Inverse versus Carry

[farming101]

Not Charlie, but here is a spread chart for Nov 14/July 15.
There was carry in the futures last September but it would have been wise just to do a spread trade to try and capture some of it.
Selling physical and replacing with futures/options would have been another strategy.
Cash canola last September was a fair bit under $9 if I remember right.

<a href="http://photobucket.com/" target="_blank"><img src="http://i1211.photobucket.com/albums/cc421/farming101/Nov%2014%20July%2015%20spread_zpsuq5osoy2.jpg&quot ; border="0" alt=" photo Nov 14 July 15 spread_zpsuq5osoy2.jpg"/></a>

[charliep]

Not sure on your question. New crop (November) has been at a small inverse to old crop months for the past 6 months. Range on the November 2015 contract was $440 to $460/tonne. July $450 to $470. The normal assumption is that markets pay carry in old crop to the end of the crop year when bins are supposedly empty. New crop/harvest occurs and the prices are lower. In the current world, I also would want to hold any July position from here forward unless I was a commercial long willing to stand for delivery. Could be some fireworks ahead. Most grain companies/crushers will be using November for their all their old crop hedging activities. In other, some longs wanting to hold positions. Short who want out. Volatility with vent to higher prices. Not saying will happen but the risk.

[charliep]

Thanks farming101. Hard to teach an old dog new tricks to post things.

[charliep]

Just checking but is that the November 14 contract? I see RSX14.

[farming101]

Yes, Farmaholic was asking about last fall's situation so posted Nov 14/Jul 15 spread

[farming101]

Here is the July 15/ Nov 15 spread

<a href="http://photobucket.com/" target="_blank"><img src="http://i1211.photobucket.com/albums/cc421/farming101/Jul%2015%20Nov%2015%20spread_zpsjz8d6lo8.jpg" border="0" alt=" photo Jul 15 Nov 15 spread_zpsjz8d6lo8.jpg"/></a>

[charliep]

Just have to check but the question might be why the inverse in old crop months. Not sure I can explain other than the nuances with ICE futures contract delivery.

[farmaholic]

Yes Charlie that is it. Or even month to month going further out(earlier on). I just have trouble putting the poorer prices paid earlier together with an inverse in the market. I am sorry if I am not making myself clear.

[mcdon]

Whether a spread is at an inverse or at a carry depends on a number of criteria. Stocks that are in a deliverable position (traders sometimes use carryout but that is misleading) composition of open interest, contract specifications to name a few.

[charliep]

Strong basis levels in forward months has created opportunty for some. You had opportunity to lock in July basis through the winter. You would have had the rally plus a strong basis.