K Forage....carrying on from a previous thread...a question was posed whether to buy paper now or not.
IMO and what I did, I flipped old canola inventory into july 2015 paper for about 30 bucks to me...based on basis offering and futures without carry. Seemed like a no brainer to me but I might be proved wrong, but I know I'm no worse off than holding old crop in bin going forward. Downside risk july 15 is small IMO...at this point in time.... but fireworks are going to be in the front. 50 bucks a tonne one way or the other. Mite miss cash opportunity short term on frost scare, but the market has been pretty resilient to blow off any and all fundamentals. Futures lift on a scare likely maintains sideways cash till new year while basis erodes since the pipeline is likely full of forward contracts through harvest pressure. Any rally potential will be short covering rally give circumstances...and likely met with increased farmer selling. If full blown frost event..all bets off. IMO trade way to short at these futres levels and I don't think farmer selling new crop is huge....market is giving the old crop holders a free pass right now on account of/respecting the risk associated with even a normal frost. They are ponying up now thru basis to get supply till new year while trying to line up the paper thru to Nov 15. IMO, trade is underestimating current producer resolve.
Wheat...basis has improved in the deffereds... but carry in suggesting "supply" is thought to be ample. We'll see on this one, but I still would not play short wheat at these levels...but that's just me. Downside risk for quality is small IMO. Kansas still premium to Minny which makes no sense, given the current risk associated with quality. I think I want to be a holder of physical quality stocks, now and into this winter....so no trade here.
Feed...be it wheat, corn, barley, oats....I think the trade has lined things up to depress feed (more to do with livestock fundamentals and macroeconomic objectives) and I think "quality" should be preserved. Lining up to be ugly feed $. Only hedge is short corn, but for us....doesn't work. If I was feed buyer in US, I mite buy futures as a hedge cause it sure seems awfully cheap, but the US price discovery/mechanics/politics I don't fully understand. As such, logistics and Canadian made issues will generate a cash price, and that's about as good as its going to get for us. Such disconnect between US corn cash and relevancy to Canadian feed market given the politics.
Anyway....I'm throwing my opinion out there....
IMO and what I did, I flipped old canola inventory into july 2015 paper for about 30 bucks to me...based on basis offering and futures without carry. Seemed like a no brainer to me but I might be proved wrong, but I know I'm no worse off than holding old crop in bin going forward. Downside risk july 15 is small IMO...at this point in time.... but fireworks are going to be in the front. 50 bucks a tonne one way or the other. Mite miss cash opportunity short term on frost scare, but the market has been pretty resilient to blow off any and all fundamentals. Futures lift on a scare likely maintains sideways cash till new year while basis erodes since the pipeline is likely full of forward contracts through harvest pressure. Any rally potential will be short covering rally give circumstances...and likely met with increased farmer selling. If full blown frost event..all bets off. IMO trade way to short at these futres levels and I don't think farmer selling new crop is huge....market is giving the old crop holders a free pass right now on account of/respecting the risk associated with even a normal frost. They are ponying up now thru basis to get supply till new year while trying to line up the paper thru to Nov 15. IMO, trade is underestimating current producer resolve.
Wheat...basis has improved in the deffereds... but carry in suggesting "supply" is thought to be ample. We'll see on this one, but I still would not play short wheat at these levels...but that's just me. Downside risk for quality is small IMO. Kansas still premium to Minny which makes no sense, given the current risk associated with quality. I think I want to be a holder of physical quality stocks, now and into this winter....so no trade here.
Feed...be it wheat, corn, barley, oats....I think the trade has lined things up to depress feed (more to do with livestock fundamentals and macroeconomic objectives) and I think "quality" should be preserved. Lining up to be ugly feed $. Only hedge is short corn, but for us....doesn't work. If I was feed buyer in US, I mite buy futures as a hedge cause it sure seems awfully cheap, but the US price discovery/mechanics/politics I don't fully understand. As such, logistics and Canadian made issues will generate a cash price, and that's about as good as its going to get for us. Such disconnect between US corn cash and relevancy to Canadian feed market given the politics.
Anyway....I'm throwing my opinion out there....
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