Record canola and (nearly record) soybean crush margins

[blackpowder]

Apologies if I sounded sarcastic.
People I've talked to either don't know or won't admit if they do.
I was referring to the ability to forward sell wheat or canola while being able to cover the check you have to write to the buyer in event of crop failure and higher prices.
Insuring the price with calls or call spreads.
There is a cost but it's quite reasonable comparatively.

[makar]

Apologies if I sounded sarcastic.
People I've talked to either don't know or won't admit if they do.
I was referring to the ability to forward sell wheat or canola while being able to cover the check you have to write to the buyer in event of crop failure and higher prices.
Insuring the price with calls or call spreads.
There is a cost but it's quite reasonable comparatively.

Dont agree on the risk no shortage of 60 dollar a acre cheque writing stories.I forward contract NO grain i dont have on hand wrote 2 cheques that was enough even though I had the grain. No idea how to use calls and spreads and know nobody that does.

[blackpowder]

I respect that. Just saying there is another way.

[TechAnalyst]

I try to keep content as brief as possible so someone may actually read it, but should have elaborated.

Corporations are supposed to maximize shareholder wealth and as annoying as that phrase is, it’s what drives growth and risk taking. Paying as little as need be is normal.

The intent of the post is to try to make sure producers are aware of the record margins so when developing marketing strategies, they (you) realize it’s also perfectly acceptable to be aggressive when setting target prices. And maybe plan for being patient.

Only crushers will know when they have purchased what was available at recent basis levels and when they have to share some of the gravy. But this suggests that they certainly should be willing and able.

[LEP]

Where does Mitch say anything is rigged? Are you saying that a buyer - any buyer, including a crusher - should pay more simply because someone says they are making too much? Are you, as a farmer, willing to take less when buyers are in a pinch and their margins are razor thin, just because it would be a nice thing to do?

I've been around a while, so I can tell the story of canola in 1984 from personal memory. The industry oversold the crop (mainly exports) that year - there was basically nothing left. I think the official carry out that year was 170,000 tonnes. I worked for Cargill in Vancouver at the time and we were short to Japan and couldn't get enough canola, even though we were paying up - basis was a huge premium over futures, futures spreads - like the June/Nov - were inverted by over $100. Futures prices back then were usually around $280 - $350; the June 84 contract went above $700. To get enough canola to fill a rail car, we had trucks going from elevator to elevator picking up less than carload amounts to clean out the elevator and hauling it all to one elevator to load a few cars - an added expense we weren't counting on. We had to cancel or defer contracts to Japan. Also very expensive. And we weren't the only ones; every exporter was in the same boat. And the few crushers around back then had negative margins.

The memory of this is what keeps me pushing for export sales reporting like they have in the US. But no one ever suggested to manage prices to make sure margins are "shared equitably".

And then you may remember there was a crushing plant in Sexsmith Alberta years ago. It couldn't make a go of it and is long gone. I suppose if the local farmers were willing to take lower prices back then, it may still be there.

Mitch is right - the crushers are in a position to potentially create a market that supports the acreage base needed to satisfy the apparent demand. But when they are getting more canola than they need at prices like $15 to $16/bu or more, what would you have them do? Offer to pay $17 but then say, but we can't take it? There's a lot wrong with how price is determined, published, distributed, packaged and so on, but if we are going to get anywhere, farmers need to realize that they are often their own worst enemy when it comes to marketing / sales behaviour.

Since Its Agstar77 that this is really addressed to, let me put it in CWB terms. The CWB held this notion that the grain market was a pie of limited size - if railroads or grain companies were making more - in the CWB's mind, getting a bigger piece of the pie, it was at the expense of the farmer. They maintained policies that reigned in both railroads and grain companies - for control, yes, but also to make sure that they weren't making any money that the CWB thought should go to the farmer. You know, share the available margins so everyone keeps their piece of the pie. They couldn't see that a better approach could be to grow the pie - make it expand. Taking steps to make sure the farmer kept his piece of the pie, ended up making the pie actually get smaller (with the CWB in place, wheat acres dropped, and Canadian global wheat market share dropped). This is why I call the CWB and its proponents, The Brotherhood of the Shrinking Pie.

The thing I take away from this crush margin situation is this: if crushers had to pay more for canola, they could - and would. But they don't have to, because farmers keep selling.

I call the Wheat Board era "Collective Poverty". Everyone is happy as long as their neighbor doesn't make one cent more than them.

[seldomseen]

I remember June 1984 clearly. I was standing in the International store in Tisdale waiting to talk to the parts man and the radio was playing the farm news.
It was Don Bousquet reading the market news and canola hit $16.00 per bushel! I only had a couple of loads left and those were 3 ton loads but I really felt like I had hit the jackpot!
Does anyone remember Don and know what happened to him?

[TechAnalyst]

I listened to him religiously.

According to the Winnipeg Free Press, he passed on Nov. 3, 2010 at the age of 62 after a battle with cancer.

[blackpowder]

God, you didn't talk much during the noon radio show and never interrupted the grain prices.
One phone per household, hung on the wall too lol.

[agstar77]

I call the Wheat Board era "Collective Poverty". Everyone is happy as long as their neighbor doesn't make one cent more than them.

That is only your paranoia talking. The only problem is people gaming the system.

[LEP]

That is only your paranoia talking. The only problem is people gaming the system.

Sorry. I lived it. Was told several times by NDP/NFU family members.