRO.
    Is any one locking in much Basis only contracts?
    Tags: None
    • Zaphod
      Senior Member
      • May 2005
      • 460
      #2
      Wheat is trending higher, basis is the best in years (but still bad). I'm taking the basis contract.

        Comment

        • Zaphod
          Senior Member
          • May 2005
          • 460
          #3
          When wheat goes higher, the CWB always weakens the basis. It's their formula.

            Comment

            • charliep
              Senior Member
              • Oct 2000
              • 9002
              #4
              I would start with the comment I like to be fully paid when I deliver.

              I would consider a fixed payment contract on deliveries to date and
              those expected remainder 2009 (or at least be quite ready to pull the
              trigger on a basis contract in early November).

              Deliveries into 2010 (at least the ones I want to use a CWB ppo for)
              would be a basis contract. The real question would then be which
              futures month. The CWB removes carry from the futures (basis levels
              weaken in more deferred months) although they do pay some storage.
              Suspect I wouldn't go further than March but I hate paying the cost to
              roll a contract. Also have the alternative of replacing with a long
              futures position.

              Would also include the loonie in your decision somewhat. If you see the
              loonie moving over par, you have incentive to pricing earlier.

                Comment

                • jamesb
                  Senior Member
                  • Aug 2009
                  • 772
                  #5
                  I havent delivered a kernal yet. I did get some priced earlier in the year at a decent price. the fixed price is still just under $5.00. with a week left in the program i'd like to see more strength in the price to at least be on par with the pro.( not that the pro is any guarantee.)

                    Comment

                    • charliep
                      Senior Member
                      • Oct 2000
                      • 9002
                      #6
                      Can't disagree with your strategy.

                      In achieving what you want, will note that their are 3 factors that go into the CWB price.

                      Futures - factor that you can follow.

                      Loonie - I'm as confused as anyone but will be a factor over the next week.

                      Basis (combined real basis and adjustment factor - As Zaphod indicated, in the control of the CWB which means you may not see full futures movements reflected in price (may take protection in the advent of market volatility this week). Would expect to remain fairly stable short term.

                        Comment

                        • charliep
                          Senior Member
                          • Oct 2000
                          • 9002
                          #7
                          Any other thoughts on the FPC/BPC decision over the next 3 1/2 days?

                          Sometimes a picture helps. The CWB has updated their historical charts to October 26. I encourage you to look at them.

                          [URL="http://www.cwb.ca/public/en/farmers/producer/historical/"]CWB charts[/URL]

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