Pricing canola for the fall

[blackjack]

What are the risk a person should be aware of?

[ColevilleH2S]

No "act of god" clause.

I've often wondered what kind of uptake a line company would get for a Canola contract with act of god.

[crusher]

Risk of price going down.....risk of price going up.

[commonsense]

As a producer you're the biggest natural long in the market so your risk is always that price may fall if you don't hedge when prices allow you to lock in a margin. As for an AOG not sure why someone would need that as the reallity is nobody would offer it without charging such a premium that the price would not be competitive to the Non AOG canola price. There are several ways to protect yourself using options, brokers, line company min price contracts, etc that will mitigate your price risk as well. There is a cost to it but allows you to sleep at night and participate in the upside of a market.

[Hopperbin]

you priced high for march delivery, get divorced in January, price crashes after January, but your court date is January.

[cottonpicken]

Not having product to deliver against your contract
and the price goes through the roof,your on the hook
for the spread,i imagine this will be a big big issue
someday.

Unless your using options as a type of insurance.

Grain companies could easily offer act of god and do
this leg work for you,maybe some are already doing
this?

[blackjack]

Thanks for the replys.There is a whack of canola here in west central alta being grown.Just wondering what the the more experienced marketers are doing?

[charliep]

Alberta crop insurance with the variable price benefit takes off some of this pressure. If Otober prices are more than 10 % above the coverage price established in the spring, the price used in determining payouts increases to reflect the new reality. An option strategy (sell rallies/buy calls on dips) is another way to offset production risk/inability to fill a contract.